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txfan2424

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Irrespective of what AC does at this point, it is virtually certain that AC will totally piss off a great many of their customers by starting a new frequent flier program. 

 

They're not really starting a new one - they already have Altitude so what they are doing is preventing Altitude miles from going to Aeroplan, and allowing them to be redeemed in-house. They gave people 3.5 years to run down their points so they don't NEED to lose value - especially if AC offer to buy the few Aeroplan points remaining in 2020. And even if customers are pissed off, it may well be that they don't have much option other than to fly AC on many key routes.

 

Against that, these are incredible -ve WC businesses that require no capital and generate more cash the faster they grow. Bringing the NPV in-house is a smart move.

 

Just playing devil's advocate.

 

 

 

No, they are starting a new program.  All of your existing Aeroplan miles from previous flights appear as if they will be orphaned.  All of your existing credit cards appear as if they will be orphaned.  A current Aeroplan participant has the option of participating in both the old program and the new one, but collecting loyalty points works best for consumers when a consumer concentrates his efforts on a few programs.  Consumers will be able to recover some value from their existing miles, but every consumer who makes the switch will end up losing to some degree (ie, you might be able to redeem the lion's share of your points, but there will still be a remainder which is insufficient for a flight reward....this could be a few thousand miles for some consumers or it could be many thousand for others).  Unless the new program is sexy as hell and includes very attractive start-up bonuses, there will be some unhappy people.

 

The loyalty business itself is certainly attractive, for all of the reasons you mentioned.  I don't at all doubt that AC wanted a bigger piece of the action from AIM, and when that didn't happen AC walked.  But, there will be start-up costs, and these shouldn't be ignored.  I do not know the size of the army of employees at AIM or the significance of AIM's information systems, but they will be costly to re-build (the information systems are the most important because much of the value is in the data).  After having been snake-bitten by the abandonment of Aeroplan, it will be interesting to see how quickly Canadian financial institutions will sign agreements to issue new credit cards (that's where much of the money is earned).  In particular, if I were TD, I'd be pissed about having spent a pile of money on an Aeroplan contract and having invested a pile of money in promoting those cards on television only to have had the rug ripped out from underneath me.  It might take a while to sign up loyalty partners, like the banks, to profitable contracts.  Finally, as I suggested earlier, a new program would be best launched with some sort of smoke and noise, preferably with attractive sign-up bonuses to get clients on board.  It could be a few years before AC makes any money of the new program, but presumably it will ultimately be profitable.

 

So, will there be any behavioural change from AC's existing client base?  With Aeroplan abandoned and a new program launched will AC retain all of its existing business, or will some of the flying public move their business to WestJet?  A good loyalty program does what its name implies, it builds loyalty.  When you abandon the program, do you effectively reduce your clients' switching costs?  This remains to be seen, but I personally have always considered the value of $20 of Aeroplan miles when doing price comparisons between AC and WJ.  Will this make WJ more attractive for the flying public?

 

Still baffled that an agreement wasn't reached...

 

SJ

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I don't have a position here so haven't done this, but if you want scuttlebutt, I would read this:

https://www.flyertalk.com/forum/air-canada-aeroplan/1841934-air-canada-launch-its-own-loyalty-program-2020-a-68.html

 

It's the 1000+ post thread on the change on Flyertalk, the forum for people who really, really care about frequent flier programs and airline status. These are the customers both AC and Aeroplan will need to keep, so what they are saying is pretty important, imo.

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Hi zhengmit,

 

Leaving Aimia for a minute.

 

Sorry, wrong person to ask at this point.

If you are looking for investable ideas, there are out there on this Board superior participants who likely continue to identify and benefit from profitable opportunities.

 

I came to this Board about a year ago in the context of my disappearing ability to find targets with a sufficient margin of safety in my investment circle. Since I started to participate, my investment IQ has moved from 78 to 82. Little progress, not because of the absence of quality on this Board but because of mental slowness/resistance.

