Updated: US$1B in Exchange of Future CSeries Profit & Write-Off? Very Bright! How? Here...
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12:54pm - October 29, 2015 - Montreal
Updated: 2:00pm - October 30, 2015
I'm not a financial analyst… But I certainly know my way about business.
Let me think a minute, now, mmm.. Bombardier is offered US$1B in exchange of 49.5% of the "Future Profit" of the CSeries, done by letting go 49.5% of its ownership into a NewCo owned by Bombardier Inc. at 50.5% and the Government of Quebec (via "Invetissement Québec") for the remaining 49.5%
Two things JUMP to my mind.
- If I were Bombardier, how far down the road would I have expected to make a fresh US$1B in profit selling CSeries? You see what I'm getting at?
- As soon as Bombardier spends money developing more around the CSeries (i.e. CS500, CS700, CS900 etc…) only Bombardier would add money into this NewCo in exchange of new shares, thereof diluting the Quebec Government's ownership of NewCo, decreasing their entitled part to the profit. Get that point? It was said during the conference call that only Bombardier would finance the future development of the CSeries… The more the program will go on, the smaller the part of profit Bombardier will have to share away. Thinking...
- The Write-Off of the CSeries from the books "prior" of its transfert to the NewCo do let Bombardier to keep 100% of its "paper lost" to be applied to its ongoing global profit diminishing its income taxes. This is pure accounting/finance paper operations aimed at increasing the company cash flow & profits.
Now, make your own calculations, if you care to: how many CSeries should it take to get to US$1B profit (new cash)? What would be the share of the profit to give to the Government of Quebec when it actually starts to be (very) profitable?
I think I have to congratulate the new CEO Alain Bellemare and his new CFO John Di Bert… Taking care of Business… Kudo to them… Wise Kids On The Block at Bombardier… And Lucky Shareholders, I would say, this is a secret, please don't tell anyone!
That said, now that the perceived financial stability is secured, when are the "additional" orders coming for Bombardier at large, CSeries (some major airlines), Q400, CRJ, Challenger, Global, Learjet 75, Trains, Trams, Subway, Electric Buses (and many other products I don't even know Bombardier do sell… I don't even know them all! Do you???)
Alain Bellemare said on The BNN TV Network this afternoon that new orders for CSeries from Major Airlines will be annonced very soon, weeks he said. We're all happy!
Know that the discussions with The Caisse are not over, something else is coming up, and "Orders" as well... are they related? Added to the IPO of about 20% of BT that should bring in excess of another US$1B.