May 10, 2017On that date, AIMIA has 5 news releases,https://web.tmxmoney.com/news.php?qm_symbol=AIM
for 1. Announcing the notice of redemption of its senior secured note , 4.35% due, jan.22, 2018
2. Announcing the renewal of its share buyback plan.
3..Declaring dividends
4. Naming new CEO
5.Reporting 2017 first quarter result and updating on status of discussion with AC, ABTRACTS from this NR:
Strategic highlights: - Update provided around key partnerships, operating model and financing plans
- Recent discussions lead Aimia to the belief that Air Canada does not currently intend to renew the Aeroplan partnership expiring in June 2020; Aimia exploring post-2020 alternatives
- Continuing to take action to simplify and focus the business, with annualized savings of $70 million expected from 2019
- Early redemption of senior secured notes due January 2018 planned
- Rupert Duchesne to retire, with Interim Group Chief Executive David Johnston to assume role permanently
- Newly adopted dividend policy targets future dividend payout ratio linked to cashflow generation
Aimia strongly believes that a renewal of the company's long-term partnership would be the best and least disruptive option for both companies' customers, in particular Air Canada's frequent flyers. While Aimia remains open to further discussions with Air Canada, the company's strategic planning had already contemplated other post-2020 alternatives in parallel with the goal of ensuring that Aeroplan members retain access to a strong redemption offering around air rewards in the future. Given the state of current discussions, we will continue to pursue these alternatives actively. Aeroplan's purchasing agreement with Air Canada guarantees capacity to Aeroplan in exchange for a substantial volume and certainty of advance ticket purchases which makes Aeroplan Air Canada's largest single customer and generates significant cash flows to Air Canada. The company also expects to identify additional savings as it continues to simplify the business. These actions are expected to start delivering benefits during 2018, with total annualized savings targeted at $70 million from 2019, helping to offset any changes to accumulation on Air Canada or changes to the allocation or cost of Fixed Mileage Flight Rewards, which could lead to lower Gross Billings or an increase in purchasing of higher priced flight rewards. A material reduction in capital expenditures is also planned for 2018, mainly as a result of the completion of analytics investments in the International Coalitions business. Quarterly Dividends to Shareholders
- Aimia's business model is cash generative and the Board recognizes that the dividend on the common shares has been an important element of the investment proposition for investors.
- The Board has declared a quarterly dividend of $0.20 per common share, payable on June 30, 2017, to shareholders of record at the close of business on June 16, 2017. On an annualized basis and on the basis of current guidance, this dividend level would reflect a payout of around 55% of the annual Free Cash Flow before Dividends Paid.
- The common share dividend level reflects the Board's intention to more closely align to a payout ratio based on the expected annual Free Cash Flow before Dividends Paid and subject to the Board's evaluation of the Company's medium term strategy, outlook, cash flow expectations and balance sheet development.
As you can see , the early repayment of the secured debenture was announced on may 10, 2017 together with other
GOODIES, according the author of AIMIA PREFERREDS: FORSIGHT 20:20, aimia has used its line of credit to pay off this
200 millions loan and that means: at that point, the banks were satified with aimia's financial health, so, they didn't restrict aimia not to do anything, since aimia has excellent earning generating power compared to other companies, now here is what I want to point out; the author of above article of SEEKING ALPHA, said: that the
banks were the cause of dividends suspention. but I don't agree with that, if the banks saw the repayment of their line of credit was in danger, they wouldn't have allowed aimia to even announce the payment of the dividends, and buyback company's shares before letting it withdraw that line of credit. and from management point of view, why would they put their credibilityat risk, if they knew that they are not able to pay the dividends why bother announcing it at all? in contrary, they are very confident about the future, the problem with AC by 2020 is managable for them , they have been preparing for the transit as you can read above,
so did the banks. in a word, the management have been prepared everying under their power for the 2020 transit, but one thing they couldn't prepare is the sharp decline of its share price to the point that they had to embarrass themselve to annonce the temporary suspension of dividends.According that seeking alpha author, that net debt of aimia is 390millions, and the net proceeds of PREMIER CLUB would be 450 million, so why not just use that proceeds to pay off all its debts, and the company will still has more than 220millions FCF, what to do with so much money? ANSWER: pay the dividends 220x 55%=121 million for both commons and prefereeds, and after that divy payment still some leftover cash ? what to do with it?IN MY VIEW, I believe both commons and pref. dividends will be reinstalled after a reasonalbe recovery of share price. as its the intentions of management. and do not forget , there are around 50% of royal instituitional investors they still holding their shares even after the crash of share price, the management doesn't want to disappoint or upset them, since they are hired by the shareholders to lead the company. AH, one more point :
BEFORE may 10, the banks must have knew also, that AC has no intention to renew contract with aimia, but they still allowed it to withdraw its line of credit.