Bombardier’s (TSX:BBD.B) trouble with the launch of its C Series is well documented, but the delays may be creating an investment opportunity for one of its longer-termed bonds, says one portfolio manager.
Todd Johnson of BCV Asset Management was on BNN’s “Market Call” today to share his top picks. Johnson says there is value in Bombardier’s non-investment grade 7.35%, 2026 issue.
“You are getting some real yield and you are being paid for the credit risk you are taking on,” says Johnson. “We think it’s an attractive bond to own from a total return perspective.”
Johnson says the launch of the narrow-body, twin-engine C Series, which has been plagued by numerous delays, has unduly weighed on other parts of Bombardier’s business, such as its regional jets and rail division. He thinks this era will be fast forgotten.
“We’re coming to the end,” says Johnson. “The problems for the C Series, we think, are going to fade.”
Johnson notes that the 7.35% 2026 is now at a 420 basis point spread over the Canadian government bond. “We think that credit spread is excessive for Bombardier’s high quality businesses,” he says. The portfolio manager thinks Bombardier will regain its lost investment grade status within three or four years.
Founded in 2007, Winnipeg-based BCV Asset Management manages discretionary accounts for investors whose household has a minimum of 200 thousand dollars of investable assets.