By Davide Scigliuzzo and Allison Lampert
Nov 20 (Reuters) - Bombardier Inc BBDb.TO is expected to price its new bond offering on Monday, a day ahead of initially planned, in a sign the Canadian plane and train maker is drawing strong interest for its $900 million deal, one of the lead banks said.
The company said on Monday it is offering a seven-year bond, with two-thirds of the net proceeds going towards early retirement of notes with a coupon of 4.75 percent maturing in 2019, as it taps debt markets for a second year. is now guiding investors toward a yield of 7.5 to 7.75 percent on the new issuance, one of the lead banks said.
The remaining amount would give the company "financial flexibility," a Bombardier spokesman said by email on Monday, without elaborating. The spokesman was not immediately available to comment on the timing of the bond pricing.
The planned fund raising comes after Bombardier last month agreed to sell a majority stake in its CSeries jet program to European planemaker Airbus SE AIR.PA , which is expected to cut costs while bolstering the plane's sales and giving Bombardier a possible way out of a damaging trade dispute with Boeing (NYSE:BA) Co BA.N and U.S. regulators. part of the deal, Bombardier has said it would invest $300 million to set up an Alabama assembly line at an existing Airbus facility for CSeries purchased by American carriers.
The fund raising would "increase Bombardier's cash balances during a period of negative free cash flow," including about a negative $1 billion in 2017 due to heavy investments in the CSeries which is ramping up production, along with slower than anticipated deliveries of the narrowbody jets, according to a note by Fitch Ratings.
Bombardier aims to be cash flow neutral by 2018 and to break even on the CSeries narrowbody jets in 2020.
It is the latest instance of Bombardier pushing out the company's debt maturities past 2020 to bolster liquidity, Jamie Koutsoukis, a senior analyst with Moody's investor service, said by phone from Toronto.
"This is something that they've done consistently," Koutsoukis added.
In November 2016, Bombardier raised $1.4 billion by offering senior notes to refinance some of its debt. existing 7.5 percent bonds, which were issued in 2015, and mature in 2025, slipped around three quarters of a point to 100.85 on Monday to yield around 7.3 percent, according to MarketAxess data.
(1 Canadian dollar = $0.7828)