RE:Redemption of notesYes, this is repayment of some long term debt (LTD).
At the beginning of the year, BBD had about $10.1B in LTD and were in financial difficulty. In January, they sold their train division to Alstom, which netted them $3.6B. In addition, they had about $1.8B cash on hand, for a total of about $5.4B. They are putting as much of this as they can afford to against the debt, but need to keep about $1.5B on hand for operations.
By my calculation, they will end up with about $6.75B LTD, and ~$5.25B net debt. This is still a significant debt load, but (barely) manageable. The interest on this debt will be about $500M/year. This year, just about every dollar BBD expects to make (about $550M) will go toward paying interest on the debt. However, next year, they expect to generate about $875M, so there should be a few hundred million left after paying interest. In 2023, they expect to generate ~$1.2B before interest.
In early March, BBD held an investor day, wherein they laid out their five year plan. The presentation is available on their website. I recommend you look at it, and try to determine for yourself if you think their projections are acheivable.
If BBD is able to acheive their projections, the debt will not be a major concern. If they are not able to acheive their projections, the debt will be a significant challenge.
Jim
P.S. Note that this is of concern only to persons who are intending to hold long term. For persons who are intending to hold less than 18 months, the debt is a non-issue, IMO.
organeer wrote: I see this in the article, can someone "explain like I'm 5" and tell me what these notes are, some kind of debt? What bombardier tried to do and whether these numbers are good?
Thanks
organeer
Article content
MONTRAL, June 28, 2021 (GLOBE NEWSWIRE) — Pursuant to Bombardier Inc.’s (“Bombardier”) notice of redemption dated June 3, 2021 (the “Notice”) relating to all of its outstanding 8.750% Senior Notes due 2021 (the “Notes”), Bombardier today announced the calculation of the redemption price for the Notes. The redemption price for the Notes will be US$1,041.39 per US$1,000.00 principal amount of Notes, consisting of the Make-Whole Premium of US$1,033.86 per US$1,000.00 (based on a Treasury Rate of 0.051%, as calculated by Bombardier on June 28, 2021), plus US$7.53 in accrued and unpaid interest to but excluding the redemption date for the Notes, all as calculated in accordance with the terms of the indenture governing the Notes.
The redemption date for the Notes is July 2, 2021, as set forth in the Notice.