Dispute with disgruntled lenders | Bombardier dismissed by a New York court

Bombardier has not finished fighting with disgruntled lenders who claim to have been harmed by the numerous asset sales made by the Quebec aircraft manufacturer as part of its recovery. The case could be invited to its investor day scheduled for Thursday.

Millions of dollars are at stake in this legal dispute. Bombardier was recently dismissed by a New York court in its efforts to have the complaint filed against it in February 2022 by Antara Capital Master Fund and Corbin Opportunity Fund dismissed. These two creditors, however, have their work cut out for them, since some of their requests have been rejected. However, they have 30 days to return to the charge.

“We are pleased to be able to continue the proceedings in this litigation,” said Duane Loft, who represents the plaintiffs, in an email sent Monday.

The dispute concerns the many transactions – Bombardier Transportation, the C Series, the CRJs and aerostructures – carried out by Bombardier in recent years to straighten out its finances and refocus on business aviation.

By acting in this way, the Quebec multinational violated the terms of the trust deed of a 250 million US debenture issued in 2004 and which matures in 2034, the plaintiffs allege. They claim that this act stipulated that the multinational should not sell or dispose of “all or substantially all of its business or assets”. Quite the opposite happened.

Disgruntled lenders say the private jet maker should have redeemed the debentures before they matured, in addition to paying the remaining interest. They estimate that the sum was around 400 million US. The plaintiffs allege that they were muzzled by Bombardier, which got around the problem by issuing a new tranche of debt.

This scheme allowed the company to garner enough support to modify the terms of the trust deed and put an end to the plaintiffs’ offensive.

According to Judge Andrew Borrok of the Supreme Court of New York, Antara Capital Master Fund and Corbin Opportunity Fund never waived their right to affirm that the Quebec aircraft manufacturer was in default.

“Bombardier tried to muzzle us by obtaining the consent of new bondholders who had no right to consent [aux modifications demandées par l’entreprise]emphasizes M.^e loft. We are pleased that the court rejected the company’s attempt. »

In their complaint filed last year, the plaintiffs claimed undetermined sums from Bombardier for breach of contract as well as damages in an amount to be determined later at the end of a trial.

For its part, the business jet manufacturer sees the glass half full by emphasizing that the plaintiffs will have to amend their request. This testifies, believes the company, to the weakness of the complaint.

“Bombardier firmly believes that the lawsuit itself is unfounded and will continue to defend itself,” the company said in a statement.

The company will take stock of its recovery this Thursday, on the occasion of its annual investor day. Analysts expect the company to raise its financial targets for the year as it recovers faster than expected. Last week, the company bought back a half billion tranche of debt that was due in 2025.

“This is another positive step in the debt reduction strategy,” said analyst Chris Murray at ATB Capital in a note. This further reduces its interest burden, which has fallen by 330 million per year compared to 2020.

On the Toronto Stock Exchange on Monday afternoon, Bombardier stock was trading at $56.73, down $3.14, or 5.3%.