Is Market Confidence in Bombardier Taking a Dive?; Up until a Few Weeks Ago, the Cadre of North American Analysts Who Follow Canadian Company Bombardier, Owner of Shorts in Belfast, Were, If Not Bullish about the Company's Prospects, at Least Not Predicting a Haemorrhage of Employees, Rating Cuts and the Sell-Off of Successful Parts of Its Business. DEBORAH DUNDAS Reports from Canada
YOU can tell the state of a company by the number of people who want to invest in and buy from it. By the looks of it, Canadian aerospace manufacturer Bombardier needs something to change its fortunes.
That may be small consolation to the 1,200 people who are set to lose their jobs in the latest round of lay-offs at Shorts, Bombardier's Belfast operation.
Two weeks ago, the company announced that it would be laying off 3,000 employees, the number to be divided between its Belfast, Toronto and Montreal operations - 1,200 of those redundancies are expected to come from Shorts.
These announcements came two months after the installation of the company's new chief executive officer Paul Tellier, who had gained a reputation as the kind of guy you bring in when a company needs a huge turnaround.
It happened with another Canadian transportation giant, Canadian National Railways. The positive news is that he managed to turn that company around. The bad news is that it took some years to do so. And the market isn't betting that he's going to be able to do it soon for Bombardier.
Last week, Standard and Poor's, the American bond rating agency, downgraded Bombardier's debt to one level above junk bond status. The company's long- term corporate credit rating was cut to triple B minus from triple B plus. It might go even lower.
It's a significant move because it affects the rate of interest at which Bombardier can borrow money. Given its cash-strapped situation, it's not a positive announcement.
In a statement, Standard and Poor's analyst Kenton Freitag said: "Bombardier's recent earnings warning, and the potential for significant changes relating to a contemplated change in accounting policy, indicates a financial profile that has weakened materially.
"Furthermore, the key US regional airline market - a source of about 80 per cent of Bombardier's regional jet backlog - faces greater uncertainty as recent and potential bankruptcies of several major US airlines generate concern about the ability of their regional partners to accept future regional jet deliveries."
That downgrade was followed by another one by the Dominion Bond Rating Service. The Toronto-based rating agency cut its rating on Bombardier's senior debt to triple B (high) from single A and indicated that the trend for the transportation giant is "negative". …