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Bombardier and Triumph Group have reached a settlement on legal action filed over delays and escalating costs associated with the Global 7000 wing.
In the May 24 announcement, Triumph said the “comprehensive settlement agreement” resolves all commercial disputes between the two companies related to the Global 7000 wing. The companies did not disclose the terms of that settlement.
Triumph added the settlement “resets” the relationship between the companies.
“We are pleased with the settlement with Bombardier regarding our Global 7000 program contract, which we believe is mutually beneficial,” said Daniel Crowley, Triumph’s president and CEO. “Our Aerospace Structures business has been dedicated to supporting Bombardier on this critical program since entering into the contract and remains committed to the program’s continued success as the aircraft transitions from flight testing to entry into service."
Crowley called the settlement a year in the making.
“Bombardier is pleased it has reached a mutually beneficial commercial agreement with Triumph Group relating to the design, manufacture and supply of wing components for Bombardier’s Global 7000 aircraft program,” Bombardier added in a statement.
Triumph disclosed earlier this year that it had filed a lawsuit seeking $340 million from Bombardier, citing “Bombardier’s failure to pay to Triumph Aerostructures certain non-recurring expenses incurred…during the development phase” and specifying “Bombardier-directed changes to the original wing requirements for the Global 7000 program.”
Bombardier had responded the claims were “without merit” and said, “At the appropriate time, Bombardier will assert its major claims against Triumph for losses sustained due to the program schedule revision.” At the same time, though, both companies had maintained that they continued to work collaboratively, and the program was moving forward.
The announcement of the settlement came not quite three weeks after Triumph had filed an 8-K document with the Securities and Exchange Commission stating that it has renegotiated its financial agreements with lenders, and that the amendment provides its Vought Aircraft unit (known as Triumph Aerostructures) “with the option, if necessary, to commence voluntary insolvency proceedings within 90 days” of the effective date of the agreement, according to the filing. “Upon the commencement of such proceedings, the Vought entities would no longer be subsidiary co-borrowers under the credit agreement, and transactions between any of the Vought entities…will be restricted.”
During Triumph’s release of the fourth quarter 2017 earnings, also on May 24, however, Crowley told analysts that it is “highly unlikely” that the company would voluntarily file for insolvency despite having that option. “Clearly, the status quo situation across multiple contracts was untenable and required action. We continue to work with our largest customers to resolve past claims and ensure that we have the liquidity needed to satisfy their needs,” he said.
For Fiscal Year 2017, Triumph’s Aerospace Structures group (which includes Vought/Triumph Aerostructures) posted a $109 million loss, an improvement over the $1.355 billion loss reported a year earlier.
Crowley noted that Triumph also reached new contract settlements with Boeing, and said, “I look forward to achieving similar win-win outcomes with our other OEM customers in the months ahead.”
A few weeks after notifying regulators of a possible involuntary insolvency of its Vought Aircraft unit, Triumph president and CEO Daniel Crowley told analysts that scenario is “highly unlikely.”
On May 5, Triumph filed an 8-K document with the Securities and Exchange Commission stating that it has renegotiated its financial agreements with lenders, in part “to provide the Vought entities with greater financial flexibility to address their significant cash utilization relative to certain contracts.”
The amended agreement provides Vought “with the option, if necessary, to commence voluntary insolvency proceedings within 90 days” of the effective date of the agreement, according to the filing. “Upon the commencement of such proceedings, the Vought entities would no longer be subsidiary co-borrowers under the credit agreement, and transactions between any of the Vought entities…will be restricted.”
The filing would have come seven years after Triumph acquired Vought from the Carlyle Group in 2010 for some $1.44 billion in cash and stock proceedings. But losses mounted for Vought, culminating in a $1.355 billion loss in its Fiscal Year 2016.
Triumph pointed to slowing production for the 747-8 and G450/550 programs, but also charges it incurred on the Bombardier Global 7000/8000 wing program. The company took a pre-tax charge of about $400 million “related to the impairment of previously incurred development costs associated with the Bombardier Global 7000/8000 program due to the higher level of spending and delays experienced to date.”
But on May 24, Crowley downplayed the likelihood of insolvency as the company announced a settlementt with Bombardier over a lawsuit regarding its wing work.
“Clearly, the status quo situation across multiple contracts was untenable and required action,” he said, and added, “We continue to work with our largest customers to resolve past claims and ensure that we have the liquidity needed to satisfy their needs.”
Crowley noted that in addition to the settlement with Bombardier, Triumph also reached new contract settlements with Boeing, and said, “I look forward to achieving similar win-win outcomes with our other OEM customers in the months ahead.”
For Fiscal Year 2017, Triumph’s Aerospace Structures group (which includes Vought/Triumph Aerostructures) posted a $109 million loss, an improvement over the $1.355 billion loss reported a year earlier.