USA320Pilot said:
Tim:
It appears the ATSB, GE, Citigroup, Bombardier, and Embraer do not share your pessimism. These financiers, unlike Mike Boyd, have access to the company's finances and they're willing to provide US Airways with funding during bankruptcy.
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It's probably worth examing this a little closer....
ATSB - as long as the taxpayer dollars that guarantee the Tranche A loan aren't at risk, they can allow this drama to play out. The non-cash collateral, even at 50 cents on the distressed valuation dollar, is worth about $350 million IIRC and so far they've let us use as much as $125 million of the cash collateral. Sorta like saying "I'll loan you $50,000 but you've got to put your $200,000 house up for collateral". Doesn't take much "faith" in the business plan to do what the ATSB is doing.
Citi - as I hinted at earlier, they haven't put dollar one into this enterprise yet - they're the alternate Tranche A lender. Even if there comes a point that they take over the Tranche A loan, they have no money at risk - the ATSB guarantees every dollar. I won't repeat the analogy of lending a wino money under those circumstances. Suffice it to say that Citi's action doesn't take faith in the business plan, just faith in the government.
GE - their choice was between taking a lot of airplanes back at once or taking them back slowly. Not much of a choice. As for the financing, that "$140 million" consists of $80 million in reduced "power by the hour" income to them over some future period and that's about it. The rest is from them buying some of our RJ's and leasing them back to us, with the proceeds going into a credit facility (overly simplified but that's the net result) that pays them a tidy rate of return. Did I say that they now own those airplanes? Or that they get a nice big convertible note if we emerge from BK - that pays a tidy rate of return? In short, they stand to pretty much make back the "power by the hour" loss if we emerge (if we don't, they don't lose that $80 million in income) plus presumably leasing the 25 airplanes they're taking back at higher rates. They can't lose (except for losing our business if we go under) and stand a chance of winning big with that convertible note. Once again, little to no risk with possible huge reward - doesn't take much faith.
Embraer - they've got 6 airplanes sitting in Brazil with our name on the side, what to do? Take the money we've already given them (less a few million for their "inconvenience") and finance the rest of the purchase price - at a tidy rate of return. Did I mention that they still have those airplanes as collateral? Let's hear that same old song - doesn't take much faith.
Finally, Bombardier - they're in the business of selling jets and the RJ business has been down lately (thanks to Embraer) - what to do? So they use our money (which they already have, and yes - take out a few million for their trouble) and use it for partial payment on 3 CRJ's. And that's it. They don't finance these CRJ or anything else. They just sell 3 airplanes. One more time now - doesn't take much faith.
Oh yeah, the real "finally", the Bank that really is financing the 3 CRJ's - they just charge a nice high interest rate for 18 months (that's as long as they're willing to offer the financing). And did I mention that they have the airplanes as collateral? All together now - doesn't take much faith.
Jim