And which one of the three is the most interesting?
I own BBD.PR.C preferred for the second time.
Principle $25.00
Dividend $1.562 paid quarterly = 6.25%
cumulative
Redeamable by company at $26.00 on Mch31-07, $25.75 on Mch31-08, etc.
Can redeam by converting to common shares equivalent of redemption price.
BUT not at price below $2.00 . But you can buy put options to cover that risk if you like.
Since there is still 25% unrealized capital gain in the pfrd's price, and I consider it virtually certain the company will redeam with shares in a year, and that the risk of the common stock going below $2 can be hedged...This is a good deal.
jackstraw wrote:I own BBD.PR.C preferred for the second time.
Principle $25.00
Dividend $1.562 paid quarterly = 6.25%
cumulative
Redeamable by company at $26.00 on Mch31-07, $25.75 on Mch31-08, etc.
Can redeam by converting to common shares equivalent of redemption price.
BUT not at price below $2.00 . But you can buy put options to cover that risk if you like.
Since there is still 25% unrealized capital gain in the pfrd's price, and I consider it virtually certain the company will redeam with shares in a year, and that the risk of the common stock going below $2 can be hedged...This is a good deal.
??? Where is the 25% unrealized capital gain - par is $25, stock is $19.6 (which makes the yield 8%).
The company will have no interest in redeeming the issue by giving you $26, or the equivalent of $26 in common stock (with another 5% kicker).
IMO it's almost certain the redemption won't happen.
8% yield sounds attractive, but scary! Have to think Bombardier wouldn't be too keen on redeeming at such a premium either. 52 week high was just over $21.00 so there's no reason to think they'll get back to $25.00 or $26.00 anytime soon. Bombardier makes contract win announcements seemingly every week. I often wonder how valid these are. The EDC has 42 Bombardier planes parked in their yard repossessed from bankrupt U.S. airlines at the moment as well. Don't figure too many new ones will be selling until these are auctioned off and the taxpayer gets to foot the bill for the negative difference between cost and sell.
Consider it from the company's point of view. Will they want to continue paying 6% interest on debt, or 0% dividends on common stock? They will be needing new cash. Will they prefer to pay 5% transaction fee to issue even more debt, or save the 6% interest AND get rid of some of the existing debt, possibly increasing its rating.
Consider it from the existing shareholders' point of view. Will they want to pay Prd Share owners 6% before they get anything or will they accept the small dilution because the company's growth is currently less than 6%?
Bonds, preferred shares and common shares each have their place in a company structure. If Bombardier decided some time ago that they need some of each, I don't see how the situation has changed now.
Paying 6% on their preferreds is pretty sweet for a company with their credit rating.
Consider it from the company's point of view. Why should they give you $26 per share if they can buy it on the open market for $19?
Consider it from the existing shareholders' point of view. Will they want the company to spend $26 on something that the market has decided it's worth $19?
What if the board decides 6 months later that they want to issue new preferreds? Buy you out at $26, issue new ones at $25 which will have to pay about the same yield as the old ones (i.e. 8%) - net interest paid by the company will still go up by a factor of $26 / $19 - where exactly is the savings?
Capital Structure: They must refinance a block of debt soon. Since they are already fully levered, they will want more equity and less debt. The company's situation has changed a lot since these structures were put in place. They need to delever now.
Buy now for $20 or redeem for $25: There is absolutely nothing stopping them from buying these up in the secondary market...but they aren't (that I know of). Because they don't have the cash. In their coming up refinancing, it may become part of the deal that they use part of the money to buy these on the market. That buying will drive up the price.
Refinancing Rate: The next refinancing will be on superior debt. I also think there is a possiblity some of that may be backstopped by the PQ or Feds. The current default rate for junk debt is (I believe) only about 2% so 8% is excessive.
Reissue more Preferreds: These type of Preferreds are meant originally to end up a equity. The company would have a very hard time issuing more equity now. This swap is a godsend.
The aircraft was a Bombardier Canadian Regional Jet (CRJ) 100, FAA officials said.
How many does this make?
not that many I don't think. CBC's website says they have a good track record. Have been watching CNN's website with interest as I know a pilot who's with Comair. And also one for BBD.
No, I know two pilots with bbd.
[i]It could be that the purpose of my life is to serve as a warning for others[/i] ~ [i]anon[/i]
According to that LINK six crashes are listed. Of the reasons given, four a crew/ground control related, i.e. human error, the one in China is unexplained, that leaves one, on 14/11/2006 without a 'plausible' explanation.
Check out Embrear's (BBD's competitor) record. Given a choice of aircraft which one would you rather fly in ?
The impression I get from the news is Bomber's regional jet business is fading, perhaps this crash will lead to a spinoff or sale of the unit which may be good for the stock.
eezee wrote:Check out Embrear's (BBD's competitor) record. Given a choice of aircraft which one would you rather fly in ?
Be careful with using those statistics without context.
1. How many Embraer regional jets are flying and how long have they been flying compared to BBD CRJ?
2. Look too at the airlines. For example, despite what the AC-bashers may say, they have an enviable record compared to other airlines of comparable size.
3. And finally consider that when an aircraft manufacturer or airline has had only a small number of crashes over a long period of time, another's record that's only a handful more (or fewer) crashes may not be statistically signifigant.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
Agreed. Need to take into account total flying hours, numbers of takeoffs and landings, the airline itself, ground maintenance, etc, etc.