 

I have long positions in cash (which I don’t like, but can tolerate) and long-term USA government bonds, (TLT), a relatively large position that I have trimmed down to less than 10% of portfolio since 2011.

 

This year, I invested in Aimia as I felt there was potential value realization in the preferreds associated with a rapid reconnection with Air Canada.

I see you are new to the Board and would like to read your answer to your question.

 

Back to Aimia.

 

 

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  • 2 weeks later...

FWIW I am out of the prefs with a 20-30% profit in 18 months depending on the account. Oddly, I consider this to have been a highly successful investment. My assessment when I bought was that Aimia would probably not lose the AC contract, but that if they did the prefs would likely still be worth the price I paid and might even be worth par in a breakup. I also thought they'd be a great security to hold if rates rose. To have witnessed the loss of the AC contract and still made money feels like it proves my thesis. Sitting here today though, it's much harder to assess the probability of real upside, which hinges on getting another partner or breaking up the business in such a way that the pref holders receive par value. Also, the probability of the worst case outcome (the loss of AC and a run on the bank per my SOTP above) has risen markedly because the first part of it has already happened.

 

If I am making a mistake here it is because I am anchoring to my purchase price - when AC cut the cord I decided to have faith in my original thesis and not realise the loss; now that I can realise a profit, I am doing so. If I had bought at 9 I'd probably have sold earlier, but I bought between 10 and 12. That's probably an emotional red flag.

 

Thanks to everyone on here for a) flagging the opportunity and b) helping me understand it!

 

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  • 2 weeks later...

Looks like AIM has raised CAD$105m by selling one of its British loyalty programs:

 

https://www.theglobeandmail.com/report-on-business/aimia-sells-nectar-loyalty-card-business-to-uks-sainsburys-for-105-million/article37814207/

 

 

First they cut the dividend to staunch the cash outflows and now they are selling assets to raise cash.  Will it be enough?

 

 

SJ

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In 2016, Sainsbury contributed C$340 and the international segment total gross billing is C$617.5 and EBITDA margin on gross billing is 11.3%.  Since Nectar has gross billing other than Sainsbury, its gross billing is probably C$425m range (assuming Sainsbury accounts for 80% of Nectar's gross billing).  Using 11% EBITDA margin, so Aimia sold the business at 2.5x EBITDA (105/42.5).  Not sure this $105 is USD or CAD but you get the picture.  Nectar does represent another major risk in renewing and there is another C$400m liability associated with it.  At this valuation, what can I say?

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petec,

Short term wise, your decision to sell was timely. Good for you.

Any thought on the Nectar conclusion?

 

The last transaction perhaps reflects the price to pay for disorderly redemption.

Despite and maybe because of recent troubles, will look into this again.

 

This may become interesting in an orderly liquidation-like scenario. Management will need to cooperate.

 

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My thoughts, roughly summarised, are: "Christ, that was lucky".

 

If I'd thought Nectar was only worth $100m I'd have sold sooner (see my SOTP above).

 

I wonder whether Sainsbury's basically said: sell it to us at a knockdown price or we leave.

 

Future looks very binary to me on this one. And my concern is this: what incentive does any new Aeroplan partner have to sign early? Better to wait until they see the whites of Aeroplan's management's eyes in, say, late 2019.

 

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The only partner they might get on similar terms to the old AC deal would be a startup. Someone like Canada Jetlines, who would benefit from Aeroplan name recognition and a big chunk of ticket purchases right at startup.

 

Established airlines all have their own programs already, and would mostly be happy to sell tickets to Aeroplan at regular retail price.

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Looks like AIM has raised CAD$105m by selling one of its British loyalty programs:

 

https://www.theglobeandmail.com/report-on-business/aimia-sells-nectar-loyalty-card-business-to-uks-sainsburys-for-105-million/article37814207/

 

 

First they cut the dividend to staunch the cash outflows and now they are selling assets to raise cash.  Will it be enough?

