Bombardier says seeking federal money for flexibility

Thu Dec 15, 2016 2:30pm EST
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By Allison Lampert and Allison Martell

NEW YORK/TORONTO (Reuters) - Bombardier Inc is still seeking funds from the Canadian government despite improved liquidity, its chief executive said on Thursday, as the company assured investors it is prepared to deal with the cost of value guarantees for older jets.

Alain Bellemare said the plane and train maker is still in talks with Ottawa, with an eye to managing unexpected risks or funding the development of new products.

"Obviously things have changed a lot over the past 12 months, so the discussions are taking a different path," he said at a New York investor event.

Bombardier, which considered bankruptcy protection at one point last year, sold a 30-percent stake in its rail division to pension fund Caisse de depot et placement du Quebec for $1.5 billion last November and got a $1 billion bailout from the Quebec government.

In Ottawa, Prime Minister Justin Trudeau said the government was working “very productively” with Bombardier, which asked for federal aid last year.

“We hope to be making some announcements before the budget,” Trudeau told reporters. The federal budget is usually in February or March.

The investor day came two days after U.S. airline SkyWest Inc said it had agreed to terminate a residual value guarantee with Bombardier in return for a $90 million payment from the Canadian company.

Residual value guarantees cover some of buyers' losses if the value of their aircraft drops below a threshold, a potential drag on cash flow for Bombardier as older planes go out of service.   Continued...

FILE PHOTO --  Shareholders line up to view Bombardier's CS300 aircraft following their annual general meeting in Mirabel, Quebec, Canada April 29, 2016.  REUTERS/Christinne Muschi/File Photo