BeerBBQ

Any thoughts on what he meant around the 6:28 mark where he mentions GNMA?

Is that known info or are you speculating?

seems to me that most of the value in Berkowitz NAV was from value of leases. In order for the equity to be worth anything, it seems some of those leases need to be worth a significant amount....

Is a transcript available somewhere?

On a liquidation of 2nd, what do you think the recovery will be and how do you get there?

What makes you think that debt will be converted and not left behind?

How is this announcement "aggressive" (term mgmt. used on Q3 call)? And what is ADS 2.0? air miles and card services? I would've thought that after a year of strategic review they would, at a minimum, be announcing an actual deal for Episilon...

What is Tusa's FCF estimate?

What don't you like about it: funding/risk? not core business/loss of focus on core? something else? The overall strategy seems to make sense on paper i.e. use airline to funnel vacationers to a resort where more of the vacationers wallet can be captured. I realize on paper and execution are two vastly different things. I'm sure you saw the presentation on sunseeker a few weeks ago. The numbers, competitive position, etc. again on paper look interesting. Did you see anything in there that gave you pause, you don't believe, was wrong etc.? I agree with you that it does make sense on paper. But there are a few things that give me pause: - They initially said that the entire project would be de-risked, funded with non-recourse debt and owner deposits. Over time, they've walked those goals backwards. We're at a point now where the only plan in place is to entirely fund the project from operational cash flows. On one hand, it's extremely impressive that an airline would be able to fund a project like this out of cash flows. On the other hand, the entire project is now a risk to shareholders. They say the budget left for the project is $420mm, which is over 20% of the entire market cap of the business. I ask you, which would you prefer.... $420mm of share buybacks at these prices, $420mm of dividends, $420mm of fleet expansion into more Airbus A320s with proven good returns on capital, or a real estate development project outside management's core competency in an unproven area? I would prefer any of the above to the real estate. The other point about the funding is if they could have funded the project without risk, they would have. This probably means, a) they struggled to get deposits on condos meaning the demand is not there, and b) they were unable to secure non-recourse debt for the project. Neither is a good sign. - I think the most important point is that Maury has been extremely successful growing ALGT over the past 17 years. The business model is pretty incredible considering the industry they're in. The returns on capital are very high, especially for an airline. The returns on capital for their new A320 fleet is likely to be above 30% for each A320 (they cost on average $17mm per plane, and they see cash returns before interest and tax of >$5mm per plane. If you believe management, they'll see over $6mm per plane). Management SAYS that there's more room to grow into their niche - more small cities with zero competition as well as a huge opportunity in underserved mid-sized cities. If you believe that they have this huge market to still grow into, then why in the hell would they pivot to this huge real estate development project when they have such high returns on capital in their core competency? It certainly makes one think that the market opportunity isn't as big as they say it is (at least the portion in which they have no competition), and they may be nearing the end of growth in their niche. - Lastly, they're doing this at a point in time where their balance sheet is more stretched than it's ever been. They just went through a fleet transition, leaving them with over $1B in debt to entirely replace their MD-80 fleet with A320s. I want to say they have about $900mm in obligations over the next 2 or 3 years, on top of that $420mm budget for the real estate project. With that being said, EBITDA-post transition should be around $350-400mm this year, and upwards of $600mm within 3 years if managements goals are believed. I think worst case operations-wise, EBITDA is $500mm in 3 years. The transition is entirely completed as of now, and costs should inflect down/earnings should inflect upwards next year. This makes the debt less of a concern. However, further large increases in the price of oil and/or a huge downturn in the economy could cause some serious concern in them being able to meet their obligations, yet they're planning on funding a real estate project with cash flows rather than shoring up their balance sheet. Also, ALGT doesn't hedge against oil either. Good in the long run, but with quick run-ups in oil prices like over the past year, it can be a bit painful. You can see from past results that yields take a bit to catch up with fuel prices, but ALGT can generally pass along their margin to customers as they don't really have competition in their niche. Even at the top of oil prices in the past decade, Allegiant maintained an impressive operating margin unlike pretty much any other US-based airline. Edit: I should say.... despite all of the reasons the real estate is not appealing, I still own ALGT. I think the fleet transition is pretty deeply misunderstood by the market, and projections going forward seem far too low to me. On the airline side, we're going to see a pretty mechanical reduction of costs and increase in ASMs over the next 3 years that is just not being recognized by the market. And the real estate project likely won't have any material affect on the income statement for quite some time ( the same obviously can't be said of the balance sheet ). Thanks for the detailed comments. Very Helpful!

What don't you like about it: funding/risk? not core business/loss of focus on core? something else? The overall strategy seems to make sense on paper i.e. use airline to funnel vacationers to a resort where more of the vacationers wallet can be captured. I realize on paper and execution are two vastly different things. I'm sure you saw the presentation on sunseeker a few weeks ago. The numbers, competitive position, etc. again on paper look interesting. Did you see anything in there that gave you pause, you don't believe, was wrong etc.?

Anyone have any thoughts on this lawsuit? https://pennrecord.com/stories/511539439-class-action-lawsuit-filed-against-federal-housing-finance-agency-and-treasury-department#.W3277o7CxEd.twitter

https://www.politico.com/story/2018/07/27/federal-housing-chief-sexual-harassment-investigation-714779

Anyone have any thoughts on the 2019 unsecured debt? With today's 8-k, it looks like $4b out of the $5B in outstanding debt now matures on 7/20/20. Of the $1B that matures before then, I think ESL owns $400m of it. Also, roughly $134m is due 10/15/18 with the rest due in 2019. With the impending potential purchase/cash infusion from ESL for Kenmore, Home Services, Real Estate, etc., shouldn't the 2019 debt have a much better chance of being paid than what is implied by current price? Also, it seems curious that the maturity extensions for various debts over the past few years seem to all have land on 7/20/20.

I am not familiar with EC's track record. Are you referring to investment results, their success in activism, or both? Any details would be helpful.

Anyone have any thoughts on why the short interest is so high? Is there a technical reason, an uniformed view, or is it fundamentally driven (structural, valuation, fraud, etc.)? With the largest holder (Engaged) having significant influence in the Boardroom on the strategic alternatives process to either fix the business themselves or sell it (with that process set to conclude in at most 1.5 months) and at least 1 party that has repeatedly expressed interest in buying the company outright (Vintage - put money where there mouth is with a 5.9% position at $9.96/share and an all cash offer of $13/share), what is the perspective of fundamental shorts here? Is it that they believe the business is fundamentally broken and can't/won't be fixed/sold. If so what is the basis for that rationale? or is it that nobody will buy the company at prices >$10? What else? If it isn't fundamental, what is the technical reason for such a large short position?