Quebec Open To Foreign Investor In Bombardier

Quebec indicated it is open to foreign investment in Bombardier, potentially inviting a politically difficult deal with a Chinese investor.

The failure of talks to sell the CSeries jet programme to Airbus were the latest blow to Bombardier, which is saddled with debt as the aircraft limps toward commercial service next year.

The programme is years late and billions of dollars over budget, jeopardising Bombardier's attempt to enter the aviation big league on its own terms.

Asked about the possibility of foreign investment, Quebec's Economy Minister Jacques Daoust hinted that a majority stake held by overseas interests would not be unusual.

"Look at the ownership of Quebec crown jewels that are listed on the stock exchange," he told reporters in Quebec City. "You are going to realise that they are not majority-held by Quebecers."

Daoust said the most important issue for him was that the company's head office remained in Montreal.

NEGATIVE APPROACH

"We think Bombardier approaching Airbus is negative as it could imply serious funding or CSeries sales issues," Canaccord analyst David Tyerman wrote in a note to clients.

The company has been struggling to sell the narrow-body jet and has not announced a new firm order in more than a year.

Quebec is ready to help Bombardier, Daoust said, adding that the company had not asked for financial help with the CSeries.

Investissement Quebec, created by the province to provide financing for Quebec companies, loaned Bombardier CAD$117 million at market rates in 2009 for CSeries development.

The province may lean on the public pension plan, Caisse de depot et placement, to support the plane maker.

The Caisse declined to comment on "rumours" involving financing talks with Bombardier. A spokesman reiterated the pension fund’s long-held stance that it "is independent and makes its own investment decisions."

CHINESE INTEREST

Bombardier had already approached an unnamed Chinese company but those discussions ended three to four weeks ago, according to one person familiar with the situation.

"A deal with the Chinese seems to make the most sense, but that may be politically impractical," said Credit Suisse analyst Rob Spingarn.

A person in the banking industry said: "If they get the money from non-Westerners that adds another level of complexity in terms of transfer of technology."

Any deal involving the sale of aerospace technology to Chinese buyers would likely trigger a federal government review.

"It will not be a transaction that would have an easy ride through an Investment Canada review," said a Toronto-based competition lawyer, who asked not to be named, noting the government has spent heavily to support Bombardier's sales outside Canada.

The CSeries has loaded Bombardier down with debt, spurring the company to consider asset sales or other measures to raise cash. As of June 30, Bombardier had USD$9 billion in long-term debt and USD$3.1 billion in cash, after burning through USD$808 million in free cash flow in the quarter.