Is Onex sniffing around?

[Just another canuck]

Question .. why is Transat’s debt such a concern to people on this forum? I’m not disputing that it’s an issue and it obviously needs to be addressed, but AC has a $16 billion dollar debt that doesn’t seem to bother anyone.

I’m looking for informed answers, not snarky remarks fyi.

Good question. I had no idea they had that much debt. About 10 times what Transat has yet they’re roughly 6-7 times our size.

[cdnavater]

Question .. why is Transat’s debt such a concern to people on this forum? I’m not disputing that it’s an issue and it obviously needs to be addressed, but AC has a $16 billion dollar debt that doesn’t seem to bother anyone.

I’m looking for informed answers, not snarky remarks fyi.

The stock market agrees, seems more concerned about your debt.
Current share price TRZ 3.08 with a market cap of 119.4 million, AC 17.98 with a market cap of 6.49 Billion

[Latitude]

Question .. why is Transat’s debt such a concern to people on this forum? I’m not disputing that it’s an issue and it obviously needs to be addressed, but AC has a $16 billion dollar debt that doesn’t seem to bother anyone.

I’m looking for informed answers, not snarky remarks fyi.

The stock market agrees, seems more concerned about your debt.
Current share price TRZ 3.08 with a market cap of 119.4 million, AC 17.98 with a market cap of 6.49 Billion

That doesn't mean anything. AC stock was 50$+ pre pandemic.

[cdnavater]

Question .. why is Transat’s debt such a concern to people on this forum? I’m not disputing that it’s an issue and it obviously needs to be addressed, but AC has a $16 billion dollar debt that doesn’t seem to bother anyone.

I’m looking for informed answers, not snarky remarks fyi.

The stock market agrees, seems more concerned about your debt.
Current share price TRZ 3.08 with a market cap of 119.4 million, AC 17.98 with a market cap of 6.49 Billion

That doesn't mean anything. AC stock was 50$+ pre pandemic.

I personally don’t care about debt ratio but the stock market has priced in your ability to repay it, I was simply responding to a question.
Your current debt it somewhere around 2 billion or about 17 times what your entire company is worth, AC debt is about 2.5 times.
Do you think AT will come out of this without filing for bankruptcy protection?
Stock market doesn’t.

[Latitude]

The stock market agrees, seems more concerned about your debt.
Current share price TRZ 3.08 with a market cap of 119.4 million, AC 17.98 with a market cap of 6.49 Billion

That doesn't mean anything. AC stock was 50$+ pre pandemic.

I personally don’t care about debt ratio but the stock market has priced in your ability to repay it, I was simply responding to a question.
Your current debt it somewhere around 2 billion or about 17 times what your entire company is worth, AC debt is about 2.5 times.
Do you think AT will come out of this without filing for bankruptcy protection?
Stock market doesn’t.

You're mixing things up. First, stock market capitalization and what a company is worth, assets, debt, nature of the debt, etc. are different things.

Bankruptcy protection I've been hearing it in regards to Transat for the past decade+... you're funny !

[fish4life]

Question .. why is Transat’s debt such a concern to people on this forum? I’m not disputing that it’s an issue and it obviously needs to be addressed, but AC has a $16 billion dollar debt that doesn’t seem to bother anyone.

I’m looking for informed answers, not snarky remarks fyi.

The stock market agrees, seems more concerned about your debt.
Current share price TRZ 3.08 with a market cap of 119.4 million, AC 17.98 with a market cap of 6.49 Billion

That doesn't mean anything. AC stock was 50$+ pre pandemic.

Yes it was and why do you think that was?

Ohhh it’s because they had very little debt to service and were making record profits.

Think of it this way, AT has a total debt of 1.886 billion.
With an interest rate that will soon be at 8% for the government loan and prime +3.5% from their secured debt with financial institutions.
I’ll assume 8% average interest rate since their unsecured non leef will be higher and the prime rate of most financial institutions is around 6% or higher so the secured debt is closer to 10%.

With only a 8% average interest rate AT has 150 million/ year in interest payments alone before they reduce they repay 1 penny of debt. (Q1 had a financing cost of 32 million with rates increasing so 128 million/ year at current rates with the gov loan increasing Dec 31 and prime having increased since)

That is a substantial portion of total revenue and a factor in their very low valuation and concern for the ability to service their debt / will hamper their ability to recover as quickly when you can outright buy 1.5-2 321 neo’s / year if you didn’t have to service that debt.

[Latitude]

The stock market agrees, seems more concerned about your debt.
Current share price TRZ 3.08 with a market cap of 119.4 million, AC 17.98 with a market cap of 6.49 Billion

That doesn't mean anything. AC stock was 50$+ pre pandemic.

Yes it was and why do you think that was?

Ohhh it’s because they had very little debt to service and were making record profits.

Think of it this way, AT has a total debt of 1.886 billion.
With an interest rate that will soon be at 8% for the government loan and prime +3.5% from their secured debt with financial institutions.
I’ll assume 8% average interest rate since their unsecured non leef will be higher and the prime rate of most financial institutions is around 6% or higher so the secured debt is closer to 10%.