 

 

SJ

 

Are they really raising cash here since they're paying Sainsbury $183 million to cover redemptions..?

 

"Along with the sale of Nectar business and Aimia’s Intelligent Shopper Solutions U.K. and Intelligent Research businesses, and a 50% equity stake in its i2c joint venture with Sainsbury’s, the agreement also provides for the transfer to Sainsbury’s of approximately $183 million (£105 million) of cash providing coverage against the Nectar redemption liability. Aimia will continue to deliver customer insights and data analytics platforms to customers outside the U.K."

 

"As at September 30, 2017, Aimia had close to $670 million of cash and cash equivalents (including investments in corporate and government bonds). Adjusting for and giving effect to the Nectar transaction, Aimia’s net cash and liquidity position will be reduced by approximately $174 million."

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Looks like AIM has raised CAD$105m by selling one of its British loyalty programs:

 

https://www.theglobeandmail.com/report-on-business/aimia-sells-nectar-loyalty-card-business-to-uks-sainsburys-for-105-million/article37814207/

 

 

First they cut the dividend to staunch the cash outflows and now they are selling assets to raise cash.  Will it be enough?

 

 

SJ

 

Are they really raising cash here since they're paying Sainsbury $183 million to cover redemptions..?

 

"Along with the sale of Nectar business and Aimia’s Intelligent Shopper Solutions U.K. and Intelligent Research businesses, and a 50% equity stake in its i2c joint venture with Sainsbury’s, the agreement also provides for the transfer to Sainsbury’s of approximately $183 million (£105 million) of cash providing coverage against the Nectar redemption liability. Aimia will continue to deliver customer insights and data analytics platforms to customers outside the U.K."

 

"As at September 30, 2017, Aimia had close to $670 million of cash and cash equivalents (including investments in corporate and government bonds). Adjusting for and giving effect to the Nectar transaction, Aimia’s net cash and liquidity position will be reduced by approximately $174 million."

 

 

 

Yep, short term it looks like it might be cash-reducing.

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"Yep, short term it looks like it might be cash-reducing."

From the CC (1st question), it appears that the 183 million was the price to pay to transfer the matching redemption reserve liability of about 230 million.

Nectar is not Aeroplan but it helps to paint the picture if redemption activity would pick up in their core program.

It seems that they were in a tough spot.

"Some wounds never heal, they just stop bleeding". Unknown

 

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Had the impression that the recent news may cause an excessive downward movement in the prices of the shares and especially preferreds. Looked into this. Conclusion: the worse may be yet to come.

 

I had run various scenarios for Nectar and the end result, with what is disclosed now, is in the very low range of potential outcomes.

 

The transaction implies that Aimia had a weak negotiating position but may also imply that redemption trends were increasingly unfavorable at Nectar. Average life of mile for Nectar was 15 months vs 30 months for Aeroplan but the result shows the corrosive power of the redemption liability over time if there is an imbalance between accumulation and redemption.

 

Re-assessed going way back in the history. Interesting because parallels can be drawn with the principles behind P+C insurance underwriting and building a float (asset) to balance reserves (liability). When Aimia changed their breakage rate from 18% to 11% and made other “enhancements” to the Aeroplan program in 2013, the banks were asked to contribute but dissection of the numbers shows the beginning of a diverging trend between the asset side of the business and the growing redemption liability. Looking back, I submit that it would have been reasonable to build a larger reserve (in addition to the required reserves by contracts) of liquid assets to match the growing liability. There is no problem with that divergence as long as the business grows or at least maintains a balance between accumulation and redemption. Since 2012, the total (short term and long term) redemption liability has grown to 3,33 billion from 2,25 billion and gross billings as an indicator of accumulation is now about the same level (2017 annualized +/- 1,66 billion versus 2012 1,63 billion).

