MONTREAL – BUSINESS – Bombardier (TSX: BBD.B) reported that its second-quarter cash usage was approximately $500 million better than previously expected and that it has secured a commitment from investment funds and accounts managed by HPS Investment Partners, LLC to provide a three-year senior secured term loan (the “Facility”) of up to $1.0 billion. Collectively, these actions provide Bombardier with additional liquidity to operate its business through the COVID-19 pandemic as it works to close the previously announced divestitures undertaken to reshape Bombardier’s capital structure.
As of June 30, 2020, cash on hand and liquidity(1) were approximately $1.7 and $2.4 billion, respectively. With the new Facility, Bombardier expects second-quarter 2020 pro-forma liquidity(2)of approximately $3.4 billion, reflecting approximately $1.0 billion of free cash flow usage in the second quarter.(3)
The Facility is expected to be in place in the third quarter of 2020 and provides additional liquidity for working capital and general corporate purposes as Bombardier realigns production rates with current market conditions. The Facility will have a minimum utilization of $750 million and a term of three years. Bombardier will have the right to voluntarily prepay the outstanding amount of the Facility. In addition, the sale of Bombardier Transportation will result in a mandatory repayment of 50% of the then outstanding principal amount of the Facility. Drawings under the Facility will bear interest at an agreed margin over the LIBOR reference rate and will be secured by a security interest in certain aviation inventory and related accounts receivable. There are no financial covenants under the Facility.
The Facility is subject to the negotiation and execution of a definitive credit agreement and security documents, as well as the satisfaction of other customary closing and drawdown conditions. Once in place, the Facility will be the only corporate credit facility available to the Aviation segment, as certain previous corporate credit facilities were terminated in December 2019, as previously disclosed.
Bombardier will provide further details on liquidity and free cash flow usage when it reports its financial results for the second quarter of 2020 on August 6, 2020.
Bombardier has retained National Bank Financial Inc. and Citigroup Global Markets Inc. as its financial advisors and Norton Rose Fulbright as its lead legal advisor. Latham & Watkins LLP acted as lead legal advisor to HPS Investment Partners, LLC.