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Nov 16, 2018

Bombardier drop caps worst week in 30 years as stock plan probed

Bombardier shares plunge on Quebec regulator probe


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Bombardier Inc. (BBDb.TO) plunged to its worst week in at least 30 years after regulators said they were reviewing the company’s executive stock-sale program in the wake of an earlier share rout.

Quebec’s Autorite des Marches Financiers ordered the suspension of all such transactions until further notice. Bombardier said it would fully cooperate with the probe of the stock-disposition plan, which was adopted in August.

The regulatory scrutiny, announced late Thursday, intensifies stress on Bombardier a week after a drastic cut to its cash-flow forecast undermined confidence in Chief Executive Officer Alain Bellemare’s turnaround plan. The disappointing outlook had already erased a third of Bombardier’s market value even before the shares extended their decline Friday.

“With the pressure on Bombardier’s stock, preceding and following the release of our financial results on November 8, some had raised doubts about trading that may have occurred in the last months,” said Olivier Marcil, a spokesman for the Montreal-based maker of trains and aircraft.

Bombardier declined to comment on whether any executives have sold shares since the sale plan was announced.

Worst Week

The company’s widely traded Class B shares plummeted 20 per cent to $1.67 at the close in Toronto, the lowest closing level since September 2016. The stock lost 37 per cent this week, its worst performance since at least September 1988, according to data compiled by Bloomberg.

Bombardier’s US$1.5 billion in bonds due 2025 led declines among global high-yield notes denominated in U.S. dollars Friday, falling 2.3 cents to 90 cents on the dollar. The bonds are down 11 per cent since Nov. 7.

Quebec is ready to work with Bombardier if the government’s help is required, Economy Minister Pierre Fitzgibbon told reporters Friday. Fitzgibbon met with Bellemare earlier in the day to discuss ways for Bombardier employees whose jobs will be cut to find work elsewhere. The manufacturer said last week it would cut 5,000 jobs, half of them in Quebec.

David Chartrand, head of the machinists union in Quebec, urged the provincial government to step up investments in aerospace while demanding minimum job commitments from companies such as Bombardier to “promote and protect” the interests of the province and its thousands of workers.

Stock-Sale Plan

Bombardier said in August that transactions under the stock-sale plan would take place over two years. The shares closed at $4.64 on the day the program was announced. Bellemare and other top executives were looking to sell as many as 36.1 million shares, depending on certain conditions.

Bellemare wanted to sell as many as 7.04 million Class B shares, and Chief Financial Officer John Di Bert planned to unload 4.36 million shares, according to the filing. Chairman Pierre Beaudoin, whose family controls Bombardier through multiple-voting shares, intended to sell as many as 3.1 million shares.

Marcil said the trading plan was reviewed by the AMF before it was put in place. The program is a mechanism to ensure the orderly disposal on a predetermined basis of securities held by management. Trades under the plan are completed without any oversight or direct input from the participants, he said.