Bombardier’s white knight investor excused from bond lawsuit

Canso Investment Counsel Ltd., the bond investor that helped Bombardier Inc. try to ward off a default claim in 2021, has been excused from the jet maker’s fight with hedge funds in New York. 

The Montreal-based aerospace manufacturer, facing financial pressure, sold off major assets including its rail business, regional jet program and aerostructures division in 2020 and 2021. A group of holders of its 7.45% bonds due in 2034 argued that the deals violated the terms of that debt. 

In response, Bombardier in May 2021 sold an additional $260 million of bonds to Ontario-based Canso, giving it a majority of the notes outstanding. Canso then voted to waive the alleged default, thwarting other bondholders.

Hedge funds Antara Capital Master Fund, Corbin Erisa Opportunity Fund and Corbin Opportunity Fund have since argued in a lawsuit that the asset sales carried out by the company ran afoul of the debt’s terms and that Canso was unfairly interfering in the bond contract.

New York Supreme Court Justice Andrew Borrok said in a Dec. 22 ruling that Canso should be dismissed from the case. Canso cannot be held liable for “tortious interfence” with the bond contract, as the hedge funds alleged, because Canso itself is a party to the contract, Borrok said. 

In the same ruling, Borrok confirmed his denial of Bombardier’s request to dismiss the lawsuit. The trustee for the bonds in question had also sought to throw out the suit, which was also denied.