FOR THOSE OF YOU WHO ARE INTERESTED.
BOMBARDIER PRESENTS RECAPITALIZATION PROGRAM FEATURING EQUITY OFFERING AND ASSET DIVESTITURES
Thursday April 3, 6:00 am ET
TORONTO, ONTARIO--
TELLIER SAYS EMPHASIS ON TRANSPARENCY AND ACCOUNTABILITY WILL DRIVE
CHANGE IN CORPORATE CULTURE
FINANCIAL RESULTS FOR FISCAL 2003 ARE ANNOUNCED
- Equity offering of at least $800 million
- Planned divestitures including Bombardier Recreational Products
expected to raise in excess of $1.5 billion
- Reduction of dividend
- Change in governance structure
- Bank covenant amended
- Bombardier Capital to focus on only two portfolio categories
- New accounting policies adopted to enhance investor understanding of
the Corporation's performance
- Consolidated revenues for fiscal 2003 of $23.7 billion and net loss
of $615.2 million after non-cash special items of $1.3 billion
($959.7 million after tax)
- Free cash flow of $801.4 million
- Order backlog of $44.4 billion
Bombardier President and Chief Executive Officer Paul M. Tellier announced a major recapitalization program which includes the filing later today, with the securities regulatory authorities in Canada, of a preliminary short-form prospectus providing for the issue of Class B shares. The equity infusion will strengthen the Corporation's balance sheet and bolster working capital.
Gross proceeds from this equity offering are expected to be at least $800 million and will supplement the Corporation's working capital and be used for general corporate purposes. The securities to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, absent registration or an applicable exemption from registration requirements.
A NEW BOMBARDIER
The equity offering leads a list of initiatives designed to strengthen the company's balance sheet and refocus the Corporation on the aerospace and transportation businesses. To that end, Tellier announced Bombardier's intention to divest Bombardier Recreational Products, as well as other non-core assets.
"We will rebuild our credibility with investors with the action plan we are announcing today," said Tellier. "The sale of our recreational products business provides a good balance between our asset divestitures and the equity offering. Combined with our cost reduction programs, it gives us the financial flexibility we need going forward.
"Our story is a story of recovery. We are acting rapidly and strategically to re-energize the Corporation by strengthening our balance sheet and putting the liquidity concern and the bank covenant issue behind us.
"Rigour and consolidation are the order of the day. Tighter accountability and financial discipline are being applied across the Corporation. Bombardier today is focused on value creation," he said.
ASSET DIVESTITURES
The Corporation has decided to divest its recreational products business as it is the most liquid asset in Bombardier's portfolio. The Corporation has retained UBS Warburg as financial advisors and Ogilvy Renault as its legal advisors for this transaction.
The controlling shareholder supports the Corporation's plan to unlock the value of the recreational products group at this time.
In order to help ensure the stability and continuity of this heritage asset, members of the Bombardier family have expressed an interest in participating in the process as part of an eventual group of investors seeking to acquire the recreational products business.
In view of the family's interest, the Board has formed a committee of independent directors to supervise and monitor the divestiture process, evaluate offers or other alternatives and make recommendations to the Board. The independent committee is chaired by L. Denis Desautels, former Auditor General of Canada, and composed of Jalynn H. Bennett, André Desmarais, Jean C. Monty and James E. Perrella.
The committee will be responsible for ensuring that the best interests of the Corporation and all of its shareholders are served. The committee will also ensure that the process is conducted in a manner that maintains the full value of the business during the divestiture process.
The independent committee of the Board has retained Morgan Stanley as its financial advisors and McCarthy Tetrault LLP as its legal advisors.
Tellier confirmed divestment of two non-core assets already underway:
- Defence Services
Bombardier Aerospace provides technical services for military
aircraft through facilities located at Mirabel, Quebec and
Bridgeport, West Virginia. It also provides pilot training for
Canadian pilots and for NATO pilots and personnel from other
countries in Portage la Prairie, Manitoba; Moose Jaw, Saskatchewan;
and Cold Lake, Alberta. Divestiture of these activities is underway.
- Belfast City Airport
In October 2002, Bombardier announced its intention to sell the
Belfast City Airport in Northern Ireland. Prospective buyers have
been identified and negotiations are ongoing.
These divestments, combined with the equity offering, are expected to generate cash in excess of $2 billion within six to nine months. Proceeds are intended to supplement the Corporation's working capital and be used for general corporate purposes.
AMENDED BANK COVENANT
Bombardier has reached an agreement with its lenders under its two main syndicated credit facilities to amend the net debt-to-capitalization ratio covenant. This demonstrates support and provides the Corporation with the flexibility to implement its recapitalization program.
DIVIDENDS ON CLASS A AND CLASS B SHARES
At its meeting on April 2, 2003, the Board re-affirmed its policy of paying dividends on Class A shares (multiple voting) and Class B shares (subordinate voting). However, the Board resolved that such dividends would be no greater than $0.09 per share (plus, in the case of the Class B shares (subordinate voting), a preferential dividend of $0.0015625 per share per annum) on an annual basis for the current fiscal year. As a result, the annual dividend per Class A and Class B share for fiscal year 2004, if approved by the Board each quarter, will be approximately one half of the dividend paid in fiscal year 2003. The Board reserves the right to modify its dividend payment policy at any time.
FURTHER CONCENTRATION FOR BOMBARDIER CAPITAL
Tellier also said the divestitures will refocus Bombardier Capital's business plan. Origination activities will now be concentrated on inventory financing and interim financing for Bombardier Aerospace regional aircraft, with limitations on the maximum amount and number of aircraft. Bombardier Capital will continue to greatly reduce its assets under management through the ongoing wind-down and sale of all its other portfolios, which is expected to generate significant cash.
The Corporation announced today it will cease origination for Bombardier Capital's railcar leasing activities. These activities consist of third-party leasing of a fleet of over 16,000 freight cars. Earlier, Bombardier announced the sale and gradual wind-down of the receivable factoring portfolios and the business aircraft financing portfolios. These processes are underway and should be completed later this year. The receivable factoring portfolio has already been reduced by 34% and the business aircraft portfolio by 24% during the last quarter. The portfolios being wound down or sold represented 55% of Bombardier Capital's assets under management as at Jan. 31, 2003.
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