Personally, I don't like any of the regional jets. Feel like the proverbial sardine in a can, seats with minimal cushioning and seatback adjustment, and a lavatory that would be a severe challenge to many passengers.
AltaRed wrote:Agreed. Need to take into account total flying hours, numbers of takeoffs and landings, the airline itself, ground maintenance, etc, etc.
Personally, I don't like any of the regional jets. Feel like the proverbial sardine in a can, seats with minimal cushioning and seatback adjustment, and a lavatory that would be a severe challenge to many passengers.
Some of them are like little rocketships (no inappropriate inuendo intended) - I flew an embraer from Houston to Toronto once (Continental) and it was a fantastic experience, just had a blast
oops, have to edit again - when I say "blast", I mean "hoot".
[i]It could be that the purpose of my life is to serve as a warning for others[/i] ~ [i]anon[/i]
Appears the plane took off on the wrong runway. From AP-CP....
Lexington police spokesman Sean Lawson said investigators were looking into whether the pilot was on the wrong runway and discovered it too late.
The main runway at Lexington’s airport is 2,133 metres long, while a daytime-only, general aviation runway is about 1,066 metres.
That type of plane needed 1,370 metres to 1,525 metres before it lifts off, said Paul Czysz, professor emeritus of aerospace engineering at Saint Louis University.
Czysz said aerial images of the wreck indicate it was almost inconceivable that the airplane could have taken off on the longer runway because its nose is almost parallel with the shorter one. Also, trees at the end of the shorter runway were damaged, he said.
Canadian Press wrote:Bombardier secures $883M in aircraft sales
Bombardier Aerospace (TSX: BBD) has announced a series of deals with European airlines for purchase of regional and turboprop planes.
SAS Scandinavian Airlines and three of its affiliates have signed firm orders for 27 regional jets and turboprops, with options taken for two dozen more. The affiliates are Estonian Air, Norwegian firm Wideroe's Flyveselskap A/S and airBaltic of Latvia. The company says the combined value of the orders based on CRJ900 and Q400 NextGen list prices is US$883 million, with a potential value of US$1.75 billion if all options are exercised.
Bombardier, landing gear manufacturer Goodrich and SAS are also reported to have agreed on compensation stemming from landing gear incidents in 2007. Bombardier said terms of the agreement were being kept confidential, but SAS said it will receive just over US$164 million in compensation in the form of cash and credits for future aircraft orders. Last year, SAS permanently grounded the airline's entire fleet of 27 Bombardier Dash 8 Q400 aircraft after suffering three landing accidents over a seven-week period. It blamed the accidents on faulty landing gear.
Deliveries of the aircraft will be made successively until 2011, starting in the autumn 2008.
So now we know that SAS's concerns for their passengers' safety is worth ~$164M in discounts to buy more of those "dangerous" Q400s
P.S. Since SAS "permanently" grounded their Q400 "OldGens" I wonder who's flying them these days. Those planes were quite new so I doubt SAS just scrapped them.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
jackstraw, in April 2006 wrote:Since there is still 25% unrealized capital gain in the pfrd's price, and I consider it virtually certain the company will redeam with shares in a year
Since Bylo resurrected this thread, let me add that my prediction of 2 years ago that there is an almost certainty that redemption at $26 would not happen, was indeed correct. The preferreds continue to happily exist and the company had no interest giving shareholders a present for nothing.
I still have more than a ton of learning to do about the preferred market till I can rival James Hymas, but some things are elementary, Dr. Watson .
finiki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
Cannot believe how cheap this is. In the last 9 years, its forward p/e has never been this low. Ever. At current estimates, it's trading at a p/e of 7.9 for 2008 and 6.5 for 2009.
This stock traded at a 50 p/e in 1999 and has historically traded mostly at a p/e of 20-25.
"They misunderestimated me." --George W. Bush, November 6, 2000
Anybody see any news that would explain the drop in Bombardier (BBD.B) from $4.70 to $3.80 over the last couple of days? With the potential of rail or transit infrastructure projects around the world, it ought to be heading up instead.
wolf411 wrote:Anybody see any news that would explain the drop in Bombardier (BBD.B) from $4.70 to $3.80 over the last couple of days? With the potential of rail or transit infrastructure projects around the world, it ought to be heading up instead.
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
Funny how it was GD's warning for Gulftstream (Lear, Challenger competitor) which started the selloff.
BBD has a firm order backlog, although anything can slip. 50% of the business is in trains (mostly in Europe) and this is sure to get a boost from infrastructure spending.
I am long on BBD (and up 20% in less than a year makes it a large position in my portfolio), if I was shopping I would take this blip as a buying opportunity.
Peculiar_Investor wrote:How about their exposure to the business jet market?...
I wouldn't expect the drop in the business jet sector to have that much of an effect on the overall results. I'm thinking that the rail/transit potential would outweigh that, as discussed in this National Post article.
I'm surprised there haven't been any major hi-speed rail project announcements. I would think that Montreal-Windsor, Boston-Washington, San Francisco-San Diego, Dallas-Austin-Houston, etc would all make good candidates for switching passenger loads from aircraft to trains. Reduce oil sonsumption, and spend infrastructure dollars... seems like a good way to kill two birds with one stone.