Homestead31

thanks for the continued work here wabuff, but do you think it is possible that Aimia's bankruptcy lawyers actually know what they are doing here, and filed the Stipulation motion to force the issue on to the docket rather than just to force the issue? i know you love to hate on the mittlemans, but it seems unlikely it was Aimia that wanted to delay the hearing, which suggests it was Apollo that wanted to push the hearing. by filing a motion related to the stipulation the issue was put under the court's nose so that at some date in the future Apollo can't claim that they didn't have time to deal with the issue or whatever and try to hold a gun to Aimia's head on a short time line. again i appreciate your efforts here, but it seems like Aimia is playing chess, not checkers.

https://www.yahoo.com/news/unwelcome-other-countries-americans-fleeing-110037262.html

i don't think it is appropriate to say, "their actual revenues declined." You could of course say, "Their IFRS revenues," but it would probably be most appropriate to say, "their NET revenues." it seems pretty clear this (Kognitiv) is a tech company, and of course we have very limited details. true to course, wabuffo of course gives the most pessimistic interpretation possible. but another interpretation is that like most fast growing tech companies, Kognitiv sacrificed some margin in order to grow fast. Gross revenues did in fact grow 65% YoY. We don't know enough to know if this is a good thing or not, but if we are looking at the public market tech sample set, we could say that the more money they lose in pursuit of growth, the higher multiple they deserve. I will again reference Nuvei, which just went public as the largest ever Canadian IPO burning $100M, growing fast, and trading at 20x sales. I am not saying this deserves to trade at 20x sales. I am saying that if they IPO this, and the headline for the market is 65% gross revenue growth yada yada yada block chain blah blah blah online gambling, i think we will all be surprised at the valuation the public market gives it. I am also saying you don't need to believe that because you're not paying for it in Aimia's stock price. Its just a free lotto ticket that could be worth a whole bunch.

65% YoY revenue growth for kognitiv from 2019 to 2020 if i'm reading this latest filing right? that kind of growth, combined with the word "block chain" and the potential for online gaming and gambling is probably worth a billion times sales in this market

the board has done some great work here on Aeromexico and the bankruptcy, and while risks remain, i think we can all agree that the process is proceeding as smoothly as can be expected. therefore, i think it might be time to start spending some time trying to figure out what the story with Kognitiv is. Clearly at this point its mostly a black box, although they have said they expect cash flow positive in 2021. who knows if that will come to pass as in some ways it is surely tied to global travel etc., which in a Covid world cannot be counted on. that being said - i'm going to throw out some positive considerations. i of course realize there are negative considerations as well, but i am sure wabuff and others will take great pleasure in pointing those out. so in no particular order, here are some things to think about 1) as with all things Aimia, insiders are aligned, have bought a ton of stock personally, and have also put a buyback in place. i think its safe to say they wouldn't have done those things if they thought Aimia was a one trick pony a la PLM. 2) if you read between the lines on the conference calls when they reference Cardyltics, it seems clear that the plan here is to IPO Kognitiv in the not too distant future 3) take a look at the recent Nuvei IPO, which was the largest canadian IPO in history. its a different businees - Nuvei is focused on payments - but there are some parallels. Nuvei is burning $100M a year, growing through acquisition, and trading at ~20x revenue because it is "sexy" 4) the excitement around Nuvei seems to be that they do payments for online gambling. to my knowledge Kognitiv is not attached to online gambling at this point, but it seems like an absolute no brainer. as i understand it, the way kognitiv works is that someone like a retailer or whoever can go to the "loyalty capital network" in order to find rewards (unused hotel rooms, flights etc) and then use them as customer incentives. so one example that we are familiar with would be a car dealer that offers $1,000 cash back when you buy a car. instead of cash back, they could offer a trip somewhere or something like that to a consumer that has greater than $1,000 value, but maybe costs the dealer less than $1,000 because the hotel etc is happy to unload its unused inventory. this model seems like it would be a perfect fit for online gambling - rather than cash you could take your winnings in the form of travel etc. it seems like this model would also work with online gaming as in video games. i don't know how the mechanics of that would work, but i do know that that is the sort of story that the market would put a huge multiple on, and investment banks would be lining up down the block to run that IPO 5) prior to the Aimia merger, kognitiv bought a blockchain company. an IPO touted as "online gambling rewards secured by blockchain" would probably trade at 8 billion times revenue in this market. anyway - this is all of course just speculation, and i realize it may sound ridiculous considering what we know about the corporate history of Aimia's loyalty business. that being said, it seems like the narrative here could go in new directions, and narrative is what sells IPOs at high multiples. thoughts appreciated

https://www.streetinsider.com/Globe+Newswire/Grupo+Aeroportuario+del+Pacifico+Reports+Passenger+Traffic+Decrease+of+38.3%25+for+the+Month+of+September/17437210.html Big Mexican airport operator reports traffic down 38.3% YoY for September. It was down 51.4% YoY for August. Green shoots indeed.

