Aero Inventory Share Discussion Threads

[sleveen] 23/10/2008 17:55

AGM statement due December?

Edit: last year AGM statement was 19.11.2007

[mdj8] 23/10/2008 17:37

I hear you R2. I remember when Asia Citrus first floated, regrettably I didn't buy any but they did well and I believe won an award for the quality of their management. I'm not sure how this crunch/recession will affect OJ consumption, I doubt positively though. Anyway back to AI., the current price is simply irrational. There is no point in stating why, we've all examined the company extremely thoroughly and can only find positives. It's just a waiting game I suppose.

[mdj8] 23/10/2008 14:06

Wow, this share price level is ridiculous, credit crunch, recession, whatever. Note no selling at all by the big boys... gartmore, henderson etc just too cheap to sell I suppose. Thats the way I'm thinking anyway.

[robsy2] 22/10/2008 15:34

It will help offset the real extra finance costs in dollars!It is right that we finance ourselves and report in US$ . Its another smart move by the management.The market is probably more in the mood for negatives than positives at the moment, if the x-rate were moving the otherway we'd have seen the share price hammered !
US Libor rates are on the way down again which is positive and apparently we picked up another award at the AIM awards, deal of the year or something, which is also a bit of good news.
R2

[mdj8] 22/10/2008 15:06

More good news that seems overlooked...

Page 3 of the the Year ended 30th June Results:

"As a company listed on AIM we are now obliged to present our results under International Financial Reporting Standards (IFRSs). The two principal adjustments made are to show our capitalised IT development costs as an
intangible asset rather than a tangible one and to retrospectively change our functional and presentational currency to US Dollars at 1 July 2006, resulting in the value of stocks being stated at the US Dollar values at
which they were purchased. All the figures in this statement are shown in US Dollars including comparative figures from last year and almost all our trading and our debt is now denominated in US Dollars. The change in reporting currency is a logical step for a business that trades almost entirely in US Dollars and gives a clearer picture of the underlying financial performance".

Well, Mervyns helped us last night and since July the exchange rate has gone from approx 2 to 1.64. That means in sterling terms the company is now earning 21% more for every US$ received than it was in July. Good eh?

[woracle] 17/10/2008 15:24

Agreed MD, thats what I have been saying all along. Just that Robsys didnt quite get it. Its essentially a tracker.

diehard, nice summary although I think +3% in the foreseable future is most unrealistic no matter how good the company or cashflow. The banks have been burnt and will always charge a bigger margin after this episode.. until the next generation and 125% mortgages appear again ! Hopefully not in my lifetime..

[daihardtoo] 17/10/2008 09:19

The key to AI's ability to raise finance in future is the quality of the security that it offers and the cashflow that is being generated.

Cashflow is very positive - the last RNS showed that their operations are generating i.r.o. $10M per month, and on top of that they will be freeing up cash by reducing their inventory levels (there was a key statement in the RNS saying that purchase levels in September were about 40% below those experienced in March).

Undoubtedly the banks are currently very risk averse, and this will be having two effects:

1. An increase in the premium that they are charging for their facilities - future finance may be at a margin of more than 3% above LIBOR, but not necessarily

2. More onerous covenants - there is probably a facility limit set at a certain percentage of their stock balance and their debtor balance.
In my experience, bankers are nervous of lending more than 50% of stock value - but given the perceived value/quality and cashflow associated with the stocks owned by AI, it is possible that the banks were willing to advance a higher percentage.
My guess is that these covenants will come under pressure, and one of the risks facing AI would be the failure of one of their customers causing them to breach one of them.


The problem that the banks are facing is that they loaned alot of money secured on assets that are now worth alot less than they were. The collateral offered by AI has not suffered from this devaluation - therefore this is the sort of business that the banks should be chasing.

[mdj8] 17/10/2008 08:33

Woracle, 3% is a fixed premium, 3m LIBOR floats and is currently 4.5025%. The info has already been disclosed by AI.

Page 2 of Preliminary results to June 2008...

"The interest rate on this facility is US Dollar LIBOR +3%. The facility has been designed to be expandable as Aero Inventory grows".

Page 17 of Preliminary results to June 2008...

"In February 2008 a new 5 year syndicated asset based lending facility was signed and increased the size of our available banking facility from $356m to $425m. The facility was increased on 23 June 2008 to $500m".

"The interest rate charged on the facility is US Libor + 3%. The average interest rate charged in the period was 5.78%".

If you go to the NAB capital page I gave you, the average 3m US$ LIBOR rate between Feb 2008 and June 2008 was 2.79%. If you extend the average rate from Feb 2008 to Oct 18th 2008, the average Libor rate goes up to 2.95%, meaning AI.s average interest rate since Feb2008 was 5.78% to June and until now 5.95%. Clear?

[woracle] 16/10/2008 23:09

Robsys, what have I said you dont exactly understand ? You seem to think LIBOR bit is struck at whatever LIBOR rate was when they were given the line of credit ? I doubt it... thats my point. The +3% is fixed. Ask the FD what effective rate they paid 6 months ago, and what they pay this month. Ask him what rate they will pay if they drawdown another 50M tomorrow.. that might confirm it.

[robsy2] 16/10/2008 15:45

Woracle
Do you know what you are talking about?
I'd be interested to know.For me LIBOR + 3% means um LIBOR + 3%, there is no other way to cut it, BUT i am not a banker and they can be quite sneaky.
Please tell me if its different because right now what you say doesn't make a lot of sense.....

