Canada announces C$372.5 mln loan to Bombardier

Feb 7 (Reuters) - Canada’s federal government on Tuesday announced C$372.5 million ($283 million) in repayable loans for two of Bombardier Inc’s jet programs, far less than the $1 billion originally sought by the Canadian plane and train maker.

The loans, which come from a Canadian aerospace and defence fund targeting research and development projects, will be used for Bombardier’s CSeries family of narrowbodies and the Global 7000 business jet, according to a statement from the government.

The contributions will be provided over four years, in a number of installments, with the majority allocated to the Global 7000 program.

“The repayable contributions announced today will help to ensure that Canada remains at the centre of Bombardier’s research and development activities,” Bombardier Chief Executive Alain Bellemare said in a statement.

Bombardier initially asked Canada to match a $1 billion injection in the CSeries program from the province of Quebec in 2016. But negotiations dragged on for more than a year as the Liberals made requests of the company, such as changes to its dual class governing structure.

Prime Minister Justin Trudeau’s government is under pressure to invest in Montreal, Quebec-headquartered Bombardier, after his ruling Liberals unexpectedly won 40 of the province’s 78 Parliamentary seats, far more than expected, in an October 2015 election.

Bombardier, which briefly considered bankruptcy protection last year after simultaneous airplane developments caused a cash crunch, is now in a better position financially than when it asked for the matching $1 billion.

Quebec’s spending in the CSeries, along with a separate $1.5 billion investment by the province’s largest pension fund in Bombardier’s rail division, could trigger a new trade feud between the company and rival Brazilian planemaker Embraer SA .

Brazil’s foreign ministry in December authorized World Trade Organization proceedings against Canada over Bombardier’s roughly $5.4 billion CSeries jetliner program, which competes with some Embraer jets as well as the smallest products of plane giants Boeing Co and Airbus Group SE.

Reimbursable loans are a key pillar of the world’s largest trade dispute, involving mutual transatlantic claims of unfair support for aircraft makers Airbus and Boeing.

The WTO found that government loans used by European Union member states to support Airbus airplane developments constituted unfair subsidies, prompting the threat of U.S. sanctions. But, after more than a decade, the case has yet to complete lengthy WTO legal and compliance processes. ($1 = C$1.3182) (Reporting By Allison Lampert in Montreal, Additional reporting by Tim Hepher in Paris and Sweta Singh in Bangalore; Editing by Savio D’Souza)