 

The divergence continues to deteriorate and the ratio of the current redemption liability over non-current is increasing. Will update when Q4 results are reported. I assume that goodwill at Nectar will be written down to zero and wonder about the potential associated effect on Aeroplan. A non-cash event but significant in the sense that liabilities may have a stronger tendency to bite going forward.

 

What this means has serious implications for the cash flow position going forward.

 

I see three potential scenarios:

 

1-Aimia becomes exposed to a negative trend in accumulation/redemption and the feedback loop reinforces and it becomes a runoff. Using different scenarios and keeping in mind different inputs from previous disclosures and the more recent Nectar transaction, conceptually, the owners of the unredeemed points would be squeezed but would rank higher than everything below in the structure including preferreds. My take is that it could happen fast and this means 0 value for the preferreds.

 

2-Aimia “reinvents” its Aeroplan program with new partners. The way I see it, even in the best of circumstances, the new Aeroplan would operate on a smaller scale and would be less profitable, which means that the redemption liability would negatively pressure the potential positive cash flow that they could generate. Using different scenarios, my take is that the preferred would be then the fulcrum security but the eventual recovery may be less than present market value and the value eventually recovered may have to be discounted as this may play out over a fairly long period.

 

3-Air Canada gets involved. This is a mistake I made earlier because I overestimated the possibility that Air Canada gets involved and the amount that they would pay. I assume that there was a large discrepancy between their assessment and Aimia’s opinion on how challenged Aimia was in early 2017. Air Canada has time on their side and can choose when/if they want to recover value in Aimia. I cannot precisely assess the cost for them to set up a new loyalty program but it must be high. Nevertheless, buying Aimia now would mean that they would have to transfer on their books a huge redemption liability. If Air Canada makes an offer for Aimia, I would tend to think that it will be very low.

 

Here’s a recent report by GMP, who, I think, have been more optimistic than most. They appear to describe a more cautious outlook now:

 

https://gmpsecurities.bluematrix.com/sellside/EmailDocViewer?encrypt=9eed26e1-3352-476f-a960-e24ca26546d7&mime=PDF&co=Gmpsecurities&id=noauthentication@bluematrix.com&source=libraryView&htmlToPdf=true

 

I submit that their work is good but I would also say that the numbers suffer from what I would call the pro-forma bias, ie the forward-looking numbers are largely derived from the rear-view mirror. The model may fail to account for the fact that the large redemption liability will have a tendency to translate into higher revenues but also higher net negative cash flows.

 

Club Premier remains a wild card but, like Tor Lonnum , the previous CFO said on a previous conference call, on this one also, Aimia is not in the driver’s seat.

I’m not the type to short individual names and will keep following just in case, but decided to share this and see if anybody can come up with a more optimistic assessment.

 

 

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When Aimia changed their breakage rate from 18% to 11% ... since 2012, the total redemption liability has grown to 3,33 billion from 2,25 billion and gross billings as an indicator of accumulation is now about the same level (2017 annualized +/- 1,66 billion versus 2012 1,63 billion).

 

 

Odd - you would think less breakage = more redemptions and less redemption liability.

 

 

1-Aimia becomes exposed to a negative trend in accumulation/redemption and the feedback loop reinforces and it becomes a runoff. Using different scenarios and keeping in mind different inputs from previous disclosures and the more recent Nectar transaction, conceptually, the owners of the unredeemed points would be squeezed but would rank higher than everything below in the structure including preferreds. My take is that it could happen fast and this means 0 value for the preferreds.

 

 

Where I am more bullish than you is that I think Aimia can change redemption prices, e.g. they could double the points charged for a reward. That would either stop a run or diminish its impact on cash, leaving enough to satisfy the prefs. In effect this means the prefs rank above pointholders in the liability waterfall.

 

I can't see AC getting involved and can only imagine they would be sued to kingdom come for destroying Aimia and then buying it cheap.