[mdj8] 16/10/2008 09:20

Woracle, no one is asleep here. LIBOR + 3% is just that - the overall rate fluctuates as LIBOR does on a daily basis. I'm sure new facilities are considerably more expensive, particularly for banks who do not yet know the extent of their liabilities - hence the crunch. Anyway AI. still have some funds available under the original terms of their $500-million facility. The money that has not been drawn down is not sufficient for another Qantas type deal but quite frankly they need to get rid of some of the $590- million inventory they have on hand before they go for big new clients. I like the fact these guys are not overstreching themselves, they are ensuring they digest new business before biting off more. By realising cash for the inventory they hold they can pay down the facility they have to reduce interest cost and get ready to excercise it again when they need to with a suitable client, which could be more likely to be an MRO so as to spread risk and not to have exposure to one big airline in this nasty climate.

[woracle] 16/10/2008 08:59

Robsys, their line of credit with Lloyds is charged at LIBOR + 3%. We think its 3month US$ LIBOR ( can get from Bloomberg rates section ). I suspect its fix for each drawdown at whatever LIBOR is at the time for that tranch. If it was all fixed they would have simply said fixed at 5% or whatever. They would not have said "the average rate charged..". Could even be like a tracker .. As I said, its new money that they would need to take up another Quantas-like deal. Thats off the table clearly with the crunch. THAT is the key point until the banks start lending reasonably and confidently.

[robsy2] 16/10/2008 08:40

Hi Fellas
I may be being a bit thick here but I need some clarification.
Woracle I can sort of see what you are saying... so what is the LIBOR +3% deal they talk about?
We need to know if they pay Libor US$ +3% on whatever is drawn down , daily , monthly or do they pay something else.
Maybe I've got it wrong but it seems to me that if you sign a deal for 500m over 5 years at US $ lIBOR + 3% then that is it.
It doesn't make sense to me.Perhaps we should contact Hugh Bevan he should be able to clarify things. This is a key point.

[woracle] 16/10/2008 00:38

MD,

Wishful thinking its 5.7% for the full term for all the facility though. The 3% fixed I agreed but I suspect the LIBOR rate is when bits are drawn upon, or even variable.

I am saying the spread ( or premium if u want to call it that ) for commercial lending recently even in good companies is about 11/12%. You really were asleep and didnt read my earlier posts and references ! Ssk your local bank for 100M to test the waters ;). AI wouldnt get a premium of 3% now on new money. As I said even the US bellweather GE had to pay 8% recently I recall...wakey wakey dear, Le Crunch has moved on since AI. got its initial funding last year.. But dont worry, Flash Gord has forced their hand now in the last week so things should improve slowly until we get the next tremor like Alt-A :(

Interesting another growth company CAPE in oil services sector reported its debt to show its paying it off well to try sooth the markets. Instead it spooked them ! Hope AI doesnt do anything so stupid !

[mdj8] 15/10/2008 08:21

Woracle, not sure where you get 7.64%. I see 4.63%, see:



Apart from that the term of AI.'s facility is US$ LIBOR +3%. That cannot be arbitrarily changed, it is valid for the term of the contract. Additionally 11%/12% is not the spread, its the risk premium - in the case of AI. thats 3%.

As Winner always says - calm down dear.

[woracle] 15/10/2008 00:25

Robsys, you been asleep ? We've been through all this before... To summarise, current rate is about 7.64%. Thats not the problem... the concern as with all companies which need to borrow is new money if they can get it. Going rate closer to LIBOR + 11%/12% at the moment. This 11%/12% spread is the killer because banks are so risk adverse. I recall even someone like GE only got a 7 or 8% spread recently. Geez, even RBS is paying 12% on its preference shares to Gord ! Hopefully the banks will trust a bit more and Gord has forced their purse strings open so the spread should come down. Will never be LIBOR + 3% for quite a while though..

[sleveen] 14/10/2008 19:21

Yesterday's RNS show recent insti buying

[mdj8] 14/10/2008 11:31

Nicely illustrated Robsy. Really nothing to panic about.

[robsy2] 14/10/2008 10:51

saw this on LIBOR rates.
AI. pay 3% over libor US $ rates , not sure which rate they use ? but the graphs all look much the same . The last annual accounts show average rate charged during the year was 5.78%.
If you look at the graph you can see that the current spike in rates brings them to levels seen for 7 months of the 12 months of the last financial year.I think rates are trending downwards now. The point is the recent exceptional rates don't appear to be that exceptional.

[mdj8] 13/10/2008 08:44

RNS 10/10/08 - Deutsche Bank selling again. They sold more than 1% as they crossed both the 4% and 3% barriers. To sell at this level they must be desperate....

[simonrk] 10/10/2008 14:24

Let's just say I'm enjoying the feeling (smugness in fact) of owning something that has risen 7% on a day the LSE has fallen 8.8%. Its been some time since that has happened. Obviously more buyers of this stock than sellers. On this day that is amazing. Long may it continue.

[sleveen] 10/10/2008 13:55

Immposible to buy at the absolute bottom (assuming this is the bottom) unless you are very lucky.

[yf23_1] 10/10/2008 12:28

damn, I was going to pick up more today !

[simonrk] 10/10/2008 09:12

That's a buy signal ratty. Only problem is, money's a bit tight right now.