Bombardier shakes up leadership, seeks $2 bln as CSeries costs jump
By Allison Martell and Swetha Gopinath
(Reuters) - Bombardier Inc (BBDb.TO: Quote) stunned investors on Thursday by replacing its chief executive, suspending dividends, and saying it needs to raise $2 billion in new debt and equity as it revealed more cost overruns in its long-delayed CSeries passenger jet program.
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 that it had enough liquidity to fund its development programs.
"From an investor perspective, you always hate to have a situation like this where a company bets its future on a product line," said Wendell Perkins, a senior managing director at Manulife Asset Management, which owns Bombardier stock.
"The successful run of the CSeries ... is still a big question mark."
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, it will suspend dividends on both Class A and common shares.
Rising concerns about the CSeries could weigh on demand for the share issue. David Cockfield, a portfolio manager at Northland Wealth Management, said his firm wants greater clarity on the CSeries before investing in the company.
"I'm just waiting for them to get the plane off the ground," he said. Continued...