Uair
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ClueByFour
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Yeah, and the kicker?
I think Bronner has about $325 million in cash and another 200-300 million on EETCs on the line.
I think Bronner has about $325 million in cash and another 200-300 million on EETCs on the line.
Fortunately for Mr. Bronner, the street's Market Cap is not always a true representation of the value of all of a companies assets. For example, when America West stock was trading around $2/share, their market cap was $75mil or so (I am rounding). Now, trading around $11/share, their market cap is $400mil. This is a big change and AWA did not acquire or sell any substantial assets. They are pretty much the same as they were (maybe a few less assets with CMH closed), even though there was a large change in market cap.
So, while market cap is important from an acquisition target / stock perspective, its not really a valid representation of the value of all individual assets summed up because its wrapped up with expectations of future profits, etc.
It reminds me of an expression, "The parts are more valuable than the whole". Reminds me of a junk yard car... The individual salable pieces are collectively more valuable than the whole car.
So, while market cap is important from an acquisition target / stock perspective, its not really a valid representation of the value of all individual assets summed up because its wrapped up with expectations of future profits, etc.
It reminds me of an expression, "The parts are more valuable than the whole". Reminds me of a junk yard car... The individual salable pieces are collectively more valuable than the whole car.
ClueByFour
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I know. It's just funny that somebody could buy the entire airline for less than Bronner's investment, turn around and liquidate it, and probably make money--and the kicker here?funguy2 said:
Bronner would face (and lose) a huge class action suit by shareholders if somebody offered $6/share at this point.
Clue by Four:
Yep. Bronner is in a really tricky position here... Seems like we are quickly approaching a point where something has got to give.
Piney Bob:
Well, without knowing the details, I am not sure if that is true. But you may be on to something. Certainly, US Airways assets are not as valuable as they once were... How valuable are the LGA/DCA slots/Shuttle if JetBlue can just waltz in on slot exemptions from the FAA? How valuable is all that real estate at PHL, if the city welcomes, woos, and builds for LUV and AirTran? How valuable are all those RJ orders if the curve on RJ's is just about over? (The Boyd Group has stated on its website several times that the US industry is over-saturated with 50 seat RJ's).
I have to think that Bronner still thinks he can recoup his investment + some if he liquidated tomorrow... Otherwise, I would think the auction would be on-going. As it is, with the potential for asset sales currently on-going, we might be approaching that point where Bronner can no longer recoup his invest, as you suggest.
Yep. Bronner is in a really tricky position here... Seems like we are quickly approaching a point where something has got to give.
Piney Bob:
Well, without knowing the details, I am not sure if that is true. But you may be on to something. Certainly, US Airways assets are not as valuable as they once were... How valuable are the LGA/DCA slots/Shuttle if JetBlue can just waltz in on slot exemptions from the FAA? How valuable is all that real estate at PHL, if the city welcomes, woos, and builds for LUV and AirTran? How valuable are all those RJ orders if the curve on RJ's is just about over? (The Boyd Group has stated on its website several times that the US industry is over-saturated with 50 seat RJ's).
I have to think that Bronner still thinks he can recoup his investment + some if he liquidated tomorrow... Otherwise, I would think the auction would be on-going. As it is, with the potential for asset sales currently on-going, we might be approaching that point where Bronner can no longer recoup his invest, as you suggest.
BoeingBoy
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Here's my take on Bronner's investment...
1) $240 million is only 1% of RSA's portfolio. I'm sure he doesn't want to lose money (who does?) but any fund manager makes a bad investment once in a while. Wasn't it Warren Buffet who said that his worst investment was in US Air?
2) His other interests in U (tranche B loan and a/c leases/eetc's/whatever) will not be worthless.
In a liquidation there will probably be enough "cash" plus other assets to repay the loan and recoup some of the $240 million, at least for the next few months. Of course, the longer we bleed cash the greater the potential loss.
In a sale, a buyer would assume the loan (per ATSB requirements), thus protecting the tranch B loan. They would probably assume the leases (or whatever they are), thus protecting those. The price paid per share would determine if or how much he loses on the $240 investment, but he certainly wouldn't lose all of it.
Ironically, it may be that his biggest risk is in asset sales. The revenue must go to repay the loan unless reinvested in assets - a plus for him. But the remaining airline would probably bleed cash faster (can't shrink to profitability), puting his $240 million at greater risk.
Just my thinking,
Jim
1) $240 million is only 1% of RSA's portfolio. I'm sure he doesn't want to lose money (who does?) but any fund manager makes a bad investment once in a while. Wasn't it Warren Buffet who said that his worst investment was in US Air?
2) His other interests in U (tranche B loan and a/c leases/eetc's/whatever) will not be worthless.
In a liquidation there will probably be enough "cash" plus other assets to repay the loan and recoup some of the $240 million, at least for the next few months. Of course, the longer we bleed cash the greater the potential loss.
In a sale, a buyer would assume the loan (per ATSB requirements), thus protecting the tranch B loan. They would probably assume the leases (or whatever they are), thus protecting those. The price paid per share would determine if or how much he loses on the $240 investment, but he certainly wouldn't lose all of it.
Ironically, it may be that his biggest risk is in asset sales. The revenue must go to repay the loan unless reinvested in assets - a plus for him. But the remaining airline would probably bleed cash faster (can't shrink to profitability), puting his $240 million at greater risk.
Just my thinking,
Jim
