Bombardier shakes up leadership, seeks $2 bln as CSeries costs jump
12:59 PM ET, 02/12/2015 - Reuters
* Chairman Laurent Beaudoin to retire
* Beaudoin's son, Pierre, to step down as CEO
* Pierre Beaudoin takes over as chairman (Adds quotes, details from conference call, analyst's comment)
By Allison Martell and Swetha Gopinath
Feb 12 (Reuters) - Bombardier Inc stunned investors as it scrambled on Thursday to deal with big cost overruns in its long-delayed CSeries passenger jet program: replacing its chief executive, suspending dividends, and saying it needs to raise $2 billion in new debt and equity.
Shares in the Canadian plane and train maker sank more than 12 percent to C$2.65 on the news. The Montreal-based company, which is now testing the new CSeries jet after years of delays, had said just last month it had enough liquidity to fund its development programs.
Bombardier also reported a big quarterly loss, hurt by a $1.4 billion charge announced last month relating to its decision to suspend development of a new Learjet.
It plans to raise about $600 million in equity and up to $1.5 billion in new long-term debt as well as suspending dividends on both Class A and common shares
Bombardier said it would explore other options to reduce debt, including "certain business activities' potential participation in industry consolidation."
Canaccord Genuity analyst David Tyerman said that sounds as if Bombardier is willing to consider divesting or partially divesting assets.
A former United Technologies Corp executive, Alain Bellemare, will become chief executive on Friday, replacing Pierre Beaudoin, who will become executive chairman. Pierre Beaudoin's father, Laurent Beaudoin, will retire as chairman.
Pierre Beaudoin, whose family controls the company, said he personally approached Bellemare about the job and recommended him to the board. Beaudoin said he would continue to work full time, with a mandate to focus on financing and mergers and acquisitions.
"We know each other very well," Beaudoin said. "I felt it was a great opportunity and the right thing to do for Bombardier."
Asked whether the move was a response to pressure from investors, Beaudoin said it was not.
"The new CEO, I think he really is an executor. He's not being brought in to restructure the company in any way," Tyerman said.
Until the end of last month, two of United Technologies' main aerospace divisions, engine maker Pratt & Whitney and parts unit UTC Aerospace Systems, reported to Bellemare, who reported to the CEO. The CSeries, a narrow-body, medium-range jet, is powered by a Pratt engine.
CSERIES COSTS RISE
On a conference call, Beaudoin said the cost of the CSeries program is now pegged at about $5.4 billion, following repeated rises in estimates. Last February it said costs would increase by $1.05 billion, which brought the total to $4.95 billion.
Bombardier reported a net loss of $1.59 billion, or 92 cents a share, in the fourth quarter, after earning $97 million, or 5 cents, a year earlier. Revenue rose 12 percent to $5.96 billion.
Excluding the Learjet charge, the company earned 4 cents a share, compared with analysts' average estimate of 2 cents, according to Thomson Reuters I/B/E/S.
The stock has lost more than a quarter of its value in the past year. |
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