Bombardier Inc. T.BBD.A

Alternate Symbol(s): BDRPF | T.BBD.PR.B | BDRXF | T.BBD.PR.C | T.BBD.PR.D | BOMBF | BDRAF | T.BBD.B | BDRBF

Industrials Aerospace & Defense

Bombardier Inc. is a Canada-based manufacturer of business aircraft with a global network of service centers. The Company is focused on designing, manufacturing and servicing business jets. The Company has a worldwide fleet of more than 5,000 aircraft in service with a variety of multinational corporations, charter and fractional ownership providers, governments and private individuals. It operates aerostructure, assembly and completion facilities in Canada, the United States and Mexico. Its robust customer support network services the Learjet, Challenger and Global families of aircraft, and includes facilities in strategic locations in the United States and Canada, as well as in the United Kingdom, Germany, France, Switzerland, Austria, the United Arab Emirates, Singapore, China and Australia. The Company's jets include Challenger 350, Challenger 3500, Challenger 650, Global 5500, Global 6500, Global 7500 and Global 8000.

TSX:BBD.A - Post by User

Bombardier Inc. > TD: 69$ target

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Post by lb1temporaryon Jun 14, 2022 10:51am

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Post# 34754993

TD: 69$ target

Event

Last night, Bombardier announced the commencement of a cash tender offer for up to $350 million of its aggregate senior notes outstanding December 2024, March 2025, and April 2027. The tender offer expires on July 12, 2022.

Impact: NEUTRAL

We view the use of excess cash to reduce debt as being prudent, consistent with management's effort to reduce net debt to adjusted EBITDA to approximately 3.0x (currently at 7.3x), although not surprising. Our current forecast does not assume any early repayments, but that Bombardier will simply repay contractual values at maturity. While we believe that it is important for Bombardier to deleverage its balance sheet over the coming years, we believe that its maturity profile provides a reasonable cushion for unexpected fluctuations in cash flow and time for improving its ability to refinance maturities.

Assuming that the entire $350 million in aggregate purchases are for the December 2024 notes, we estimate that it would reduce Bombardier's annualized interest expense by approximately $28 million (or $0.29/share) before accounting for the reduction in interest income on cash. Assuming that the 2027 note tenders hit the $100 million cap and the remaining notes are tendered based on their relative outstanding amounts, we estimate that Bombardier would reduce annualized interest by approximately $30 million (or $0.31/share).

The 7.5% December 2024 notes have $800 million outstanding. The 7.5% March 2025 notes have $1.3 billion outstanding, and the 7.875% April 2027 notes have $2 billion outstanding. Bombardier is capping the tender for the 2027 notes at $100 million. We believe that Bombardier has demonstrated early success in executing on its turnaround strategy, having exceeded its 2021 guidance.

We believe that each successive quarter of delivering on financial targets will draw attention to the significant share price upside should Bombardier remain on-track to achieve its 2022 and 2025 targets. We acknowledge that factors negatively impacting sentiment towards the broader market could weigh on Bombardier's valuation in the short-tomedium term. However, we believe that the company's fundamentals will eventually lead to upside for shareholders over our 12-month target price.