Nov. 19, 2015: The $1.5bn investment by Caisse de dépôt et placement du Québec to take a 30% stake in Bombardier Transportation, the rail business, is another step in the financial restructuring of the distressed company.
This brings to $2.5bn Bombardier has funded in recent months. The Province of Quebec previously agreed to invest $1bn in the CSeries program.
CDPQ is a long-term instutional investor that manages funds primarily for public and private pension funds.
“The transaction concludes the review of financing options previously announced for Bombardier Transportation,” the company said in a press release. “As previously announced, Bombardier’s Board of Directors examined a wide range of strategic options for its rail business. After a thorough review process, including an initial public offering and a competitive international auction process for the private placement of a minority stake, the Board of Directors of Bombardier determined the transaction announced today, contemplating the sale of 30% of Bombardier Transportation to CDPQ, is the most attractive option. The transaction announced today, when completed, will crystallize the value of Bombardier Transportation and strengthen Bombardier’s financial position, with no increase in debt. The funds to be received by BT Holdco from the transaction will be distributed to Bombardier and Bombardier intends to use the proceeds for general corporate purposes.”
Alain Bellemare, CEO of BBD, said that BBD is “gaining an ideal partner” for the growth “while allowing us to maintain a majority stake” in the company. After the deal is complete, BBD will have $6.5bn in liquidity. BBD Transportation has a $30bn backlog.
“We have now de-risked Bombardier,” Bellemare said. Further detail about the Transformation Plan and other business plans will revealed at the BBD investors day in New York Nov. 24.
CDPQ has a sliding scale of its ownership and coupon depending on Transportation’s performance. There are also mechanisms to maintain and, if necessary, restore specific liquidity levels.
The full press release, with details of these parameters, is here.
the transaction is to close in the first quarter next year.