Dr A - yes, i think they would have to honor the $400M floor. But just for arguments sake - lets say that somehow in the BK process that contract goes away. My point is that even without that contract, a few things should be abundantly clear: 1) the loyalty business is a way better business than flying planes 2) scrapping an existing loyalty business and attempting to build a new one from scratch rather than just paying a fair price for the 49% of the existing one that you don't own would be insanity, especially when you have pockets as deep as Apollo I am thus positing that the real risk here is not in the minutia of the DIP, but rather a complete liquidation of AeroMexico. Yes, it is possible that the $100M owed to PLM is a casualty of the BK process (although i believe it was Dr A that pointed out the fraudulent conveyance angle), but even if that $100M is lost forever, and even if Apollo was able to scrap the $400M floor, they would still want the asset bad enough - AND soon enough - that they would be willing to pay some price greater than Aimia's current EV. So, absent a complete liquidation, which increasingly seems like it is off the table, it seems like the AeroMexico BK will wind up being a good - if not great - thing for Aimia, because the net of it all is likely to be that the sale of Aimia's 49% stake in PLM is pulled forward dramatically. Thoughts appreciated.

there has been some very good work done in this thread. In particular, i would like to call out Wabuffo and Dr. Aybolit, but there have been many others that have done great work. I also think it bear mentioning that part of the reason the debate has been so robust is the differing opinions, with Wabuffo leaning towards the more negative side, and the good Dr. leaning toward the more positive side. In that spirit, i'd like to ask if perhaps the forest is not being missed for the trees a bit at this point? And in that spirit, i'd like to solicit opinions on what would happen if AeroMexico 1) does wind up posting their ownership in PLM as collateral (would require permission from Aimia, but perhaps there is a way around this as has been suggested), and Apollo does wind up owning the equity in AeroMexico and 51% of the equity in PLM? If this were the case i think the obvious risk is that Apollo / the BK process would find a way to cancel the $100M that is owed to PLM by AeroMexico. And lets include the possibility Apollo - as owners of AeroMexico - abandons the pledge to pay a minimum of $400M for Aimia's stake in PLM. This is all very draconian............ but then what? it seems to me that PLM would STILL be the most valuable part of AeroMexico (see multiple thought pieces on loyalty being a better business/worth more than flying planes) and AeroMexico (under Apollo) would STILL be contractually bound to PLM until 2050, and thus Apollo - with $300+ BILLION in AUM - would STILL want to own 100% of PLM? So, even if a draconian scenario develops, Apollo winds up owning the equity of AeroMexico and 51% of the equity of PLM, and Apollo balks at the $400M number, isn't it STILL likely that Apollo would offer to pay some number that would STILL equate to something close to the current market cap of Aimia, giving you everything else for free? to be clear, i realize that a full scale liquidation is possible, but that seems pretty unlikely, especially in light of the news surrounding the new 5 minute Abbot test which has to be good for air travel. so i am not saying that that scenario is off the table. but it seems like alot of brain power is going into the idea of Apollo and the DIP, and not much brain power is going into what it will actually mean for Aimia, and it seems like given the quality of the PLM business, the value of the asset, and the contract until 2050... even if Apollo winds up owning the other half of PLM, things will STILL be ok for Aimia? and in fact, given Apollo's deep pockets, a buy out of Aimia might happen on an accelerated timeline (but on less favorable terms). i am putting this out there hoping it will be torn apart, so please do.

His "name" is not wabuff or wabuffalo, it is wabuffo and it's not the messenger that you should be attacking. Downside-type comments should be welcome, especially if fact-based. And with Aimia, there's that smell. There has been no attack here. In fact, the opposite is true as I have complimented "wabuff's" (hope you are not offended by the shortening, CB) work on multiple occasions. I just find it curious that he puts in all the effort that he does when he seemingly does not have an economic interest in the outcome. Downside type comments are definitely welcome, and I applaud them when they are presented in an unbiased way.

honest question wabuff - are you a former Aimia employee who got blown out when Mittlemans took over? it is clear your knowledge level is high, it is clear your economic interest is low, and it is clear that for some reason you really do not like the Mittlemans. What else would explain this fact pattern?

and if you're going to quote from that filing, you should include point 5 in its entirety "The Debtors have expressly told PLM that the Debtors are not purporting to pledge their interests in the Trust Agreement without PLM's consent; consistent with that representation, the DIP Motion conditions the pledge of the Debtor's rights under the Trust Agreement upon receiving PLM's consent. On that basis, and because the DIP Motion does not appear to seek authority to pledge other rights and interests under the Club Premier Agreements, PLM does not object to the interim relief sought in the DIP Motion." in other words, there is nothing to see here except that AeroMexico confirmed that they don't have the right to completely screw Aimia, and Aimia is saying since you have agreed you can't completely screw us, you can continue to negotiate the DIP. that sounds like progress, no?

