MONTREAL – Hopes for a government bailout prompted a surge in Bombardier shares on Wednesday ahead of what is expected to be gloomy third-quarter results.
The Quebec government declined to confirm published reports suggesting that it will announce Thursday a financial contribution to bolster the embattled transportation giant’s strained cash levels.
Several media reports, all citing sources, didn’t specify whether the province or Quebec’s biggest pension fund manager, the Caisse de depot, would buy Bombardier shares or make some other form of financial contribution.
The Quebec-based company’s stock (TSX:BBD.B) gained strength on the Toronto Stock Exchange as the trading day progressed — closing up 11 per cent in heavy trading — but still worth far less than a year ago.
Government ministers declined to comment on the reports. But Quebec’s two main opposition party leaders welcomed an expected government contribution — either through an equity investment or convertible debt. Bombardier employs nearly 18,000 people in the province, contributes to exports and bolsters innovation.
Speculation of a possible joint venture to complete development of the CSeries comes as the Toronto Transit Commission board decided at a meeting Wednesday to sue Bombardier over late delivery of streetcars.
Bombardier spokesman Marc Laforge said the company had expected the lawsuit given the comments from TTC officials.
“Obviously not all the delays in this project have been caused by Bombardier and we will discuss this with our customer in due time,” he said in an interview.
Bombardier’s stock cratered in August to a low of $1.03 after hitting a 52-week high of $4.43 in early December. On Wednesday, the B shares closed at $1.61 with 18.7 million shares trading, more than double normal daily activity.
Earlier, Analyst Benoit Poirier of Desjardins Capital Markets said he doubts the province will make an equity investment in Bombardier Inc., given the 62 per cent drop in the company’s stock price this year.
Poirier says he suspects the province could help Bombardier by investing $1 billion to $2 billion in Bombardier Transportation to avoid a planned IPO to sell a minority stake in the rail division, or by providing favourable financing to customers that buy Bombardier Aerospace CSeries planes.
Bombardier declined to comment on possible government actions expected to be announced after its results are released on Thursday. Analysts forecast the company’s adjusted profits will plummet 75 per cent to three cents per share on a 6.3 per cent drop in revenues to US$4.6 billion.
Quebec, Canada and Britain have previously made large financial contributions to Bombardier to help develop and sell the CSeries, a 110- to 160-seat commercial jet. It’s slated to enter into service next year — about two-years behind schedule.
Canada committed US$350 million, Quebec $117 million and Britain 180 million pounds.
The Quebec government also agreed in 2013 to provide $1 billion in financing help to buyers of the CSeries, joining a similar practice by the federal government.
Bombardier relaunched the CSeries in 2008 after several years of work on the aircraft was paused because it couldn’t sign up sufficient orders from airlines and leasing companies. The fuel-efficient plane that is larger than Bombardier’s regional jets was designed to compete with the smallest planes produced by Airbus and Boeing.
The CS100 had its first flight in September 2013, followed last February by the larger CS300. Bombardier had expected the plane would be popular as a replacement for older aircraft and in growing emerging markets like China. However, amid falling fuel prices it has received just 243 firm orders among 603 commitments.
Quebec isn’t the only government partner concerned about Bombardier.
Northern Ireland enterprise minister Jonathan Bell met with senior company officials and toured Bombardier’s Mirabel facility to see the assembly of the CSeries, which include wings made at its plant in Belfast.
“While I recognize that Bombardier faces challenges, the management team is confident these can be overcome and that more sales will follow,” he said in a news release.
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