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Uncertainty rises around $500M sale of Bombardier plants to Spirit

Deal may not close by the drop-dead date of Oct. 31, which Spirit says could prompt litigation.

September 30, 2020   by CP STAFF

MONTREAL — Uncertainty continues to mount around the US$500-million sale of Bombardier Inc.’s aerostructures business to Spirit AeroSystems, as the Kansas-based company warns that a failed transaction could pave the way for a legal dispute with the Quebec plane maker.

Spirit filed documents with US regulatory authorities Sept. 29 confirming that the deal may not close by the drop-dead date of Oct. 31, which it says could prompt litigation from Bombardier.

“In such event, the Bombardier sellers may commence legal actions alleging that we have not complied with our applicable covenants and agreements,” Spirit said at the bottom of a 9,000-word filing to the US Securities and Exchange Commission.

The company noted it believes has complied with all its commitments under the agreement.

The document arrives one week after Spirit submitted forms stating the deal will automatically terminate if conditions are not satisfied before November.

Bombardier spokesman Olivier Marcil said the two firms are still working to meet the closing conditions, which include no major adverse changes to the business, and to complete the transaction.

“It is important to avoid drawing premature conclusions on the basis of these mandatory and regulated disclosures,” Marcil said.

The half-billion-dollar sale of Bombardier plants that produce fuselage and wing components in Belfast and Morocco forms a key part of its shift from a commercial plane-and-train maker to a pure-play manufacturer of private jets.

The deal is also critical to buoying the Montreal-based company’s balance sheet, which as of June 30 was weighed down by US$9.3 billion in debt, more than a third of which is due before 2023.

“While the cash from the sale would be welcome, we note that in August Bombardier secured another $1 billion in a new secured term loan that alleviates the near-term liquidity concerns,” analyst Cameron Doerksen of National Bank said in a research note this week.

Nonetheless, the deal “is becoming more uncertain with Spirit facing its own financial challenges and closing conditions not yet satisfied,” he said, noting the maker of airplane parts recently terminated another pending acquisition.

Bombardier shares closed at a new 25-year low Sept. 30, falling two cents or four per cent to 33 cents on the Toronto Stock Exchange.

 


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