Bronner: Alabama Pension Fund

[jimntx]

Maybe RSA planned all along to thin the herd and bet on the other horses in the race. How many analysts have said there were too many airlines chasing too few customers? Some stock dopes had to have heard that and taken it to heart.

Cold, but possible.

[post="178367"][/post]​

Oh please. Dr. Bronner may be an egomaniac, and he might even be crazy, but he is NOT stupid. No airline is a sure bet these days--not even Southwest. US Airways, UAL, Delta, and ATA might be less attractive than others, but none of the airlines is exactly what you would call a hot property on the stock markets.

If you look at the financial history of the airlines over the past 25 years (since deregulation), it seems to me that running/owning an airline is in the same class of investment as owning a pro football team. You do it for the ego strokes, not for the profits to be made.

 

[700UW]

Jim,

You miss understood, non-gauranted loan of the $75 million means the ATSB did not back $100 million of the loan, they loan is secured through assets and the RSA is a secured creditor for the $75 million they loaned US upon exit of bankruptcy.

And Bronner is Chairman of the Board and RSA is the majority owner of US Airways.

From US Airways 2003 Annual Report:

http://www.usairways.com/about/investor_re...03%20Report.pdf

RSA Investment
Pursuant to a definitive agreement, on the Effective Date, RSA invested $240 million in cash in Reorganized US Airways Group (the RSA Investment Agreement) in exchange for approximately 36.2%, on a fully-diluted basis, of the equity in Reorganized US Airways Group. As of the Effective Date, in connection with its investment, RSA was granted a voting interest of approximately 71.6% in Reorganized US Airways Group and entitled to designate and vote to elect eight of 15 directors to Reorganized US Airways Group’s Board of Directors. See also Note 14(a) in the Notes to the Consolidated Financial Statements for a summary of the related party transactions with RSA.

Because RSA holds a significant equity position in Reorganized US Airways Group, if RSA disposes of all or a significant amount of this position, it could cause Reorganized US Airways Group to undergo a new ownership change. This would generally limit (or possibly eliminate) Reorganized US Airways Group’s ability to use post-Effective Date NOLs and other tax attributes.

The Class B Preferred Stock issued to RSA is subject to mandatory redemption on its maturity date of March 31, 2011 and is therefore classified as long-term debt. Upon its maturity, the Company will be required to redeem each share for $1,000, or $75 million in aggregate, plus accrued and unpaid dividends. The Class B Preferred Stock holders are entitled to cumulative quarterly dividends at a rate of 8% per annum paid in cash by the Company. After March 31, 2006, the Company may redeem for cash each Class B Preferred Share at a redemption price initially equal to $1,025 declining ratably to par value through March 31, 2010, plus accrued and unpaid dividends. The carrying value of the Class B Preferred Stock as of December 31, 2003 was $49 million, net of unamortized discount of $26 million.

Also found this, very interesting, can the company be lying to us?

Effective March 12, 2004, US Airways obtained covenant relief for the
measurement periods beginning June 30, 2004 through December 31, 2005. In regard to the ATSB loan.

 

[jimntx]

Jim,
http://www.usairways.com/about/investor_re...03%20Report.pdf

RSA Investment
Pursuant to a definitive agreement, on the Effective Date, RSA invested $240 million in cash in Reorganized US Airways Group (the RSA Investment Agreement) in exchange for approximately 36.2%, on a fully-diluted basis, of the equity in Reorganized US Airways Group. As of the Effective Date, in connection with its investment, RSA was granted a voting interest of approximately 71.6% in Reorganized US Airways Group and entitled to designate and vote to elect eight of 15 directors to Reorganized US Airways Group’s Board of Directors. See also Note 14(a) in the Notes to the Consolidated Financial Statements for a summary of the related party transactions with RSA.

Hey, 700 you gotta admit that getting 71.6% of the voting interest for 37% of the stock is pretty slick. I admit, that I did not know. Still don't see how it would benefit the RSA to destroy US Airways. Now, if the RSA had to pay taxes and they needed a loss to offset profits, that would make sense. But, to them a loss is a loss is a loss.

Also found this, very interesting, can the company be lying to us?

[post="178426"][/post]​

Surely, you jest. An airline management that doesn't tell its employees the truth?
I find that hard to believe. After all I had such good examples at AA particularly in regard to Carty and his little secret pension plan for executives.

 

[TechBoy]

Still don't see how it would benefit the RSA to destroy US Airways.

[post="178527"][/post]​

Let me take a venture on why it might be good for RSA to liquidate US. I don't have all the facts, so sue me if I'm wrong.

If you add up current cash on hand -- about $900m unrestricted -- and the value of marketable US assets, primarily DCA and LGA slots and gates -- probably worth several hundred million -- there is a lot of money in US. That would be enough to pay off the ATSB loan (which is secured by the slots and gates) and have plenty left over for other creditors, including RSA. So while RSA loses out on its $240m equity investment, at least they get back some or all of their $75m loan.

