Q1 balance sheet revisitedCaveat: I could be all wrong.
Went thru Q1 and only found a $345M shortfall balance sheet wise. Considering BT is still cleaning up legacy and how the quarter ended with COVID19, not too bad. Was closer to $700M shortfall last year. They do manage the balance sheet very tightly (like most large companies I would imagine though probably a little more here...) it seems so any sort of interruption esp major one like COVID 19 will wreak havoc on cashflow so the short term bridge loan could be helpful for sure. Also, there is definitely a quarterly ebb and flow. One thing that is annoying is how they report Other assets and liabilities (financial and non financial, and provisions) - I have to guess which part of each line item is current and non current, and "real" vs mark to market (mark to market should be ignored IMO, ditto items that are always non current).
Hopefully the post COVID 19 year (July 2 to June 30) will be positive cashflow wise. The uncertainties as I see them:
1 - general - how much cashflow (net of capex) will BT generate in the next 12-15 months? how much cashflow (net of capex) will BA generate in the next 12-15 months? how much will the commercial operation wind down (severance?) cost? Will Belfast close?
2 - does sale of BT to Alstom happen? Highly likely it does but for investors, the ideal would have been a transfer to in the interim or full backstop by CDPQ (found it interesting that CDPQ private equity also invested in Keolis - wonder if that's dead money...- surely they didn't charge SNCF 15% interest...) otherwise its a year or more of uncertainty business aviation definitely doesn't need considering the last 5 years AND more recently, COVID19. Because the BT sale transformationally de-leverages the balance sheet - something like 10x any other asset sale.
3 - what will be the cost (or benefit) of refinancing? American companies are refinancing now at attractive rates (and terms - 20 years in some cases). The $2B refinance in Q1 '19 cost $80M if you extrapolate to $9.3M..., that's a fair chunk of change....plus as I said before, they can't afford to be paying 8% interest - its a big expense every quarter this high yield debt. Also, some of the bonds were trading at 60 cents on the dollar as of yesterday so seems like something that should be looked at now... the way I see it, this is a good test for Martel. Can he seize the opportunity or does he stick to the plan?
May you live in interesting times!!!