BBDBCN 7 ⅞ 04/15/27

Bombardier Inc

Credit, Industrial/Transportation


Publicly listed companies mentioned herein: Airbus SE (AIR FP), American Airlines Group Inc (AAL), Bombardier Inc (BBD/B CN), Delta Air Lines Inc (DAL), General Dynamics Corp (GD), JetBlue Airways Corp (JBLU), Southwest Airlines Co (LUV), United Continental Holdings Inc (UAL), United Technologies Corp (UTX)

Highlights

The presenter is long Bombardier Inc bonds (BBD 7 ⅞ 04/15/27) and is bullish on the company’s outlook over the upcoming years. The company is made up of a $9B (top-line) transportation business, a $6B business aircraft segment, a $2B aerostructures & engineering services business, and a group of commercial assets that it is looking to divest. Despite negative sentiment from the market due to major FCF estimate misses and a seeming inability to generate returns on capex, the presenter is confident in BBD’s management team and product portfolio. He expects margin expansion, improved FCF generation, unwinding working capital and capex, and deleveraging over the next 12 – 18 months as BBD begins to realize returns from investments in various projects. This bond offering, which BBD issued in February 2019, is currently trading at 98.813 with an 8.074% YTW and a 7.875% coupon; as this story plays out, the presenter believes the yield will drop to 6% or lower and the bond’s price will rise to ~110 with additional optionality.

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