With only a 8% average interest rate AT has 150 million/ year in interest payments alone before they reduce they repay 1 penny of debt. (Q1 had a financing cost of 32 million with rates increasing so 128 million/ year at current rates with the gov loan increasing Dec 31 and prime having increased since)

That is a substantial portion of total revenue and a factor in their very low valuation and concern for the ability to service their debt / will hamper their ability to recover as quickly when you can outright buy 1.5-2 321 neo’s / year if you didn’t have to service that debt.

Why are we even having this discussion ? Do you really think the government will keep that interest rate and the loan wont be renegotiated ? TRANSAT AT is a large, important corporation and both the federal and provincial government has said several time they will be there for them. They already renegotiated part of it last year. Don't forget that a lot of important players own shares of Transat (Caisse de dépot, FTQ, etc.).

[safetyfirst123]

That doesn't mean anything. AC stock was 50$+ pre pandemic.

Yes it was and why do you think that was?

Ohhh it’s because they had very little debt to service and were making record profits.

Think of it this way, AT has a total debt of 1.886 billion.
With an interest rate that will soon be at 8% for the government loan and prime +3.5% from their secured debt with financial institutions.
I’ll assume 8% average interest rate since their unsecured non leef will be higher and the prime rate of most financial institutions is around 6% or higher so the secured debt is closer to 10%.

With only a 8% average interest rate AT has 150 million/ year in interest payments alone before they reduce they repay 1 penny of debt. (Q1 had a financing cost of 32 million with rates increasing so 128 million/ year at current rates with the gov loan increasing Dec 31 and prime having increased since)

That is a substantial portion of total revenue and a factor in their very low valuation and concern for the ability to service their debt / will hamper their ability to recover as quickly when you can outright buy 1.5-2 321 neo’s / year if you didn’t have to service that debt.

Why are we even having this discussion ? Do you really think the government will keep that interest rate and the loan wont be renegotiated ? TRANSAT AT is a large, important corporation and both the federal and provincial government has said several time they will be there for them. They already renegotiated part of it last year. Don't forget that a lot of important players own shares of Transat (Caisse de dépot, FTQ, etc.).

Are you suggesting that the Canadian government is willing to help out the industry by reducing interest rates for all airlines? Or perhaps looking at ways to reduce fees to improve the health of the industry? That would be amazing if true, but I'm not holding my breath.

I love Air Transat, it is a classy airline with a very honest product that is well loved by consumers. It is also an excellent employer. But to suggest that bankruptcy is out of the question is unrealistic and naive.

[DanWEC]

They already have. It's the least they could do for almost commanding the collapse of the entire industry, unique to our country.

[Sharklasers]

They already have. It's the least they could do for almost commanding the collapse of the entire industry, unique to our country.

Transat was the only Canadian airline who couldn’t manage to make any money in the 2017-early 2020 window. To suggest they weren’t on a negative track precovid is highly revisionist.
It looks like Trudeau is finally rapidly running out of runway and I wonder if Transats outlook would substantially change once the MP from Papineau is no longer in charge.

[Latitude]

Are you suggesting that the Canadian government is willing to help out the industry by reducing interest rates for all airlines? Or perhaps looking at ways to reduce fees to improve the health of the industry? That would be amazing if true, but I'm not holding my breath.

I love Air Transat, it is a classy airline with a very honest product that is well loved by consumers. It is also an excellent employer. But to suggest that bankruptcy is out of the question is unrealistic and naive.

They dont have to ''help'' all Canadian airlines, even tho some others do have hundreds of millions in loan (same as Transat). I'm thinking Sunwing for example, or AC that did use around 2 billions $.

[fish4life]

AT’s financial statements talk about how the government loans will continue to increase in interest rate.

IMO the best thing for Transat would be to go through CCAA and clear out a bunch of this bad debt. Then execute on a plan to return to profitability and I bet 10 years from now they will be a healthier company than just struggling along with the massive debt load for the next decade.

[DanWEC]

They already have. It's the least they could do for almost commanding the collapse of the entire industry, unique to our country.

Transat was the only Canadian airline who couldn’t manage to make any money in the 2017-early 2020 window. To suggest they weren’t on a negative track precovid is highly revisionist.
It looks like Trudeau is finally rapidly running out of runway and I wonder if Transats outlook would substantially change once the MP from Papineau is no longer in charge.

I don't know why the continuous knocks from you about Transat, but no, they weren't making money in those years, essentially breaking even after a gradual decline from strong profitability. However, this is now a completely different company. All new sr management and CEO, Different fleet, business plan, strategy, etc. The previous CEO and founder, though with the best of intentions, was literally driving it into the ground by living in a time capsule. He didn't email, and relied on faxes and assistants. ( ) I wouldn't assume any level of accuracy on future predictions based on past performance. Apples to oranges. We will see, I have my fingers crossed.