Bombardier Closes 250 Million Bond Offering Advancing Debt Strategy

Bombardier Successfully Closes $250 Million Bond Offering, Advancing Strategic Debt Optimization

Bombardier Inc., a leading Canadian aerospace company, has recently completed the offering of an additional $250 million in 6.75% Senior Notes due 2033. This move marks a pivotal milestone in the company’s ongoing financial restructuring and debt optimization strategy. Priced at 103.500% plus accrued interest, the bond issuance demonstrates strong market confidence in Bombardier’s financial trajectory and operational execution.

The proceeds from this offering are earmarked for the redemption of higher-cost debt, specifically the complete payoff of $166.29 million in 7.125% Senior Notes due 2026 and approximately $84 million of 7.875% Senior Notes due 2027. This debt restructuring not only reduces Bombardier’s overall cost of capital but also extends its debt maturities, positioning the company for long-term financial stability. The transaction comes on the heels of Bombardier’s robust operational performance and a record $16.1 billion backlog, signaling an optimistic outlook for the company’s future.

Investor confidence in Bombardier’s strategic direction is further underscored by the successful pricing of the notes above par value and recent credit rating upgrades. These developments collectively highlight the effectiveness of Bombardier’s disciplined approach to capital allocation, debt reduction, and operational excellence.

Historical Context and Financial-Results Transformation

Bombardier’s path to financial stability has been marked by significant challenges and a determined turnaround effort. In the late 2010s and early 2020s, the company grappled with high leverage and operational setbacks that threatened its viability. The period was characterized by mounting debt and uncertainty, prompting urgent action from management and stakeholders.

A turning point came in early 2022 when Bombardier announced a $400 million aggregate paydown of its 7.500% Senior Notes, funded entirely from operating cash flows. This decisive move signaled a shift toward financial discipline and set the stage for a systematic approach to balance sheet optimization. The company’s leadership, overhauled in 2021, implemented operational improvements and strategic focus that would underpin the transformation.

Since its peak debt position of approximately $10.1 billion in 2022, Bombardier has consistently reduced its gross debt to $5.6 billion by 2025, a nearly 45% reduction over three years. This deleveraging has been powered by strong operational cash generation and a clear focus on sustainable leverage ratios. The new management team’s ability to meet operational and financial targets for three consecutive years further demonstrates the effectiveness of their strategy.

The September 2025 Bond Offering Details

The $250 million offering of 6.75% Senior Notes due 2033 was structured as an addition to the existing $500 million series issued earlier in May 2025. Priced at 103.500% plus accrued interest, the transaction reflects robust investor demand and confidence in Bombardier’s creditworthiness. Institutional investors’ willingness to pay a premium underscores the appeal of the company’s improved risk profile.

The offering closed on September 18, 2025, and the proceeds are allocated to redeem all remaining 7.125% Senior Notes due 2026 and a significant portion of the 7.875% Senior Notes due 2027. By combining the new issuance with existing notes, Bombardier enhances liquidity and market acceptance, creating a single, larger, and more attractive debt instrument for investors.

The redemption of these higher-coupon notes is scheduled for early October 2025, ensuring a swift transition to a more favorable debt structure. This sophisticated financial engineering addresses multiple objectives: lowering interest expenses, extending debt maturities, and consolidating the company’s capital structure for greater efficiency.

“The premium pricing achieved in the offering reflects market recognition of the company’s improved credit profile and the attractiveness of the 6.75% coupon in the current interest rate environment.”

Strategic Rationale and Financial Impact

The primary rationale behind the September 2025 bond offering is to reduce interest expenses by replacing higher-coupon debt with lower-cost financing. By refinancing the 7.125% and 7.875% notes with 6.75% securities, Bombardier achieves immediate annual interest savings and extends its debt maturity profile, thereby reducing refinancing risk for the next eight years.

This refinancing results in meaningful improvements to Bombardier’s capital structure. The company’s average coupon on long-term debt has decreased by 11 basis points, and the average maturity has been extended to 4.7 years. These changes directly enhance cash flow margins and debt service coverage ratios, providing a stronger foundation for future growth and investment.

The timing of the offering was strategically chosen to coincide with strong operational performance and favorable market sentiment. The ability to price the notes above par value is a testament to Bombardier’s success in rebuilding investor trust and establishing itself as a credible borrower. The transaction also supports the company’s broader capital allocation framework, which emphasizes debt reduction while maintaining liquidity for operational and strategic needs.

Credit Rating Improvements and Market Reception

The progress made by Bombardier has been formally acknowledged by major credit rating agencies. S&P Global Ratings upgraded Bombardier’s issuer credit rating to ‘B+’ from ‘B’, and raised its issue-level rating on the company’s unsecured debt, citing continued deleveraging and ample liquidity. The agency highlighted Bombardier’s growth in higher-margin aftermarket services and the sustainability of its $14.9 billion backlog.

Moody’s Ratings also upgraded its outlook on Bombardier to positive, reflecting confidence in the company’s ability to sustain its financial improvement trajectory. These upgrades enhance Bombardier’s access to capital markets and are expected to lower its future borrowing costs, as many institutional investors have minimum credit rating requirements for their portfolios.

