Disgruntled lenders return to the charge against Bombardier

With a week to go until its year-end results are released, Bombardier could be embroiled in a legal dispute with disgruntled lenders who allege the company broke its word by selling a series of assets over the past last years. Millions of dollars are at stake.

Julien Arsenault
The Press

The plaintiffs, Antara Capital Master Fund and Corbin Opportunity Fund asked the Supreme Court of New York to consider their case. They believe that the disposals of Bombardier Transportation and assets such as regional jets and the aerostructures division violated clauses of the indenture of a debenture of 250 million US dollars issued in 2004 and which matures in 2034.

Last spring, Bombardier settled a similar dispute by obtaining the consent of certain lenders to modify the terms of eight tranches of debt maturing between 2022 and 2034. The plaintiffs, however, decided to turn to the courts to return to the charge. .

“This action stems from a series of flagrant abuses of the rights of bondholders,” argue the lawyers of Antara and Corbin, in their request filed on January 31 with the New York court.

In their opinion, the trust deed, which dates back to the early 2000s, “contained a very important covenant” that the multinational would not “sell, transfer, lease, lend or of all or substantially all of its business or assets.

However, since 2017, as part of its refocus to alleviate its heavy debt, has sold assets that accounted for nearly 80% of its total revenue at the time. The portrait has therefore changed considerably, the plaintiffs point out.

According to them, at the end of these numerous transactions, the business jet manufacturer should have redeemed the tickets before their expiry in addition to paying the remaining interest. They estimate that the sum was around 400 million US.

Financial analysts had estimated that the financial impact of the premium offered by Bombardier to its lenders last year in exchange for their consent to an amendment to the trust deeds was less than 10 million US.

The aircraft manufacturer had been able to muzzle its disgruntled lender by issuing a new tranche of debt of US 260 million due in 2034 to an institutional investor. This agreement allowed Bombardier to garner enough support to modify the trust deed and put an end to the plaintiffs’ offensive.

“The company resorted to a new tactic,” the document reads. The new notes were issued for the sole purpose of manufacturing a new majority and disenfranchising the existing majority. »

The plaintiffs are claiming undetermined sums from Bombardier for breach of contract and damages in an amount to be determined later at the end of a trial.

In a press release, the Quebec company indicated that the allegations were “unfounded” and that it intended to defend itself “with vigor”.

On the Toronto Stock Exchange, on Wednesday before noon, Bombardier shares fell two cents, or 1.42%, to trade at $1.73. The company is due to report its results for the fourth quarter of fiscal 2021 on February 10.