|Bid||5.62 x 142800|
|Ask||5.62 x 10700|
|Day's range||5.47 - 5.67|
|52-week range||3.28 - 13.95|
|Beta (5Y monthly)||2.17|
|PE ratio (TTM)||N/A|
|Earnings date||19 Nov 2020|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||04 Feb 2019|
|1y target est||22.24|
(Bloomberg Opinion) -- When the global economy went into hibernation to try to halt the spread of Covid-19, companies everywhere scrambled to get their hands on cash. Banks, shareholders and governments were all tapped for money, but self-help played a big part too. Businesses tried to clear their inventories, to get paid quickly for their products and services, and to pay their bills more slowly. Do all those things and a company should have more funds in the bank to pay wages and other fixed costs — crucial if you want to survive an economic crisis of this scale.As is so often the case, those creative types in the finance industry have come up with a smorgasbord of ways to help firms increase their cash holdings. The oldest and most common is called factoring. Essentially, if you’re a cash-strapped company whose customers are dragging their feet on paying their bills, no problem: A bank will give you an advance on those invoices, for a fee. Another increasingly fashionable technique is a more complicated service known as reverse factoring or supply-chain finance. This allows a company’s suppliers to get paid what they’re owed quickly. The company then refunds the finance provider at a later date.Both these techniques — known as invoice finance — generate chunky fees for banks and fintechs such as Greensill Capital, a reverse-factoring specialist backed by SoftBank’s Vision Fund. Viewed positively, these arrangements help keep the wheels of commerce oiled, especially at a time when supply chains face massive disruption — and uncertain payment schedules — because of the pandemic. In theory, they let everyone get their money reasonably quickly. However, this is really just another kind of short-term borrowing, and one that’s not well understood by investors. It can lead to nasty surprises.Most obviously, there’s the risk of fraud, where individuals raise finance against fake invoices. That may have contributed to the collapse of London-listed hospital operator NMC Health Plc, according to the Financial Times.But the economic upheaval caused by the coronavirus has exposed other potential problems. If a company suddenly stops using invoice financing — either voluntarily or because their banks tighten credit terms — that can worsen its cash flow difficulties at exactly the wrong moment. This happened when British contractor Carillion Plc collapsed two years ago. Furthermore, these arrangements aren’t always disclosed in a transparent way, making it difficult to get a full picture of a company’s accounts. Consider these four examples:ThyssenKrupp AG. Having completed the 17 billion-euro ($20 billion) sale of its elevators division, German steelmaker ThyssenKrupp’s financial position is now much improved. Yet its shares tumbled 16% last week when it disclosed that 2.5 billion euros of those proceeds will be gobbled up by the normalization of its working-capital arrangements. The company had used invoice financing for about 2 billion euros of its receivables (the sum owed to it by customers) every year, and most of this will be halted. ThyssenKrupp will also stop delaying payments to some suppliers at the end of each financial year, which prettified its accounts and helped it comply with banking covenants. Typically, this was then followed by a large cash outflow in the first quarter of the new financial year when the supplier payments came due. While ThyssenKrupp always disclosed its factoring facility in the footnotes to its financial statements, some investors might not have been paying attention.Rolls-Royce Holdings Plc. In February, Rolls-Royce surprised investors by quantifying the full extent of its invoice-financing arrangements for the first time. The British aircraft-engine maker’s annual report revealed it had drawn 1.1 billion pounds under a factoring facility, which allowed it to collect cash it was owed more quickly. Furthermore, its suppliers have drawn 860 million pounds using a supply-chain finance facility. Both arrangements helped improve Rolls-Royce’s perennially weak cash flow. When it announced first-half results in July, the group announced that it has stopped factoring its receivables. It said the decision was voluntary and would lower its financing costs. But free cash flow was 1.1 billion pounds lower than investors expected. Bombardier Inc. The Canadian train and private-jet manufacturer became a prolific user of invoice financing after overextending itself trying to launch several new aircraft programs. It’s in the process of breaking itself up but hasn’t completed the sale of its train division to France’s Alstom SA. Until those proceeds arrive, it’s vital that Bombardier keeps hold of its cash. It’s unfortunate, then, that Bombardier will suffer a roughly $320 million negative cash impact in the second half of the year because of winding down a reverse-factoring facility used by its aviation business. “Disruptions to the financial markets have rendered this facility too expensive,” management explained on an investor call. Leoni AG. Factoring is only possible if you have a sufficient quantity of invoices to sell to the bank. Leoni, a struggling German automotive supplier, depended on selling its receivables to generate cash. This became a problem in March when carmaker customers suddenly halted production and curtailed their orders. With fewer invoices to sell, Leoni was forced to go cap in hand to the government for a 330 million-euro state-backed loan.Taken together, these four cases show the pitfalls of this technique. If invoice financing can cease just when it is needed most, that’s all the more reason for investors to treat it as quasi-debt. And it’s imperative that disclosures, particularly around reverse factoring, are improved. Ultimately investors need to understand exactly how a company is generating cash.