Great Lakes lives on...

FloridaLarry

Well-Known Member
Great Lakes Aviation (parent of Great Lakes Airlines) has more lives than the Eveready Bunny.

They have new financing, at a better rate than they had. New lender: Callidus Capital, who signed an agreement with them yesterday (12/21/14) for a ten year period, for $25M at 14%, collateralized by their fleet and other assets. They also have two revolving loans for capital improvements and other uses, one for $10M and a second for $3M. Callidus is a private outfit based in NYC and operating several investment funds, but I can find little additional information about them.

Great Lakes' previous loans were at LIBOR plus 11% with a minimum of 15.5%, plus various penalty fees during the last year-plus of financial troubles.

There are, of course, various requirements spelled out in lots of fine print.

Let's hope their new business plan will support this higher debt at a somewhat lower rate.

Above from SEC form 8-K and previous filings.
 
They got a small fleet of aircraft as security assets for a 25 million loan and it's still costing them 14% interest on ten years?

Really shows how much confidence lenders have in that operation.
 
Holy cow! That's nearly 70 million in interest alone! Am I missing something here? How could any company agree to such terms? Sounds like a last ditch effort to save a sinking ship.
 
Holy cow! That's nearly 70 million in interest alone! Am I missing something here? How could any company agree to such terms? Sounds like a last ditch effort to save a sinking ship.

By any company, do you mean the airline or the lender?

The lender obviously thought there was some collateral value in GL's assets. In these days of government gridlock, just having a company with an approved OPSEC is pretty valuable.

I still content that GL will transfer ownership in a debt-equity swap.
 
The Airline

From GL's perspective, this was actually a better deal than their previous lender.

Companies stay alive on current cash-flow. Financing allows them to keep going. It's sometimes a hard thing to wrap your head around: a loan deal that you would never take personally may be quite a deal for a corporate entity.
 
"Gosh, I lost a few million dollars' of pensioners' money today. Oh well, time for me to take my bonus and go home."

I firmly believe the bank will walk away as the winner here. Likely the funding for this loan did not come from low-risk investors like pensions anyway.

People hate IBs, but capitalism doesn't work without them. There are very very few companies who don't hold long term debt. Even Google has $3B in long term debt (when they have about $80B in current assets).

GL is somewhat unique among small airlines in that they own their aircraft. It seems to have enabled them to get debt financing where other firms would have just cut the size of the fleet to make the cash flow work.
 
With the regional airline industry starting to shrink, EAS and 135 airlines seem to be gaining traction. GLA has lost routes, but the demand for their particular industry service seems to be growing.

My thought on the lenders is maybe they see something we don't? Maybe Lakes will gain routes and the thought of owning their own aircraft is appealing. In evaluating the company, you have to admire their desire and hard work in avoiding liquidation.
 
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