RE:AeroMexico secured it's loan with it's share of PLM I'm glad I'm not negociating with Mittleman...
Just to be clear - only the $50m intercompany loan from PLM to Aeromexico (which was agreed to on May 12, 2020) is perfected by a first priority security interest in Aeromexico's shares of PLM. The other $50m is not.
And it wasn't because Mittleman negotiated it that way. It was already there in the contract language of an Intercompany Loan Agreement contract that had been signed between Aeromexico and PLM in January 20, 2016 so that PLM could make intercompany loans to Aeromexico from time-to-time.
The second $50m was a separate agreement via amendments to the Shareholder agreement with AIMIA and was completed this week (June 29, 2020 - that's why there was another press release - there were two separate agreements to be finalized). This $50m is via PLM making a $50m pre-purchase of program points from Aeromexico. There is no interest payable by Aeromexico on this $50m (also no security apparently). It is a receivable for PLM/payable for Aeromexico.
It is in this second agreement, that the seven-year purchase agreement of AIMIA's 49% share was negotiated as well as the agreement term extension.
It is important to keep in mind that in the case of the Intercompany loan of $50m from PLM to Aeromexico, Aeromexico has no intention of paying this back in cash. The first option is to pay it back as a credit to any future PLM debt issue/dividend recapitalization for Aeromexico's portion of dividends. If that isn't possible (and it looks unlikely, now that Aeromexico is in Chapter 11 and the term is 3-years), then Aeromexico can "pay it back" via a second $50m-payment-in-kind via Aeromexico granting PLM a further $50m in pre-purchase program points.
I fail to see how, in any scenario, Aeromexico defaults on this intercompany loan. Therefore, the security agreement was neither negotiated by AIMIA/Mittleman nor is going to cause a default by Aeromexico under any scenario.
Despite the happy talk spin from Mittleman on the TD call, Aeromexico cares only about its own interests. The relationship with AIMIA is neither friendly nor unfriendly - it is commercial and mercenary....always and at all times. To think otherwise is naive.
Aeromexico views AIMIA as a free-rider on future growth in PLM and does not want AIMIA to participate on the upside because they view themselves (Aeromexico) as the sole creator of that additional value. So I believe they will engineer an outcome that just barely meets the rules of the buyout (7.5x adjusted EBITDA, $400m put option value) such that they deliver that to AIMIA and not one single penny more.
What's the problem with $400m USD for AIMIA's 49% in PLM? I think that's too cheap and I would've just forced Aeromexico to negotiate their way right to the end of the Shareholder Agreement in 2030. By then PLM would be obviously more valuable than $400m USD for a 49% share. Who agrees with me? Why, the Mittleman Bros themselves (who in their Q3 and Q4, 2019 letters were valuing PLM at 10x EBITDA but settled for 7.5x in the agreement with Aeromexico).
wabuffo