petec Posted March 12, 2020 Share Posted March 12, 2020 I have to say I think the price on this one just got silly. Very tempted. Like I need any more leveraged crap. Link to comment Share on other sites More sharing options...
chesko182 Posted March 13, 2020 Share Posted March 13, 2020 Good presentation from yesterday https://d1io3yog0oux5.cloudfront.net/_0ebf25c6f097a0b54cf1a06504d40159/aercap/db/488/4052/file/JPM+Conference+2020+2.0+Final+v2.pdf they also drew 6.6B from their credit line today (market prob saw it as a credit negative as stock got crushed and more notably bonds did too for the first time in a while). Coincidentally, this amount would cover the current year's CapEx and debt maturities (assuming they receive no lease payments which of course is non-sense). My gut says they will be pounding the table on their own stock (or maybe buying a competitor?) Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 Good presentation from yesterday https://d1io3yog0oux5.cloudfront.net/_0ebf25c6f097a0b54cf1a06504d40159/aercap/db/488/4052/file/JPM+Conference+2020+2.0+Final+v2.pdf they also drew 6.6B from their credit line today (market prob saw it as a credit negative as stock got crushed and more notably bonds did too for the first time in a while). Coincidentally, this amount would cover the current year's CapEx and debt maturities (assuming they receive no lease payments which of course is non-sense). My gut says they will be pounding the table on their own stock (or maybe buying a competitor?) Or just being safe. Link to comment Share on other sites More sharing options...
elliott Posted March 13, 2020 Share Posted March 13, 2020 Good presentation from yesterday https://d1io3yog0oux5.cloudfront.net/_0ebf25c6f097a0b54cf1a06504d40159/aercap/db/488/4052/file/JPM+Conference+2020+2.0+Final+v2.pdf they also drew 6.6B from their credit line today (market prob saw it as a credit negative as stock got crushed and more notably bonds did too for the first time in a while). Coincidentally, this amount would cover the current year's CapEx and debt maturities (assuming they receive no lease payments which of course is non-sense). My gut says they will be pounding the table on their own stock (or maybe buying a competitor?) the repurchase program is temporarily suspended Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 Good presentation from yesterday https://d1io3yog0oux5.cloudfront.net/_0ebf25c6f097a0b54cf1a06504d40159/aercap/db/488/4052/file/JPM+Conference+2020+2.0+Final+v2.pdf they also drew 6.6B from their credit line today (market prob saw it as a credit negative as stock got crushed and more notably bonds did too for the first time in a while). Coincidentally, this amount would cover the current year's CapEx and debt maturities (assuming they receive no lease payments which of course is non-sense). My gut says they will be pounding the table on their own stock (or maybe buying a competitor?) the repurchase program is temporarily suspended That’s what frustrates me about companies like this - they can’t always do what they need to when they need to. What’s the risk of a liquidity crunch here? I’m assuming half the airline industry has to go bankrupt for them to be in real trouble but others know it far better than me. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 13, 2020 Share Posted March 13, 2020 The idea that they can't do what they need to do really means that their business operations are not as secure as they say it is in their presentations. Link to comment Share on other sites More sharing options...
manuelbean Posted March 13, 2020 Share Posted March 13, 2020 The idea that they can't do what they need to do really means that their business operations are not as secure as they say it is in their presentations. Well, what they say in their presentation is that they have liquidity for more than 1 year. If for any reason, things get messy, it's better to be safe than sorry, right? Besides, a great thing to do now with all that cash would be to buy distressed assets/competitors. I thought this post was quite interesting. https://tinyurl.com/w2b5tzt Having said that, the CEO has said that their Chinese clients are deferring payments but that the company is counting on collecting until the end of the year. He said that China is a big market so he wants to help his clients who will stick around for another 30 years (I think he was talking about the state companies). That's all fine and good, but we can look at it the other way round: These clients have the power to say "Now you hold on, we won't pay you for several months until we get back on the horse. What are you going to do?" So besides not having any pricing power (I know, it's a financial company), they also don't have the collecting power.... Having said all of this, I'm tempted to add more. Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 The idea that they can't do what they need to do really means that their business operations are not as secure as they say it is in their presentations. Well, what they say in their presentation is that they have liquidity for more than 1 year. If for any reason, things get messy, it's better to be safe than sorry, right? Besides, a great thing to do now with all that cash would be to buy distressed assets/competitors. I thought this post was quite interesting. https://tinyurl.com/w2b5tzt Having said that, the CEO has said that their Chinese clients are deferring payments but that the company is counting on collecting until the end of the year. He said that China is a big market so he wants to help his clients who will stick around for another 30 years (I think he was talking about the state companies). That's all fine and good, but we can look at it the other way round: These clients have the power to say "Now you hold on, we won't pay you for several months until we get back on the horse. What are you going to do?" So besides not having any pricing power (I know, it's a financial company), they also don't have the collecting power.... Having said all of this, I'm tempted to add more. I don't own it, but I am tempted to buy it. Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 Can anyone give me a two minute history lesson here? I haven't followed the stock for long, so: 1) what was it in 2014 that so boosted the scale of the company? A deal? 2) the company remained profitable through 2008/9 and saw no impairment to BV. Was the business model broadly the same? I notice British Airways CEO out today saying this is a "crisis like no other" and worse than 2008/9. Link to comment Share on other sites More sharing options...