Market reception to Bombardier’s debt securities has been notably positive, as evidenced by the successful pricing of multiple offerings above par value. The September 2025 transaction’s pricing at 103.500% represents strong institutional demand, especially remarkable given the broader economic uncertainty and challenges facing the aerospace sector in 2025.

“The combination of upgrades from both major rating agencies provides validation of management’s strategic approach and enhances the company’s access to capital markets at favorable terms.”

Bombardier’s Operational Performance Context

Bombardier’s financial restructuring is underpinned by robust operational performance. In the second quarter of 2025, the company reported total revenues of $2.0 billion, with adjusted EBITDA of $297 million and EBIT of $205 million. These results reflect Bombardier’s ability to convert revenue growth into sustainable earnings.

The company’s backlog reached a record $16.1 billion as of June 30, 2025, driven by a landmark Orders of 50 firm aircraft and 70 options from a new customer, along with a comprehensive maintenance services partnership. This backlog growth represents the highest single-quarter business jet unit order volume in more than a decade, underscoring continued strong demand for Bombardier’s products.

Delivery performance has also been consistent, with 36 aircraft delivered in Q2 2025 and 59 in the first half of the year. The company remains on track to meet its full-year delivery guidance of over 150 aircraft. Services revenue, a key driver of margin expansion, reached $590 million in Q2, up 16% year-over-year, reflecting the growing importance of recurring, high-margin aftermarket activities.

Industry Context and Market Conditions

The global aviation sector is experiencing a robust recovery, with industry revenues projected to surpass $1 trillion in 2025. Business aviation, in particular, has shown strong momentum, with flight activity up approximately 3% year-over-year in the first half of 2025, and global activity remaining more than 10% above pre-pandemic levels.

New business jet deliveries are gaining pace, with 455 recorded in the first half of 2025 and projections for 820 total deliveries by year-end, an 8% year-over-year increase. The market has shifted toward sustainable growth, with pre-owned aircraft inventory increasing only modestly, supporting a seller-favored environment.

Despite these positive trends, the industry faces ongoing challenges, including Supply-Chain disruptions, labor shortages, and inflationary pressures. The aviation debt market has also evolved, with wider credit spreads but increased opportunities for borrowers with strong credit profiles, such as Bombardier. The recovery in aviation asset-backed securities markets further contextualizes the favorable reception of Bombardier’s corporate debt offerings.

Risk Considerations and Future Outlook

While Bombardier’s financial and operational improvements provide a strong foundation, several risks remain. Macroeconomic uncertainty, the cyclical nature of business aviation demand, and interest rate volatility could impact future performance. Supply chain disruptions continue to pose operational risks, potentially affecting production capacity and delivery schedules.

Credit rating agencies have noted that a sustained increase in leverage or a decline in backlog could trigger rating downgrades, while further improvements could result in additional upgrades. Market competition, evolving customer demand, and reliance on aircraft deliveries also present ongoing challenges. Nonetheless, Bombardier’s substantial liquidity, extended debt maturity profile, and strategic focus on high-margin services provide resilience and flexibility to navigate these risks.

The company’s growing services business, recurring cash flows, and expanding global service network offer stability and growth prospects even in the face of potential volatility in new aircraft demand. These factors, combined with a strengthened balance sheet, position Bombardier to capitalize on industry trends and pursue strategic opportunities as they arise.

Conclusion

Bombardier’s successful $250 million bond offering is a testament to its comprehensive financial transformation and renewed market confidence. The ability to price the notes above par value and secure favorable terms reflects the company’s effective execution of its debt optimization strategy and the strength of its operational performance.

Looking ahead, Bombardier is well-positioned to leverage its improved financial flexibility, strong backlog, and expanding services business to drive sustained growth and profitability. The company’s proactive approach to debt management, combined with a favorable industry backdrop, supports its long-term objective of financial stability and strategic growth. With continued focus on innovation and operational excellence, Bombardier stands poised to maintain its leadership in the global aerospace industry.

FAQ

What was the purpose of Bombardier’s $250 million bond offering?
The proceeds are being used to redeem higher-cost debt, specifically the 7.125% Senior Notes due 2026 and a portion of the 7.875% Senior Notes due 2027, thereby reducing interest expenses and extending the company’s debt maturity profile.

How did the market respond to the bond offering?
The notes were priced at 103.500% plus accrued interest, reflecting strong investor demand and confidence in Bombardier’s improved creditworthiness and financial strategy.

What impact have recent credit rating upgrades had on Bombardier?
Upgrades from S&P Global Ratings and Moody’s have validated Bombardier’s financial turnaround, lowered its borrowing costs, and expanded its access to institutional investors.

What are the main risks facing Bombardier?
Key risks include macroeconomic uncertainty, supply chain disruptions, interest rate volatility, and competitive pressures in the business aviation market.

How is Bombardier positioned for the future?
With a record backlog, robust services revenue, improved liquidity, and a more stable capital structure, Bombardier is well-positioned to pursue growth and navigate future industry challenges.

Sources: Bombardier Official Announcement