Avation Share Discussion Threads

[wigwammer] 29/1/2021 09:33

This point was true many years ago, when the debt was created. Yet - the debt WAS created, and for years the returns more than justified the cost. With base rates and corporate lending rates near all time lows, and likely to remain contained for some time, and with the prospect of a return to operating normality over the next 6-12 months - especially on regional routes - there don't appear to be many good reasons to believe the returns won't exceed the cost of capital again in the foreseeable future. Unless someone can tell me otherwise?

[russman] 29/1/2021 08:26

It is a small leasing company; AVAP needs cheap debt finance to grow.
Their business model is broken if the bonds cannot be refinanced at a cheaper rate than AVAP lease their fleet out.

[wigwammer] 28/1/2021 10:38

That's true, Harrogate. But it was also true 5 years ago. Yes - the current environment is difficult. But the question is - is this likely to be a business they want to lend money against going forward? The business model is not permanently broken, they are not guilty of wrongdoing, they are not being competed out of existence. In fact, the retirement of old fleet and underinvestment by a cash strapped industry is likely to leave them in a competitively stronger position. So it is quite likely the unsecured holders accept a slightly higher coupon as compensation and avoid a situation where they may end up with nothing. Looking at the discount to book, that scenario is not one currently priced in. Re May deadline - quite possible the can is kicked once or twice before agreement is reached.

[wigwammer] 28/1/2021 10:06

266k buy trade just reported.

[harrogate] 28/1/2021 09:38

I agree with that of course in regards to rating agencies and yes the unsecured nature of the bonds doesn't help bond holders. But they still need refinancing on terms that leave equity worth more than we are at and it needs doing pretty soon. Not very liquid so not sure how real it is but the bonds are trading at 75c/ $That seems a level that suggests a deal is coming but WTFDIK

[russman] 28/1/2021 09:33

You could (in theory) hedge the bonds with the equity.
But neither are that liquid.

[wigwammer] 27/1/2021 21:30

The maths is very simple. Predicting future returns and an appropriate WACC is not.

[russman] 27/1/2021 20:35

AVAP WACC needs to be lower than the AR on leasing out its planes.
The maths is very simple; refinancing $350m of junk on decent terms is not.

[wigwammer] 27/1/2021 19:38

Thanks Harrogate. The debt which needs to be refinanced in May is unsecured - which gives holders far less room to manoeuvre. The debt agencies - all of them - are rear view mirror specialists. If you want a commentary on what has happened - great. If you want a measured assessment of future probabilities, look elsewhere. IMO

[harrogate] 27/1/2021 18:56

Refinanced not refunded

[harrogate] 27/1/2021 18:55

As it has been for at least 6 months this is all about the bonds. If they get refunded on reasonable terms maybe out by 2 or 3 years the company will have the chance to benefit from all the industry situations you mentioned. If they play hardball all that upside could go to bond holders. I am still betting that they will refinance on terms that will make this share price too low but as time goes on it gets squeaky

[wigwammer] 27/1/2021 17:32

Substantial mature capacity retired during pandemic, leaving AVAP in a great place to facilitate recovery. Regional to recover first, exactly their sweet spot. Valuation recovery leveraged from this price point :)

[wigwammer] 27/1/2021 16:08

Massive leverage into any recovery. Valuation barely above 52 week low. Jeeez I would not be short here :)

[albert arthur] 23/12/2020 07:39

Trading UpdateAvation PLC (LSE: AVAP), the commercial passenger aircraft leasing company advises that the Annual General Meeting being held today in Singapore includes a Trading Update. Mr Jeff Chatfield, Executive Chairman, provides the following commentary:The purpose of this statement is to provide investors with an update on current operations for the half-year financial period commencing 1 July 2020.Avation produced satisfactory results in the year ended 30 June 2020, notwithstanding the ongoing global pandemic. Lease revenue increased by 14% to US$135.3 million. In a challenging year, we were able to maintain profitability with profit before taxation of US$14.7 million.

[russman] 22/12/2020 19:13

Very difficult to shift junk in this bond market.

[harrogate] 22/12/2020 09:32

I know little about the bond market. And clearly AVAP is now all about those bonds. Maybe this sort of downgrade is automatic as maturity approaches. Interesting that while liquidity I am sure is very limited the bonds have been strengthening and are now at around 73c on the $. IF they do reschedule these bonds then the price will move sharply up I am sure but this looks almost binary at the moment

[harrogate] 14/12/2020 13:54

Don't you think it is likely that the bonds will just get extended - say for another 3 years at maybe a higher coupon ?

[albert arthur] 14/12/2020 13:19

The bond will get snapped up quickly I believe, great investment opportunity as I see it.

[russman] 13/12/2020 21:21

If the bonds are redeemed at par and on time, they would represent a potentially stunning investment.
The bonds trade at a discount due to the short term risk of default.
You should always look at the nearest horizon.