Bombardier’s Debt Restructuring Strategy and Its Implications for Long-Term Value

Bombardier Inc. has embarked on an aggressive debt restructuring strategy in 2025, leveraging long-dated senior notes to refinance near-term, higher-cost obligations. This move, which includes refinancing $500 million of Senior Notes due in 2027 to 2033 and a subsequent $250 million offering of 6.75% Senior Notes due 2033, underscores the company’s commitment to stabilizing its balance sheet while navigating a challenging aviation sector [1]. The strategy has yielded tangible benefits, including credit rating upgrades and improved liquidity, but it also raises critical questions about long-term risk exposure and capital structure sustainability.

Strategic Merits: Cost Reduction and Creditworthiness

Bombardier’s refinancing efforts have directly addressed its near-term debt pressures. By extending the maturity of $500 million in 2027 notes to 2033, the company reduced its average coupon on long-term debt by 11 basis points and extended the average maturity of its debt to 4.7 years [2]. This not only lowers immediate interest costs but also defers refinancing risks to a more favorable interest rate environment. The proceeds from the additional $250 million offering of 6.75% Senior Notes due 2033 will further retire higher-yielding debt, including its 7.125% notes due 2026 and part of its 7.875% notes due 2027 [3].

These actions have bolstered Bombardier’s credit profile. S&P Global Ratings upgraded the company to BB- with a stable outlook, while Moody’s shifted its outlook to positive, citing improved earnings and cash flow visibility [4]. Such upgrades are critical for Bombardier, which has historically faced skepticism due to its heavy reliance on debt. The company’s net leverage ratio, now targeting 2.0x–2.5x by 2025 (down from 3.0x previously), reflects disciplined deleveraging, with gross debt falling from $10.1 billion in 2022 to $5.6 billion in 2025 [5].

Risks of Extended Maturities and Interest Rate Sensitivity

While the refinancing strategy has stabilized Bombardier’s short-term liquidity—evidenced by $1.2 billion in available liquidity as of June 30, 2025—the extended debt maturities introduce new vulnerabilities [6]. By locking in 6.75% coupon rates for a decade, Bombardier exposes itself to potential interest rate volatility. If inflation or central bank policies drive rates higher in the coming years, the company’s fixed-rate debt could become less advantageous compared to floating-rate alternatives.

Analysts have also flagged the risks of over-reliance on long-term financing. A report by Corporate Jet Investor notes that Bombardier’s capital structure remains “elevated relative to peers,” with adjusted net debt to EBITDA expected to hover near 2x–3x through 2025 [7]. While this ratio is healthier than historical levels, it still necessitates consistent cash flow generation to service debt. Any disruptions—such as delays in new aircraft programs or softening demand in its services segment—could strain liquidity.

Capital Structure Implications and Operational Stability

Bombardier’s debt strategy has reshaped its capital structure, prioritizing long-term stability over immediate flexibility. The company’s focus on extending maturities reduces the frequency of refinancing needs, which is particularly valuable in a sector prone to cyclical downturns. However, this approach also limits Bombardier’s ability to pivot quickly in response to market shifts. For instance, its ongoing investments in defense and services expansion require capital deployment, yet the extended debt schedule may constrain access to short-term financing for opportunistic projects [8].

Operational stability, meanwhile, appears robust. Bombardier’s services revenue grew 16% year-over-year in Q2 2025, and its backlog reached $16.1 billion, signaling strong demand for its products [9]. These metrics suggest the company can generate sufficient cash flow to meet obligations, but they also highlight the importance of maintaining operational momentum. A ratings downgrade—though currently deemed unlikely by Moody’s—could emerge if earnings growth falters or cash flow volatility increases.

Conclusion: Balancing Prudence and Pragmatism

Bombardier’s debt restructuring strategy exemplifies a prudent approach to managing near-term risks while positioning the company for long-term growth. The refinancing of high-cost debt and credit rating upgrades demonstrate effective capital management, but the extended maturities and fixed-rate exposure necessitate cautious optimism. For creditors and investors, the key takeaway is that Bombardier has made meaningful progress in stabilizing its balance sheet, yet its success will ultimately depend on sustaining operational performance and navigating macroeconomic uncertainties.

Source:
[1] Bombardier Second Quarter Performance Places Corporation on Track for Full-Year Guidance while Backlog Grows Significantly [https://bombardier.com/en/media/news/bombardier-second-quarter-performance-places-corporation-track-full-year-guidance-while]
[2] In the second quarter of 2025, Bombardier successfully completed a $500 million debt refinancing transaction [https://www.corporatejetinvestor.com/news/bombardier-2q/]
[3] Bombardier Announces Launch of US$250 Million Offering of Additional 6.75% Senior Notes due 2033 to Repay Existing Debt [https://www.barchart.com/story/news/34593738/bombardier-announces-launch-of-us250-million-offering-of-additional-6-75-senior-notes-due-2033-to-repay-existing-debt]
[4] Bombardier Inc. Upgraded To 'BB-' On Earnings And Cash [https://disclosure.spglobal.com/en/regulatory/article/-/view/sourceId/101629395]
[5] Bombardier Updates 2025 Strategic Objectives to Reflect Strong Performance and Solid Business Fundamentals [https://bombardier.com/en/media/news/bombardier-updates-2025-strategic-objectives-reflect-strong-performance-and-solid]
[6] Bombardier’s Second Quarter Performance Places Corporation on Track for Full-Year Guidance [https://bombardier.com/en/media/news/bombardier-second-quarter-performance-places-corporation-track-full-year-guidance-while]
[7] Aviation Debt Capital Markets Are Growing: An Overview of Recent Trends [https://www.vedderprice.com/aviation-debt-capital-markets-are-growing-overview-of-recent-trends]
[8] BOMBARDIER INC. MANAGEMENT'S DISCUSSION AND ... [https://docs.publicnow.com/5EDF282C23D848F9B868E0DB56F08B0F0122C625]
[9] Bombardier Second Quarter Performance Places Corporation on Track for Full-Year Guidance while Backlog Grows Significantly [https://bombardier.com/en/media/news/bombardier-second-quarter-performance-places-corporation-track-full-year-guidance-while]