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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(Bloomberg Opinion) -- Canadian transportation champion Bombardier Inc. is running out of road. Its shares lost more than one-third of their already much diminished value last week after another disastrous profit warning.The trains and private jet manufacturer may be forced to exit its commercial aerospace joint venture with Airbus SE because of a shortage of cash; a writedown looms when the group reports 2019 results next month. In the meantime, it’s looking at ways to accelerate repayment of its $10 billion debt pile, which suggests a breakup might be on the cards. Bombardier has held talks about a combination of its rail businesses with French rival Alstom SA, Bloomberg reported on Tuesday, adding that this is one of several options being considered.On the other side of the Atlantic another storied industrial conglomerate, ThyssenKrupp AG, is suffering a comparable crisis. The German steel and car-parts maker has put its prized elevator division up for sale to help with its massive debt and pension liabilities.When their respective restructurings are completed, these vast and politically important employers will be shadows of their former selves. ThyssenKrupp has already been booted from Germany’s benchmark Dax index, while Bombardier’s on the cusp of becoming a penny stock (again).So how did they get into such a mess and why haven’t they managed to extricate themselves, despite years of restructuring and several false dawns? In both cases, hubris, shoddy governance and poor project management have played a role in their downfall. The fate of the two companies was sealed around a decade ago when they bet the farm on high-risk growth strategies — and lost. Bombardier signed off on the C-Series, an ambitious attempt to break Airbus and Boeing Co.’s lock on the commercial aerospace market. The small, fuel-efficient jet won rave reviews but orders were disappointing and delays caused costs to balloon to about $6 billion and debt to pile up. Bombardier made things worse by trying to bring several new business jets to market at the same time. Weak sales forced it to abandon development of the Learjet 85 — resulting in a $2.5 billion writedown — and to cede control of the C-Series to Airbus for the humiliating sum of one Canadian dollar.ThyssenKrupp’s original sin was sinking about 12 billion euros ($13.3 billion) into a pair of steel plants in Brazil and the U.S. to try to keep pace with the acquisitive ArcelorMittal SA. Poor construction work and a faulty business plan led to massive losses from which ThyssenKrupp has never really recovered.Woeful governance had a hand in both corporate disasters. Bombardier has a dual-share structure that gives the founding Bombardier-Beaudoin families majority voting control even though they own a much smaller fraction of the share capital. Pierre Beaudoin served as chief executive officer from 2008 until 2015 — during which time his father, Laurent, remained chairman — but he didn’t do a very good job. Pierre is now the chairman.ThyssenKrupp’s anchor shareholder, the Krupp Foundation, presided over a management culture that prized fealty and the preservation of corporate perks, including the company’s hunting grounds, but failed to prevent compliance breaches. Recent boardroom fireworks at the German giant (two chief executives and a chairman have departed in quick succession) suggest it remains dysfunctional.In their attempt to stop the rot, ThyssenKrupp and Bombardier have followed a similar script. Scrap the dividend, sell underperforming assets, slash thousands of jobs and cut costs. But the cash flow needed to cut debt has never consistently materialized and things have got worse.In 2019 ThyssenKrupp burned through 1.1 billion euros of cash and it expects to consume even more in 2020, risking a breach of banking covenants. Bombardier burned about $1.2 billion in cash last year, far in excess of the roughly break-even target it set at the start of the year.A problem for both companies has been estimating the cost and completion date of large projects. It’s one reason why ThyssenKrupp’s industrial plant construction unit — once a decent source of cash flow from large customer prepayments — has become a bottomless money pit (the unit is now up for sale). At Bombardier, several high-profile train projects have run late and over budget. Bombardier must pay penalties for late delivery.Judging by their balance sheets, both companies appear to be in trouble. ThyssenKrupp has just 2.2 billion euros in net assets, while Bombardier’s liabilities far exceed its reported assets.However, unlike Bombardier’s, ThyssenKrupp’s bonds still trade well above par and its 7.4 billion euros market capitalization is almost four times that of the Canadian company. That’s because ThyssenKrupp still has something of value to sell: The elevators unit could fetch more than 15 billion euros if management decides to part with all of it (the sale process is ongoing and ThyssenKrupp might opt to keep a majority stake).Bombardier doesn’t face an immediate cash crunch thanks to the proceeds of recent asset sales and no big debt maturities this year. But having already offloaded its ageing Q400 turboprop aircraft line and its Belfast wing factory, it’s not exactly overburdened with stuff to sell to meet future liabilities.Neither of Bombardier’s two remaining core divisions, trains and private jets, is worth as much as ThyssenKrupp’s elevators. In 2015 Bombardier sold a 30% stake in its rail division to the Quebec public pension fund, valuing the whole unit at $5 billion. The business aviation division would probably fetch more.For both businesses, the difficulty with flogging more silverware is that what’s left over probably won’t generate much profit.The moral of these twin corporate calamities is simple: If tens of thousands of people depend on you for employment, don’t bite off more than you can chew. And make sure the higher-ups know what’s going on.To contact the author of this story: Chris Bryant at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.