Originally Posted by
Beagle
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 :t_up: