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Bombardier Announces US$1 Billion Loan

By Alicia Arizpe | Wed, 07/22/2020 - 12:32

Canadian manufacturer of business jets and rails Bombardier announced that it secured a US$1 billion loan to weather the COVID-19 pandemic. While the company has been hurt by the pandemic, it appears optimistic due to the loan and its “better than expected cash usage.”

Aircraft manufacturers have been facing trouble as COVID-19 wiped demand for new aircraft and led to plant closures across the globe, which in turn disrupted global aerospace supply chains. Bombardier’s aviation division had also faced trouble due to the outbreak announcing in early June that it would cut 2,500 jobs to align with “current market conditions reflecting the extraordinary industry interruptions and challenges caused by COVID-19.” The Canadian manufacturer estimated that business jet deliveries would decrease by 30 percent because of the pandemic and adjusted its operations accordingly. However, the company reported today that it had secured a three-year secured term loan of up to US$1 billion. This loan, together with Bombardier’s better than expected cash use of US$500 million, will provide the company “with additional liquidly to operate its business through the COVID-19 pandemic as it works to close the previously announced divestures undertaken to reshape Bombardier’s capital structure.”

However, Bombardier had been facing several problems before the outbreak. For many years, the Canadian planemaker had specialized in business aircrafts and decided to use this experience to enter the commercial segment with the development of the 110-seat CSeries aircraft, which targeted a market that had been ignored by other commercial jet manufacturers. However, the CSeries ran into many problems during development leading the jet’s launch to be delayed several times and ramping up development costs. Its problems were worsened by a prolonged trade battle with Boeing, which claimed that Bombardier’s trade practices harmed the US company. While Boeing lost the case in 2018, the costly legal battle was another nail in the coffin for the CSeries, which eventually led Bombardier to sell the program to Airbus. Now, Bombardier Aviation specializes in the design and manufacture of business aircraft including the Global family, the Challenger family and the Learjet.

Bombardier Aviation came to Mexico in 2005 building a US$200 million plant in Queretaro that started operations in 2006. It employs over 1,500 people in the production of aft fuselage of the Global family, harnesses, main electric assemblies, among other products. Bombardier’s recreational products division, which manufactures off-road vehicles, announced in early July the construction of a US$160 million plant in Chihuahua, becoming the first company to invest in Mexico under the USMCA.

Alicia Arizpe Alicia Arizpe Senior Writer