AIR - Air NZ.

[silverblizzard888]

Not ideal for the shareholders that were holding out for dividends, but it makes sense that legally speaking they cancel the dividend as it could have wider impact on the company's potential to continue operating. Either way they were going to have an angry crowd after them, but this at least made more financial sense.

900 million loan isn't too bad either, interest rates a bit higher than anyone would want, but given the risk it seems warranted. It will be for the temporary and in the future they could refinance with a bank at a lower rate.

[whatsup]

Exactly what the doctor ordered.

Not a good day for the doomsday merchants who are only interested in wanting a well managed airline going through short term problems (not of its making) put into receivership.

I do not think that this is the case, Im betting that the majority of Kiwis would want AIR to survive and hold its head up again in the very competitive world of air lines no matter what mistakes have been made over the years, hind sight is a wonderful conversation subject !

[Balance]

I do not think that this is the case, Im betting that the majority of Kiwis would want AIR to survive and hold its head up again in the very competitive world of air lines no matter what mistakes have been made over the years, hind sight is a wonderful conversation subject !

I am talking of the doomsday merchants on this site.

Well, I am in to buy today - hopefully I will get the bargain I am looking for.

[whatsup]

Not ideal for the shareholders that were holding out for dividends, but it makes sense that legally speaking they cancel the dividend as it could have wider impact on the company's potential to continue operating. Either way they were going to have an angry crowd after them, but this at least made more financial sense.

900 million loan isn't too bad either, interest rates a bit higher than anyone would want, but given the risk it seems warranted. It will be for the temporary and in the future they could refinance with a bank at a lower rate.

Don't forget that this stand by draw down facility does not kick in until they have exhausted their own cash and bank facilities, Im betting that they will not want to get deeper into the clutches of a govt no matter how charitable they present themselves!

[winner69]

As Shylock said -

This kindness will I show.
Go with me to a notary, seal me there
Your single bond; and, in a merry sport,
If you repay me not on such a day,
In such a place, such sum or sums as are
Express'd in the condition, let the forfeit
Be nominated for an equal pound
Of your fair flesh, to be cut off and taken
In what part of your body pleaseth me.

Government not as generous as Shlock ..they charging interest ..loan conversion to equity means that pound of flesh is the whole company

[Dassets]

Having done quite a bit of distressed asset financing/investing imo this package works in no way whatsoever. If you give a loan to a distressed entity you don't give a loan that actually dooms them to more intense distress. This package gives the company time to do its downsizing and then the government doesn't have to do it. Should just go into receivership now. Start again and put the real heat on the government. I would expect the secured lenders to have extensive covenant breaches. The new lending probably asked for waivers as a CP. No-way would I waive if I was secured.

[Beagle]

So $900m from Government at exorbitant interest rates

In spite of the words about it being paid back inevitable that it will be converted into equity .....that would a huge dilution of existing shareholders

No divies for a few / many years I would say

http://nzx-prod-s7fsd7f98s.s3-websit...298/319205.pdf

Bandaids don't heal cancer.

The Government can borrow at 1%, (I know I just loaned them some money with Kiwibonds at that rate), so yes, the interest rate is exorbitant especially considering (see page 18 and 19 of the 2019 annual report, annual financial results), AIR's other loans vary between 1.0 and 3.1%. I would say the terms are odious considering the normal international finance rates for aircraft.

My sense is this will indeed get converted into equity and it is highly likely that shareholders, (other than the Govt) will be heavily disadvantaged.
Crucially, the $211m a month in cash burn Rob Fyfe was talking about yesterday, sheets home to existing shareholders.
I expect really radical changes to their business plan along the lines of what Qantas announced yesterday with massive staff suspensions.
Crucially, my expectation is demand will exbibit an L shaped recovery after the worst of this virus has run its course and we may see a systemic change in people's propensity to travel and a lot more business being done through electronic means.

If this doesn't go under $1 today I will be doubling my short position. I think the vast majority, if not all the present equity of $2b will be eliminated before this is over.
Govt will step in and convert their loan to equity once the share price goes under 25 cents and the company is on its knees. History will repeat.

Cancelling the dividend and not allowing another one at any stage while AIR is on life support must be a very bitter pill for shareholders.

Agreed, this is a very expensive Band-Aid that probably won't be big enough to cover the wound. I think its highly likely there will be a second tranche of "support", if you can call it that, required.

Shares will probably go into freefall today. Good day for the shorters

[Tomtom]

Reading through this the first question I had was to why the dividend wasn't cancelled previously. They've had a few weeks and ample opportunity.

[whatsup]

The Government can borrow at 1%, (I know I just loaned them some money with Kiwibonds at that rate), so yes, the interest rate is exorbitant especially considering (see page 18 and 19 of the 2019 annual report, annual financial results), AIR's other loans vary between 1.0 and 3.1%. I would say the terms are odious considering the normal international finance rates for aircraft.

My sense is this will indeed get converted into equity and it is highly likely that shareholders, (other than the Govt) will be heavily disadvantaged.
Crucially, the $211m a month in cash burn Rob Fyfe was talking about yesterday, sheets home to existing shareholders.
I expect really radical changes to their business plan along the lines of what Qantas announced yesterday with massive staff suspensions.
Crucially, my expectation is demand will exbibit an L shaped recovery after the worst of this virus has run its course and we may see a systemic change in people's propensity to travel and a lot more business being done through electronic means.

If this doesn't go under $1 today I will be doubling my short position. I think the vast majority, if not all the present equity of $2b will be eliminated before this is over.
Govt will step in and convert their loan to equity once the share price goes under 25 cents and the company is on its knees. History will repeat.

Cancelling the dividend and not allowing another one at any stage while AIR is on life support must be a very bitter pill for shareholders.

Agreed, this is a very expensive Band-Aid that probably won't be big enough to cover the wound. I think its highly likely there will be a second tranche of "support", if you can call it that, required.

Shares will probably go into freefall today. Good day for the shorters

Beagle, IF that is the case nobody buy nobody will buy today wait until the govt converts ! whites of their eyes !

[Beagle]

Beagle, IF that is the case nobody buy nobody will buy today wait until the govt converts ! whites of their eyes !

It will take a while for shareholders to realise the grim reality of the situation. After the annual result in August and the outlook statement the numbers will show how grim the situation really is.