Peregrine Posted March 13, 2020 Share Posted March 13, 2020 Can anyone give me a two minute history lesson here? I haven't followed the stock for long, so: 1) what was it in 2014 that so boosted the scale of the company? A deal? 2) the company remained profitable through 2008/9 and saw no impairment to BV. Was the business model broadly the same? I notice British Airways CEO out today saying this is a "crisis like no other" and worse than 2008/9. 1) Bought ILFC from AIG in a hugely accretive transaction - issuing shares at close to 2x BV to buy ILFC at 1x by time of deal consummation. 2) Biz model is a lot more robust now given diversity of lessee base, diversity of funding sources, less leverage, stronger liquidity position, etc. Hard to compare current crisis with that of 2008/2009. You have a sharper decline in air travel demand but still plenty of liquidity, in 08 credit markets were broadly frozen. Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 Can anyone give me a two minute history lesson here? I haven't followed the stock for long, so: 1) what was it in 2014 that so boosted the scale of the company? A deal? 2) the company remained profitable through 2008/9 and saw no impairment to BV. Was the business model broadly the same? I notice British Airways CEO out today saying this is a "crisis like no other" and worse than 2008/9. 1) Bought ILFC from AIG in a hugely accretive transaction - issuing shares at close to 2x BV to buy ILFC at 1x by time of deal consummation. 2) Biz model is a lot more robust now given diversity of lessee base, diversity of funding sources, less leverage, stronger liquidity position, etc. Hard to compare current crisis with that of 2008/2009. You have a sharper decline in air travel demand but still plenty of liquidity, in 08 credit markets were broadly frozen. Thanks & agreed. Link to comment Share on other sites More sharing options...
johnny Posted March 13, 2020 Share Posted March 13, 2020 Gonna just ramble out-loud here: One thing they did on this latest presentation that I -really- don't like is, in describing their balance sheet and liquidity position, they gave figures as of 12/31/19. Sorry, that's not going to cut it. Telling me you expected $3.1b of OCF at the EOY freaks me out a lot more than if you just hadn't mentioned it to begin with. They tried to calm us down by mentioning that the revenue deferrals in greater china only amount to around 3% of revenue. What a weird denominator to choose--wouldn't it seem much more appropriate to express it as a percentage of revenue from the same geography? As best as I can tell, that implies it is really something like ~10% of revenues when matched to geography, and that's in the market that seems to have gotten a grip on the situation much faster than the rest of the world is likely to. So -10% revenue strikes me as the bull case here. So that's about 1/3rd of their actual net spread minus depreciation. -30% revenue is a total earnings wipeout, although I guess its only taking out around half of OCF (these are all half-recalled vague guesses). Anybody have any intuitions or connections to get discussions on what the shape of a federal financing package to the airlines is likely to look like? It's hard for me to guess whether it'd be a relatively low-constraint low-interest line of credit that would allow the airlines to keep current on all obligations or whether they'd be more inclined to micromanage and start trying to impose haircuts. Being a counterparty to TBTFers may not be as risky as the strict quantitative analysis suggests. It also seems to me that once one country starts trying to boost its airlines, the others are going to follow and if everybody gets spooked enough to just provide credit lines for the next year, that gives Aercap a clear path to returning to a normal environment without diluting itself or becoming a subsidiary of Berkshire. Link to comment Share on other sites More sharing options...
