Friday, 8 July 2011

Why did Bombardier lose Thameslink?

Basically because of their financing.  The Thameslink deal was based on financing the order as well as building trains.  Their train-building skills are as good as Siemens in most respects but they do, according to The Daily Telegraph,  have a lower credit rating than Siemens.  This means that the finance behind their offer will be more expensive than Siemens because their cost of borrowing is higher.  The cost is so much more that it amounted to £700million over 30 years.

I know little about corporate finance but that seems a lot of money.  I wonder also if Bombardier's own risk profile was skewing their contract terms, and that these made them less competitive than Siemens.

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1 comment:

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