 

As I have said before, Aimia made a catastrophic error in paying out too much float as dividend. They clearly overestimated the probability AC would renew, which was an unforgivable error given that AC had sold its shares in Aimia and had almost no incentive to remain.

 

My best guess is that some big airline will partner with Aimia some time in 2019, but the terms will be lousy - Aimia will have to pay something close to full prices for seats, thereby transferring a lot of the value of the redemption liability to the new partner. That might or might not stabilise the cash situation; if it does, Aimia might make enough to start paying the dividend on the prefs, which might therefore do OK; if it doesn't then Aimia's cash flows will simply fund redemptions for years to come. Either way I would not touch the common with a bargepole.

 

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"Odd - you would think less breakage = more redemptions and less redemption liability."

 

If you invite 100 people to your pizza party and expect that 18 people won't come and then "discover" that only 11 people won't come, yes, you can expect more pizza to be consumed but you have to modify (up) your order. My take is that Aimia is in the unfortunate position of making an accounting profit on their revenues, but more recognized revenues means more cash leaving head office. Cash is most expensive when you most need it.

 

To complete the parallel with the insurance business, Aimia can "control" the combined ratio (modify terms of the contract) but they cannot easily control the timing of redeeming triggers and they now have to deal with the fact that short term liability reserves are potentially much larger than their asset reserves.

 

I now see Aimia as a liquidating scenario but thanks for the perspective.

 

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Is it possible for Aimia to stop redemptions or declare that Aeroplan points are worthless?

 

 

Yes, it can be done quite easily.  A long haul flight in North America currently requires 25,000 miles.  Aimia can arbitrarily bump that up to 500,000 miles if it chooses (along with changes to overseas flights).  In one stroke of a pen, the miles would be devalued 95%.

 

In response, it's possible that plan participants could try to get a class certified and seek legal redress, but as far as I understood, the legal relationship between Aimia and the general public constitutes a gratuitous promise, so it's not clear to me that participants could even get a favourable court decision.

 

 

SJ

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"Odd - you would think less breakage = more redemptions and less redemption liability."

 

If you invite 100 people to your pizza party and expect that 18 people won't come and then "discover" that only 11 people won't come, yes, you can expect more pizza to be consumed but you have to modify (up) your order. My take is that Aimia is in the unfortunate position of making an accounting profit on their revenues, but more recognized revenues means more cash leaving head office.

 

 

Yes, but the redemption reserve is held for points that haven't been redeemed yet. Breakage revenue is recognised on billing, not redemption. If the redemption liability is rising, that implies points are not being redeemed, as would be the case if breakage is rising. If breakage drops, more points are redeemed, cash flows out, and the redemption liability falls.

 

Or am I being thick?

 

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Is it possible for Aimia to stop redemptions or declare that Aeroplan points are worthless?

 

 

Yes, it can be done quite easily.  A long haul flight in North America currently requires 25,000 miles.  Aimia can arbitrarily bump that up to 500,000 miles if it chooses (along with changes to overseas flights).  In one stroke of a pen, the miles would be devalued 95%.

 

In response, it's possible that plan participants could try to get a class certified and seek legal redress, but as far as I understood, the legal relationship between Aimia and the general public constitutes a gratuitous promise, so it's not clear to me that participants could even get a favourable court decision.

 

 

SJ

 

This is why, ultimately, there won't be a run and the prefs rank above the points. IF management choose this course.

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Good discussion.

