Author Topic: AIM.TO - Aimia  (Read 182623 times)

samwise

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Re: AIM.TO - Aimia
« Reply #680 on: May 17, 2020, 06:49:07 PM »
Thanks. Hopefully they can get there with the PLM dividends. In fact if the crises ends soon enough, just the recap will significantly help. I am not worried about a FCF multiple but agency costs.

 BRK, Leucadia, are good examples. I also remember the early days of HCHC and SPLP. or Biglari. So the outcome depends on the skill and intent of the people in control.


Dr. Aybolit

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Re: AIM.TO - Aimia
« Reply #681 on: May 17, 2020, 07:31:09 PM »
very true on the negative examples, BH being by far the most egregious, followed by HCHC, and SPLP a very distant 3rd worst.
 
what they all did wrong?

1) debt at the holdco. 

2) absolutely outrageous comp on absolute and relative basis (vs. size and performance or lack thereof) (would exclude SPLP from this one), and/or self-dealing (SPLP probably back in on this one).

3) sycophant boards enabling it all.

none of that going on here.   

kab60

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Re: AIM.TO - Aimia
« Reply #682 on: May 17, 2020, 09:53:16 PM »
I like the setup and Mittlemans way of investing, although he's been hitting one disaster after another in recent years. But I still don't get the 15m in holdco costs. Shouldn't this be a five man team plus some public costs? What's the right multiple on those HQ costs?

Dr. Aybolit

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Re: AIM.TO - Aimia
« Reply #683 on: May 18, 2020, 02:42:39 AM »
they mentioned on the call that further cost cuts were targeted at HQ, although no indication of amount or timetable, so maybe it gets down to C$13M / US$9.3M ( the Alexander Capital report mentioned C$13M as a mgmt est. of minimum HQ cost). 

seems reasonable to pay for a public co. board of directors, their D&O insurance, finance, tax, legal, HR, IR, IT, C-suite, admin, audit, rent, listing maintenance. 

maybe capitalize that at 5x because it shouldn't grow much if at all i would think in near term, while growing much more slowly over the long term than the hopefully growing dividend flows it receives.

so corp. costs (excluding severences, etc.) go from C$41M in 2018 (activists join BOD in Apr. 2018) to C$25M in 2019 to C$13M-C$15M in 2020.  decent progress.


samwise

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Re: AIM.TO - Aimia
« Reply #684 on: May 19, 2020, 10:13:57 AM »
Another Mittleman holding is going private, with the management and owners rolling their equity into private shares. Maybe Mittleman does the same thing with VRL now. (It's Aussie theme parks and cinemas. )

BTW its a good way if someone wants to make a bet on theme parks reopening. the bid is (from memory) 2.20 + 0.10 if parks reopen in time, +0.08 if cinemas reopen in time.

Oh on value creation by smart owners of loss shells, I should have mentioned the Canadian experience: Kingsway. Not going well so far.

Homestead31

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Re: AIM.TO - Aimia
« Reply #685 on: May 19, 2020, 03:57:51 PM »
some valid points raised about past abuses by holding companies... but money talks.  you have to give the insiders here credit: they continue to buy alot of stock in the open market.

wabuffo

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Re: AIM.TO - Aimia
« Reply #686 on: May 21, 2020, 08:50:02 AM »
For those pointing to LifeMiles.....ruh roh!

Moody's downgrades LifeMiles ratings to Caa1; negative outlook:
https://markets.businessinsider.com/news/bonds/lifemiles-ltd-moody-s-downgrades-lifemiles-ratings-to-caa1-negative-outlook-1029221491

Colombia Grounds Flights Through August in One of Strictest Bans:
https://www.bloomberg.com/news/articles/2020-05-20/colombia-grounds-flights-through-august-in-one-of-strictest-bans

Avianca Peru Ceasing Operations; To Enter Liquidation:
https://www.aerotime.aero/aerotime.team/25029-avianca-peru-ceasing-operations-to-enter-liquidation

As I said before, I don't think the examples of previous Chapter 11s are relevant to the current crisis.   Its one thing to be in Chapter 11 to deal with a debt restructuring, while revenues are close to 100% of what they were to pre-Chapter 11.  Its completely another case, when you are entering Chapter 11 while revenues are down 90-100%. There is a real chance that the loyalty program's principal airline sponsor has to completely liquidate and dissolve. 

