BUSINESS

Bombardier's CS300 Jet Gets Go Ahead For Test Flights (PHOTOS)

02/20/2015 01:59 EST | Updated 04/22/2015 05:59 EDT
Bombardier
MONTREAL - Bombardier said Friday that the first test flight of the CS300, the larger model of its new CSeries passenger jets, is expected in about a week.

The Montreal-based aerospace and rail equipment company also announced Friday that it now expects to raise $938 million from an equity offering — up from the previous estimate of $750 million.

Bombardier has been focusing a lot of its resources on getting the CSeries launched following years of planning and preparation.

Last week, the company revised the program's cost estimate to US$5.4 billion, up from US$4.23 billion a year ago, following a four-month delay in aircraft flight tests because of an engine failure.

On Friday, Bombardier said first CS300 test plane is expected to take off from Mirabel airport north of Montreal sometime between next Thursday and Saturday, depending on weather.

The 120- to 160-seat aircraft is slated to enter into service in mid-2016, about six months after the smaller CS100.

Story continues below

Bombardier CSeries jets

Under Bombardier's equity offering, the company will issue nearly 424.2 million subscription receipts at a price of C$2.21 each through a syndicate of underwriters.

The receipts will be exchanged for Bombardier's class B shares after the financing gets shareholder approval next month.

Members of the founding Bombardier family said they will place orders for a total of US$50 million of the shares offered.

The company also signalled last week that it would issue more shares and debt to raise about $1.5 billion. It has also suspended its dividend and shelved development of a new Learjet model to conserve its cash.

Even with the success of Bombardier's efforts to raise cash through equity sales, questions remain about its ability to launch the CSeries in the face of soft demand and stiff competition.

"The CSeries timeline is tight with high risk of the entry into service schedule slipping, further delaying potential improvement in cash flow and credit ratios and straining liquidity," Evan Mann of Gimme Credit wrote in a report.

Mann expects Bombardier's financial challenges will persist longer than anticipated, requiring the issuance of more debt.