 

From AR 2016:

 

Unfunded Future Redemption Costs

In the coalition loyalty program model, Gross Billings are derived from the sale of Loyalty Units to Accumulation Partners. The earnings process is not complete at the time a Loyalty Unit is sold as most of the costs are incurred on the redemption thereof. Based on historical data, the estimated period between the issuance of a Loyalty Unit and its redemption is currently approximately 30 months for the Aeroplan Program and 13 months for the Nectar Program; however, Aeroplan and Nectar have no control over the timing of the redemption or the number of units redeemed. Aeroplan and Nectar currently use proceeds from Gross Billings (which are deferred for accounting purposes) in the fiscal year from the issuance of the unit to pay for the redemption costs incurred in the year. As a result, if Aeroplan or Nectar were to cease to carry on business, or if redemption costs incurred in a given year were in excess of the revenues received in the year from the issuance of the Loyalty Units, they would face unfunded Future Redemption Costs, which could increase the need for working capital and, consequently, affect the payment of dividends to Shareholders. (my bold)

 

Changes to Coalition Loyalty Programs

From time to time we may make changes to our coalition loyalty programs that may not be well received by certain segments of the membership and may affect their level of engagement. In addition, these members may choose to seek such legal and other recourses as available to them, which if successful, could have a negative impact on results of operations and /or reputation.

 

-------------------------

 

In terms of revenue recognized related to breakage:

 

"The amount of revenue recognized related to Breakage is based on the number of Loyalty Units redeemed in a period in relation to the total number expected to be redeemed, which factors in the Corporation's estimate for Breakage. Breakage represents the estimated Loyalty Units that are not expected to be redeemed by members." (my bold)

 

--------------------------

 

In terms of the redemption reserve:

 

"Aeroplan maintains the Aeroplan Miles redemption reserve (the "Reserve"), which, subject to compliance with the provisions of the Corporation’s credit facilities, may be used to supplement cash flows generated from operations in order to pay for rewards during periods of unusually high redemption activity associated with Aeroplan Miles under the Aeroplan Program. In the event that the Reserve is accessed, Aeroplan has agreed to replenish it as soon as practicable, with available cash generated from operations. To date, Aimia has not used the funds held in the Reserve.  At December 31, 2016, the Reserve amounted to $300.0 million and was included in short-term investments and long-term investments."  (my bold)

 

----------------------------

So,

-Maybe a way to look at this is to see the potential cash flow impact of a mismatch between accumulation and redemption.

-Concerning what SJ alludes to, I agree that they can modify their "contracts" with people holding the points but that may contribute to the potential mismatch described above. Not long ago, there was a lot of uproar from consumers with Air Miles when they tried to make miles expire. They had to retract and apologize. This is uncharted territory but if this comes down to the wire, it is hard to see equity holders collecting before consumers.

Would you continue accumulating points if they lose redeeming value?

 

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"Yes, it can be done quite easily.  A long haul flight in North America currently requires 25,000 miles.  Aimia can arbitrarily bump that up to 500,000 miles if it chooses (along with changes to overseas flights).  In one stroke of a pen, the miles would be devalued 95%.

 

In response, it's possible that plan participants could try to get a class certified and seek legal redress, but as far as I understood, the legal relationship between Aimia and the general public constitutes a gratuitous promise, so it's not clear to me that participants could even get a favourable court decision."

 

People always assume this is easy and I was made to believe this as well.  If you talk to any consultant, they will tell you it is doable in theory but impossible in reality.  In Aimia's contract with TD or CIBC, there is legal clause to prevent Aimia to devalue the points to a large extent.  There is some clause requiring that Aimia to maintain a reasonable value for points.  Without reading contract, outsiders have no idea but devaluing points by 95% is simply impossible (10-15% per year might get by but I am even not sure about that).

 

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"Yes, it can be done quite easily.  A long haul flight in North America currently requires 25,000 miles.  Aimia can arbitrarily bump that up to 500,000 miles if it chooses (along with changes to overseas flights).  In one stroke of a pen, the miles would be devalued 95%.

 

In response, it's possible that plan participants could try to get a class certified and seek legal redress, but as far as I understood, the legal relationship between Aimia and the general public constitutes a gratuitous promise, so it's not clear to me that participants could even get a favourable court decision."

