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 dismiss the lawsuit filed against it in February 2022 by Antara Capital Master Fund and Corbin Opportunity Fund. 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 come back.
“We look forward to continuing to pursue this litigation,” Duane Loft, who represents the plaintiffs, said in an email Monday.
The litigation concerns the numerous transactions – Bombardier Transportation, the C Series, the CRJs and the aerostructures – carried out by Bombardier in recent years to redress its finances and refocus on business aviation.
By doing so, the Quebec multinational breached the terms of the trust deed of a US$250 million debenture issued in 2004 and maturing 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 the sum to be around US$400 million. 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 assert that the Quebec aircraft manufacturer was in default.
“Bombardier tried to muzzle us by obtaining consent from new bondholders who had no right to consent [to company-requested changes],” says Loft. We are pleased that the court rejected the company’s attempt. ยป
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 stressing that the applicants 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 provide an update on 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 deleveraging strategy,” ATB Capital analyst Chris Murray said in a note. This further reduces its interest burden, which is down $330 million a year from 2020.”
On the Toronto Stock Exchange on Monday afternoon, Bombardier stock was trading at $56.73, down $3.14, or 5.3%.