The alternative for RSA is to hope that US can turn itself around and make money again -- which doesn't look likely. With US likely to burn cash at a fast clip through the fall and winter, the amount of money left to potentially pay RSA keeps shrinking. Better to liquidate now -- unless you really think that US can be turned around.

 

[Reservation Agent]

If the USAIRWAYS current stock will be worthless, does that mean that RSA has lost their 37% share of stock in USAIRWAYS?

Will the unions petition for a court appointed trustee to take control of the airline?

With $25 billion dollars in assets with Retirement Systems of Alabama, they don't seem very concerned about a 1 percent investment in USAIRWAYS...

I look for a Chapter 7 liquidation around the corner with labor strife, jittery customer & travel agent bookings, and the beginning of a slow travel booking season...I think after 2 BK the travelling public will be weary of buying USAIRWAYS tickets... and risking getting stuck trying to get home on their tickets on standby at Thanksgiving, Christmas on another carrier.....

Plus , if part of the transformation plan is to be more like a low cost/low fare carrier like JetBlue, America West and Southwest, why go along with the $5 and $10 increase to buy a ticket online or at a ticket counter?...

Sure, the other low fare carriers do alot of business online, but they don't charge you extra to call in to buy it...and they have web sites that are more user friendly and less congested with exteranous stuff on it like USAIRWAYS....

 

[GadgetFreak]

If the USAIRWAYS current stock will be worthless, does that mean that RSA has lost their 37% share of stock in USAIRWAYS?

Will the unions petition for a court appointed trustee to take control of the airline?

With $25 billion dollars in assets with Retirement Systems of Alabama, they don't seem very concerned about a 1 percent investment in USAIRWAYS...

I look for a Chapter 7 liquidation around the corner with labor strife, jittery customer & travel agent bookings, and the beginning of a slow travel booking season...I think after 2 BK the travelling public will be weary of buying USAIRWAYS tickets... and risking getting stuck trying to get home on their tickets on standby at Thanksgiving, Christmas on another carrier.....

Plus , if part of the transformation plan is to be more like a low cost/low fare carrier like JetBlue, America West and Southwest, why go along with the $5 and $10 increase to buy a ticket online or at a ticket counter?...

Sure, the other low fare carriers do alot of business online, but they don't charge you extra to call in to buy it...and they have web sites that are more user friendly and less congested with exteranous stuff on it like USAIRWAYS....

[post="179306"][/post]​

I think you and Techboy make some very good points. The numbers may now or soon after indicate that RSA will take the smallest loss if they liquidate. And while they may not like it, they can take the loss. Putting more money in would make that difficult. There is a possibility that nervousness, issues like places not taking meal vouchers (which not only is a real problem for customers but adds to the nervousness) will lead to a serious downturn in reservations. If this happens this pushes RSAs balance more towards liquidation perhaps. And you are completely right about the web site. I think I have only bought 1 ticket there, maybe even none. Cant remember for sure. I find it hard to use and I dont really trust it. I buy almost all my AA tickets on their web site, not because they charge not to do so but because it is easier than calling.

 

[EyeInTheSky]

IVAN is looking to crash Bronner's party in Mobile. Bad week for Bronner.

 

[700UW]

Bronner is in Montgomery, AL, not Mobile.

 

[EyeInTheSky]

Bronner is in Montgomery, AL, not Mobile.

[post="179374"][/post]​

700UW, I know that. BUT, Bronner owns a lot of properties in Mobile including four hotel/resorts and that new 32-story office building in downtown Mobile.

 

[jimntx]

Well, let's just all agree that ALL of US Airways problems are the fault of RSA. Everything was perfect at UAIR until RSA came along. Getting rid of RSA will solve all of UAIR's problems and it will be the leading airline in the industry.

Investing $240 million in a bankrupt airline that couldn't get money from anyone else was the worst possible thing that could have ever happened to UAIR. I see nothing but blue skies ahead. It is obvious that RSA intended from the very beginning to lose its entire investment. They wanted to lose the money, and investing it in UAIR was the quickest and surest way of doing that. Yeah, that's the ticket.

 

[700UW]

Jim,

US went into Chapter 11 the first time with financing from TPG.

 

[jimntx]

True, but UAIR needed the $240 million from RSA to get OUT of bankruptcy. I didn't notice a line of other investors at the door wanting to put up that much money.

 

[700UW]

Because RSA wanted to invest in US, and they had deep pockets, once they became the DIP financier they had the inside track on everything.

 

[jimntx]

I'm not disputing that RSA wanted to make the investment. I'm just pointing out that no one else did. Without the $240 million that RSA was willing to invest, it is doubtful that UAIR would have emerged from bankruptcy the first time. It was not a case of UAIR selecting from a group of suitable courters. It was "marry RSA or die an old maid."