 

People always assume this is easy and I was made to believe this as well.  If you talk to any consultant, they will tell you it is doable in theory but impossible in reality.  In Aimia's contract with TD or CIBC, there is legal clause to prevent Aimia to devalue the points to a large extent.  There is some clause requiring that Aimia to maintain a reasonable value for points.  Without reading contract, outsiders have no idea but devaluing points by 95% is simply impossible (10-15% per year might get by but I am even not sure about that).

 

 

So, to clarify your argument, you are essentially saying that AIM risk litigation from a couple of its partners if it does a massive devaluation.  That's definitely a possibility, because the relationship between CIBC or TD and AIM is not a gratuitous promise.  In Canadian courts, litigants need to demonstrate that economic damage has occurred.  It would be very interesting to see the argumentation that CIBC or TD would make to support that contention.  And it would be very interesting to see how many years it would take for that type of litigation to work its way through the system (perhaps it would take more than five years but fewer than ten?). 

 

At this point, if I were running AIM, litigation from the banks wouldn't be my primary concern.  IMO, they need to devalue the outstanding miles and they should begin the process soon.  Even two or three devaluations of 10 to 15 percent each over the next two or three years would go a long way to protecting AIM's solvency.  If they don't deal with their immediate solvency challenge, they won't even be around to worry about litigation from the banks in 5 or 10 years.

 

 

SJ

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"Yes, it can be done quite easily.  A long haul flight in North America currently requires 25,000 miles.  Aimia can arbitrarily bump that up to 500,000 miles if it chooses (along with changes to overseas flights).  In one stroke of a pen, the miles would be devalued 95%.

 

In response, it's possible that plan participants could try to get a class certified and seek legal redress, but as far as I understood, the legal relationship between Aimia and the general public constitutes a gratuitous promise, so it's not clear to me that participants could even get a favourable court decision."

 

People always assume this is easy and I was made to believe this as well.  If you talk to any consultant, they will tell you it is doable in theory but impossible in reality.  In Aimia's contract with TD or CIBC, there is legal clause to prevent Aimia to devalue the points to a large extent.  There is some clause requiring that Aimia to maintain a reasonable value for points.  Without reading contract, outsiders have no idea but devaluing points by 95% is simply impossible (10-15% per year might get by but I am even not sure about that).

 

 

So, to clarify your argument, you are essentially saying that AIM risk litigation from a couple of its partners if it does a massive devaluation.  That's definitely a possibility, because the relationship between CIBC or TD and AIM is not a gratuitous promise.  In Canadian courts, litigants need to demonstrate that economic damage has occurred.  It would be very interesting to see the argumentation that CIBC or TD would make to support that contention.  And it would be very interesting to see how many years it would take for that type of litigation to work its way through the system (perhaps it would take more than five years but fewer than ten?). 

 

At this point, if I were running AIM, litigation from the banks wouldn't be my primary concern.  IMO, they need to devalue the outstanding miles and they should begin the process soon.  Even two or three devaluations of 10 to 15 percent each over the next two or three years would go a long way to protecting AIM's solvency.  If they don't deal with their immediate solvency challenge, they won't even be around to worry about litigation from the banks in 5 or 10 years.

 

 

SJ

 

Agreed - especially if the devaluation is temporary i.e. Aimia reverses it having done a deal.

 

Of course the risk is that a devaluation simply accelerates a run. It would reduce the cash outflow, but also reduce the buying power Aimia represents, and therefore reduce the attractiveness to a new partner. There are no simple answers here.

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Here is an interesting analysis that would tend to validate a more optimistic assessment:

https://seekingalpha.com/article/4143261-aimia-clown-car-fell-gold-mine-still-golden

 

There is a lot of info circulating on Aimia and the quality is uneven but this piece is quite good in terms of business insights and relevance.

Still, the author describes a potentially favorable transition and, at the same time, suggests that the Board and mangement should be replaced...

Recent Sedar disclosures suggest that a shareholder may want to take a more active role.

 

I viewed this investment mainly as event driven and not as a transition opportunity.

AIM will report Q4 numbers on Valentine's day.

 

 

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