Markets rose today on speculation of a remain vote win in the U.K. The S&P 500 was up 1.3% and Toronto was up 0.9%. The great majority of stocks rose today.
Friday’s market direction will likely depend on the Brexit vote.
Bombardier was in the news for several reasons:
The terms of a $1 billion dollar investment by Quebec were finalised. Quebec gets just short of half of the C-Series program plus warrants to buy about 4.26% of Bombardier at a price of U.S. $1.72 which is a premium to the recent price of about $1.52. Quebec also got a 20 year commitment that certain C-Series jobs remain in Quebec. While the money was needed due to the dire straights of the company, this was not a great deal for Bombardier. Bombardier had invested $5.4 billion in the C-Series by February 2016 according to Wikipedia. Selling half of that (and with strings attached) for $1 billion is a testament to failure. The C-Series has so far destroyed at least $3.2 billion of share owner’s money.
Bombardier also announced it is delivering the first plane. Not date was mentioned but it is presumably in the next few days.
Moody’s raised the outlook on some of Bombardier’s debt or its overall corporate rating from negative to stable. But Moody’s also lowered the rating on senior unsecured debt to B3 from B2. Bombardier then issued a press release disagreeing with the downgrade and indicating that Moody’s was not giving the company credit for recent progress. It is always sad and a red flag when a company starts to argue against a credit rating agency. In my view Bombardier refuses to accept and acknowledge the horrible state of its finances. It’s own balance sheet shows that the company’s common share equity is NEGATIVE $3.8 billion dollars (After deducting preferred equity from total common equity). I am disturbed that the company would argue with Moodys. The financial mismanagement of this company can certainly not be cured while it remains unacknowledged. The Board of directors that presided over this debacle for years remains largely unchanged. Still, I do think that the preferred shares will most likely continue to pay their dividend and may rise in price and the common may also eventually rise though that is far from certain.