BOMBARDIER Recreational Products Inc., a privately held company, is taking measures to raise between $40.27 million to $80.55 million (CA $50 to $100 million) of new capital with a goal of reducing its overall debt. The company hopes for funding to come from BRP’s shareholders, as well as contributions from other institutional sources.
However, Standard & Poor's Ratings Services has just lowered BRP's long-term corporate credit rating in response to the OEM seeking an amendment allowing it to use the new funding to repurchase debt at a discount. The notes in question would mature in 2013.
S&P says it lowered BRP's long-term corporate credit rating to CCC-plus, down from B-minus. Reps at S&P said that if the debt repurchase goes ahead as planned, the bondholders won't get back all the principal and interest payments that they would have otherwise received. BRP officials say they believe that S&P's decision is based on overly rigid guidelines that do not appropriately incorporate the company's particular situation.
The OEM insists it is not making a distressed debt offer, and says the proposed amendment to allow for repurchases of a portion of its term loan at a discounted rate with new capital reflects management's motivation to reduce debt levels.
BRP's portfolio of brands and products include Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and sport boats, Evinrude and Johnson outboard engines, Can-Am ATVs and roadsters, as well as Rotax engines and karts. The company operates manufacturing facilities on three continents and distributes product to more than 80 countries.
In December, BRP drafted a plan to cut production by 20 percent and to eliminate 980 jobs. The OEM said the global economic recession was forcing it to take conservative actions to reflect the retail and inventory realities of the marketplace and cut expenses to a minimum.
Click HERE to learn about other parts of BRP's operating plan.
-- Submitted by Guido Ebert