(Adds Bombardier's statement on pricing)
By Davide Scigliuzzo and Allison Lampert
Nov 20 (Reuters) - Bombardier Inc said on Monday it priced $1 billion worth of seven-year bonds at par with a final yield of 7.5 percent per year, underscoring strong demand for the deal partly slated to retire debt maturing in 2019.
The final yield of the offering, which came in $100 million more than initially expected, is at the tight end of the 7.5 to 7.75 percent range it had used when marketing the deal.
The Canadian plane-and-train maker is tapping debt markets for a second year in a row.
Bombardier plans to use most of the proceeds to retire notes with a coupon of 4.75 percent due in 2019 and the rest for general corporate purposes.
Reuters had reported the news earlier on Monday, citing a term sheet seen by the Reuters financial service IFR.
Bombardier agreed in October to sell a majority stake in its CSeries jet program to European planemaker Airbus SE, which is expected to cut costs while bolstering the plane's sales. It would give Bombardier a possible way out of a damaging trade dispute with Boeing Co and U.S. regulators.
As part of the deal, Bombardier has said it would invest $300 million to set up an Alabama assembly line at an existing Airbus facility for CSeries purchased by American carriers.
"We believe some of the remaining proceeds may also be used to fund its new Alabama facility," said research firm CreditSights in a note to clients.
One of the investors said it made sense for Bombardier to use the proceeds to bolster its liquidity since the company was paying a higher rate on the issue.
"They have wild swings in working capital so I think there is always an extra need (for cash)," Greg Zappin of Penn Mutual Asset Management said by phone. "If you are going to pay up a bit (to issue new bonds), you might just get the extra liquidity."
In separate notes, rating agencies Moody's and Fitch both raised doubts about Bombardier attaining its goal of being cash flow neutral by 2018. Moody's cited uncertainty from the trade challenge on the company's U.S. CSeries sales.
Bombardier also aims to break even on the CSeries in 2020.
In November 2016, Bombardier raised $1.4 billion by offering senior notes to refinance some of its debt.
1 Canadian dollar = $0.7828 Reporting by Allison Lampert in Montreal and Davide Scigliuzzo at IFR in New York; Editing by Richard Chang and Lisa Shumaker