Peregrine Posted March 13, 2020 Share Posted March 13, 2020 Gonna just ramble out-loud here: One thing they did on this latest presentation that I -really- don't like is, in describing their balance sheet and liquidity position, they gave figures as of 12/31/19. Sorry, that's not going to cut it. Telling me you expected $3.1b of OCF at the EOY freaks me out a lot more than if you just hadn't mentioned it to begin with. They tried to calm us down by mentioning that the revenue deferrals in greater china only amount to around 3% of revenue. What a weird denominator to choose--wouldn't it seem much more appropriate to express it as a percentage of revenue from the same geography? As best as I can tell, that implies it is really something like ~10% of revenues when matched to geography, and that's in the market that seems to have gotten a grip on the situation much faster than the rest of the world is likely to. So -10% revenue strikes me as the bull case here. So that's about 1/3rd of their actual net spread minus depreciation. -30% revenue is a total earnings wipeout, although I guess its only taking out around half of OCF (these are all half-recalled vague guesses). Anybody have any intuitions or connections to get discussions on what the shape of a federal financing package to the airlines is likely to look like? It's hard for me to guess whether it'd be a relatively low-constraint low-interest line of credit that would allow the airlines to keep current on all obligations or whether they'd be more inclined to micromanage and start trying to impose haircuts. Being a counterparty to TBTFers may not be as risky as the strict quantitative analysis suggests. It also seems to me that once one country starts trying to boost its airlines, the others are going to follow and if everybody gets spooked enough to just provide credit lines for the next year, that gives Aercap a clear path to returning to a normal environment without diluting itself or becoming a subsidiary of Berkshire. 1. I don't think their liquidity position changed much since two months ago. They might have a bit more cash on hand + their undrawn credit lines. Debt maturities of $3.5 billion and planes on order of $3.5 billion. So assuming that they even make 0 operating cash flow this year + are unable to refinance maturing debt, they'd still be able to cover cash needs for the year. Btw, you're going to see a lot of deferrals of plane orders from airlines this year and Gus said on the call that they don't expect to do so - which is a big positive in my view. 2. They expect those lease deferrals to be repaid within 1-2 months. Airlines are going to pay off rents first and foremost (before they even pay their staff). For the record, their highest ever default credit costs went to about 2.7% of revenues in 2009 - on average it's been less than 1%. So a 10% hit sounds really crazy - this basically assumes not only mass airline bankruptcies but also complete contraction of air travel for years. 3. Back in 9/11 the government offered large loan guarantees to help airlines tide over a short-term liquidity problem. Airlines broadly are in far better shape this time around but I expect fed help will come in the form of loan guarantees again. They recognize that credit markets have tightened quite a bit in the last few weeks even though secured funding markets remain fairly liquid. Link to comment Share on other sites More sharing options...
johnny Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. Link to comment Share on other sites More sharing options...
Peregrine Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. Sorry, looked back at the transcript and they didn't say that. They do expect the "vast majority of deferrals" to be repaid by end of this year. Link to comment Share on other sites More sharing options...
elliott Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. It doesn’t really matter what happens in 2020, so long as they’re liquid enough to avoid chapter 11. If you’re buying it at 0.3x book the only way you lose is if there’s a permanent impairment to book. In other words, if aircraft can’t be sold over the next few years at roughly the prices they’re carried for. Link to comment Share on other sites More sharing options...
Peregrine Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. Did you want them to sound panicked? Link to comment Share on other sites More sharing options...
petec Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. Did you want them to sound panicked? That’s always a great look for what’s effectively a bank ;) Does anyone have to hand the duration of their leases vs their debt? Link to comment Share on other sites More sharing options...
elliott Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. Did you want them to sound panicked? Do you feel that comment brings anything to this conversation? What a waste of time of 30 seconds of my life. Link to comment Share on other sites More sharing options...
Peregrine Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. Did you want them to sound panicked? That’s always a great look for what’s effectively a bank ;) Does anyone have to hand the duration of their leases vs their debt? They don't give specifics but generally they lean more toward raising longer-term debt to match shorter-term leases. Avg. lease end date is Q3 2027. 97% of lease rents contracted out till 2022. Link to comment Share on other sites More sharing options...
Peregrine Posted March 13, 2020 Share Posted March 13, 2020 Did they say on the call they expected the deferrals to only be 1-2 months? I don't see how that makes any sense. The cashflow problem for the airlines is not a 1 or 2 month problem. What I did not like from that conference is the confidence with which management seems to expect things to get back to normal. Like, the situation extending or getting worse is not a possiblity. Anybody else had that feeling? Maybe its just me. Anyway, some of your points are really good. Thanks for sharing. Personally, I am not too concerned about revenues and earnings this year. If they are just even in 2020 I am fine. Actually, one could even argue that would be a good result, given the circumstances. Not to mention if it means Aercap has stregnthened relationships with customers by helping them in dire times. Did you want them to sound panicked? Do you feel that comment brings anything to this conversation? What a waste of time of 30 seconds of my life. Sorry for being flippant. Though I'm sure if management had a panicky voice, you and other listening would've followed suit as well. In any event, they have reason to feel confident. Gus and co have been building up this balance sheet and liquidity position for years in anticipation of an event like this. Gus, especially, has seen a lot. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 13, 2020 Share Posted March 13, 2020 One thing I haven't seen in many companies is buying stock. Very few insiders buys--anywhere in the market. VLO bought some shares, FUN CFO bought some shares, but I would expect AER execs to buy shares. Link to comment Share on other sites More sharing options...
Peregrine Posted March 14, 2020 Share Posted March 14, 2020 One thing I haven't seen in many companies is buying stock. Very few insiders buys--anywhere in the market. VLO bought some shares, FUN CFO bought some shares, but I would expect AER execs to buy shares. As AER is a foreign issuer, they don't report insider buys/sells to the SEC. Link to comment Share on other sites More sharing options...
elliott Posted March 18, 2020 Share Posted March 18, 2020 aircraft industry stocks we are either going to make a lot of money, or lose it all AER dropping close 30% today (so is AL) Link to comment Share on other sites More sharing options...
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