But we'll see, I guess.

wabuffo

Homestead31

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Re: AIM.TO - Aimia
« Reply #687 on: May 23, 2020, 10:19:24 AM »
"Despite the Avianca Peru liquidation, routes to and from the country remain the group’s plans. "

Dr. Aybolit

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Re: AIM.TO - Aimia
« Reply #688 on: May 24, 2020, 04:59:25 PM »
the Avianca bankruptcy is instructive, but not in the way it was referenced here.  Avianca's 1st lien bonds, PFAVH 9% of 5/23, $484M, have traded down from $100 to $21 since the end of Feb. 2020.  LifeMiles $388M (paid down from $495M) 1st lien term loan of 8/22 has traded down from $100 to $81.  The market seems to be correctly valuing the best part of the airline business more highly, despite the end of days being upon us.

wabuffo

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Re: AIM.TO - Aimia
« Reply #689 on: May 25, 2020, 09:18:59 AM »
Aeromexico/PLM deal:
In an earlier post, I tried to summarize the key terms of the $100m loan from PLM to Aeromexico based on comments AIM mgmt made on their CC:
Quote
PLM advances $50M USD to AeroMex in the form of an intercompany loan with an interest rate of 6% and another $50M in the form of PLM pre-purchasing $50M USD of award tickets on Aeromexico flights....

Half of the $50M USD loan requires Aeromexico to pay it back, the other half gets “paid back” in the event of a leverage recap of PLM (ie, netted against PLM’s share of the dividend).

Now we get a release of the actual LOI:
Quote
The parties agree that [loan advance repayment amount redacted] of this advance will be repaid
(1) from the proceeds of the leveraged recapitalization transactions set forth in Section I.4(d) of this LOI or,
(2) if unavailable, through an additional advance purchase of award tickets under the facility described in Section I.4(b) hereof or
(3) otherwise as agreed in such amendment.

1 and 2 seem like important details that were omitted by AIMIA (they only mentioned pt 1 - in fact, none of the three options explicitly mention a cash payback at all, contrary to the implication left to the listener of the CC by AIMIA mgmt).  In effect, if I'm reading this right, Aeromexico has the option to "pay back the $50m loan portion" with more free seats provided to PLM or by crediting its future dividend recap money.  This is basically a PIK loan paid in free award seats (and/or the dividend recap).  Not at all the impression we were given.  There's no way Aeromexico defaults on this (so the security guarantee given by Aeromexico is worth bupkis - unless Aeromexico fails and liquidates)

If some folks here are so sure that loyalty businesses are highly valuable even when the underlying airline is in financial trouble (using Avianca/LifeMiles as the example), why not go straight to the dividend recap right now?   They could've taken the $110m in cash + another $150m in debt financed cash out now.  Aeromexico gets its cash now but so does AIMIA.  That would've been a better deal for AIMIA - and they probably could still have gotten the partnership extension, IMHO.  This move would've been much more accretive for AIM's stock price. Instead Aeromexico gets its dividend recap cash now (in effect) but AIMIA doesn't.   Good quarter guys! Perhaps - I'm missing some galaxy-brain strategery here by AIMIA's new mgmt team.

Kognitiv deal:
While I'm at it - let's also look at some drip-drip disclosures by AIMIA about the Kognitiv deal.  Again, on SEDAR there is a May 2020 investor presentation by AIMIA.  On p. 18, there is a cash-flow waterfall chart.  We were told about AIMIA's $21m convertible preferred investment in Kognitiv.  But I don't think mgmt ever told us about a FURTHER $29M is cash-related transaction costs that will be 'invested' into the transaction when it closes.   Suddenly, we're talking $50m of cash going out the door on a hope-and-prayer investment.  It makes me wonder if the whole biz could've been shut down for a lot less.

Perhaps I'm making mountains out of molehills - but I always worry when I feel the mgmt team is pumping up the positives, but burying the negatives - or perhaps, they are just sloppy negotiators.  I think these are important details and the fact that they were omitted in the press releases trumpeting the value creation makes me worry that this team is in over its head because it is rushing to get press releases out rather than negotiating for shareholder interests in a hard-nosed manner. (meet the new boss, same as the old boss).

Bill
« Last Edit: May 26, 2020, 03:22:49 AM by wabuffo »