In the world of investing, one will always be able to find businesses that promise the world, and continue to fail over and over again, despite having the explicit favouritism of whichever political party is in power.
In Canada, a few examples come to mind, but Bombardier, Inc (TSX:BBD.B) is perhaps the problem child the Canadian and Quebec governments can’t seem to reel in, no matter how much money is thrown down this black hole.
Bombardier has continued to sell off pieces of its business (mostly non-core businesses thus far) to pay down debt, but its debt load remains substantial, and a number of large payments are set to be made over the next few years that the company does not have the ability to pay with cash flow from operations.
The deal the plane maker made with Airbus, in which Bombardier gave away the CSeries for free (but retained debt), is now coming back to haunt the transportation manufacturer.
Now, Bombardier has announced plans to look at selling its business jet division, as this is one of its only bright spots (some suitor may pay a nice chunk of change for this), but by doing so, will only be left with a poorly run and mismanaged train division, and a truckload of debt, which will affect profitability, even if the company is able to turn its train operations around.
For investors considering gaining exposure to Bombardier, take a look at the company’s bonds which are providing a juicy yield of around 9% currently, reflecting the very real worries the market has about the liquidity and solvency of Bombardier.
Invest wisely, my friends.