as always wabuff, i do respect the work you are doing, i am just not sure that the conclusion always has to be chicken little. you of course may be right that this might end badly, but it is also worth noting that pre-COVID, airlines had actually come to be regarded as pretty good businesses due to the oligopoly industry structure, strong tailwinds from emerging market growth, and of course the dependable cash flows from they loyalty programs. now in a COVID world airlines are considered terrible businesses, and i think you are seeing everything through a COVID lens. and that might be the right lens. only time will tell. but if you are Apollo, and you are coming within a barge poles' length of the situation, you must have a view past COVID, and if you have a view past COVID, you must realize that the loyalty program is the most valuable part of any airline, and you must realize that AeroMexico is primed to be a huge beneficiary in a post COVID world not only because the rest of Mexican competition is being hollowed out, but also because Mexico is likely to be a big beneficiary of the re-shoring of Asian supply lines, which will greatly increase travel - expensive business class travel - in Mexico. so again, who knows what will happen, but Apollo is likely thinking about this as at least a 10 year investment, and in that time frame the value of PLM will become more and more evident.... so one possibility tied to the back and forth re: PLM as collateral would be that Apollo simply bids for the balance of PLM outright in the near term. I'm not putting all my eggs in that basket or anything, but i continue to think that everyone at the table knows that PLM is the real prize, and if Apollo were to shake out the couch cushions, they could find the money to bid some kind of discount to the $400M floor in a negotiated agreement. i'm not aggressively suggesting that that will be the outcome - just saying there is a wide range of possibilities.

i am trying to rewind this a bit on page 5 of the collateral sheet where PLM is listed, there are 2 items i'd like to focus on. First, it says "Mexican non-possessory pledge (specific) over beneficiary rights (derechos fideicomisarios)" emphasis mine As I understand it, under a non-possessory pledge: "The pledgor creates a security interest over tangible moveable property (or generically described unidentified property), but unlike the commercial pledge, the pledgor maintains possession of the pledged assets and can use and sell those assets in the ordinary course of business, subject to certain rules." emphasis mine Second, it says "Prior approval of PLM’s Shareholders Meeting is required." which seems to be self explanatory. Of the three parties involved here (AeroMexico, Aimia, and Apollo) it seems likely that AeroMexico has the weakest hand and Apollo has the strongest hand, but it seems like Aimia has a fair amount of negotiating leverage too. For Apollo to be at the table, it seems likely that they must be comfortable with the idea that they will wind up as equity holders of AeroMexico. I think everyone would agree that airline loyalty is a much better business than the business of actually flying planes - which means that Apollo has to find a way to work with Aimia here. It is impossible to know how this will work out and it will be quite a game of chicken, but on one extreme, the way I am reading the doc Aimia could wind up trying to buy out AeroMexico's stake in PLM. This of course would risk having Apollo abandon the DIP, so i think it is unlikely that this hard of a line is drawn, but it is not unreasonable to expect that Aimia could win some sort of concessions in exchange for agreeing to allow AeroMexico to pledge the excess value of PLM as collateral. Pref User - as for your question about "out-negotiating Apollo" i think the above applies and gives more leverage to Mittleman/Aimia than might be immediately apparent. As for your commentary around the re-rating of AeroMexico's multiple, take a look at a chart of Air Canada from late 2018 when the deal for Aeroplan was announced. The stock re-rated significantly over the next few quarters, because again, loyalty is a better business than flying planes. I think if not for COVID, AeroMexico would have re-rated higher on the news that they had firmly established a path toward full ownership of PLM, although likely not as aggressively as Air Canada given the longer time line. However, looking at the Air Canada experience surely inform's Apollo's view here, and I would note that with $300B+ in AUM, Apollo could find the $400M guaranteed payment to Aimia for its half of PLM in the couch cushions. It is thus not impossible to imagine that Apollo will wind up as the equity owner of AeroMexico and then buyout Aimia's PLM stake on an accelerated time line, which would be hugely positive for Aimia stock. I realize all of this is rather rosy and an angel's advocate view - but as the most negative scenarios are always front and center thanks to wabuff (and full credit to the quality of wabuff's work) - so i think it is worth remembering that there are a wide range of possible outcomes here, Aimia is not just a silent observer, and PLM remains the prize in anything associated with Aeromexico.

yes re: Apollo and equity. do you agree with my reading of "excess value" meaning that Aeromexico's stake in PLM is pledged as collateral only net of what is owed to PLM? because it seems to me that the chances of Aeromexico avoiding liquidation have gone up considerably, and it seems to me that based on the "excess value" PLM's outstanding loan to Aeromexico is well protected, which when taken together suggests that Aimia stock should trade meaningfully higher.

I know you do great work and get into the weeds, but i also know you have a tendency to always see everything in the most negative light possible. are you sure that you are not letting that negative light color your reading of the document? The text says, "EXCESS VALUE (emphasis mine) in pledged 51% equity stake in PLM" my reading of that is that Aeromexico has pledged their stake in PLM net of what they owe to PLM as DIP collateral. the text also says, "Prior approval of PLM's Shareholders Meeting is required" I fully admit i am not a BK attorney, but this doesn't seem as dire as what you are LOLing at.