Outperforming expectations, Bombardier secures favorable terms in a strategic debt refinancing move
Bombardier Inc., the Canadian manufacturer of private jets, successfully issued a $750m junk bond on Friday to refinance its debt maturing in 2026, as reported by Financial Post.
This offering exceeded the initial plan of $500m, achieving slightly better terms than anticipated, with a coupon rate of 7.287 percent. These details were reported by BNN Bloomberg and shared by an anonymous source familiar with the sale, highlighting the sensitivity of the discussions.
The bond, set for a seven-year term, was introduced at a time when high-yield spreads — the additional yield investors demand over Treasuries — are near their lowest point in roughly two years.
Bombardier's venture into the debt market last November involved issuing $750m in seven-year bonds with a call option available after three years, at a yield of 8.75 percent.
Concurrent with this new debt issuance, Bombardier announced its intention to redeem about $200m of its $1.7bn notes due in 2027. This move is part of its ongoing efforts to manage its debt obligations strategically. The transaction was noted for its favorable pricing.
“Friday’s transaction 'priced well inside of the single B average level, and just shy of B+ levels, thus offering some tightening potential should Bombardier achieve high B ratings as we expect they will this year,'” Matt Woodruff, an analyst at CreditSights Inc., commented in a March 25 note.
This refinancing initiative is seen as a positive step towards enhancing Bombardier's credit quality and its capacity for liability management. The ability to effectively manage and reduce its debt could improve the company's chances of receiving a credit rating upgrade.
As Bombardier works to address a $2.8bn maturity wall due in 2026-2027, Bloomberg Intelligence credit analyst Matthew Geudtner observed, the firm's improving credit quality and proactive liability management increase the likelihood of an upgrade in its credit rating.
