Great Lakes limps further

[FloridaLarry]

Great Lakes and their financial backers have signed a 4th Amendment, 2nd Forbearance, on their credit agreement. Details are in the SEC form 8-K dated May 30th.

Significant details from the 8-K below:

As of May 30, 2014 the Company was in breach of or expected to be in breach of three financial covenants under its Credit Agreement dated as of November 16, 2011 (the “Credit Agreement”). Pursuant to the Forbearance Agreement, the Lenders have agreed to temporarily forbear from exercising certain rights and remedies under the Credit Agreement. The Company has agreed, until the Forbearance Termination Date, to pay the Lenders an additional two percentage points per annum above the rates of interest otherwise applicable under the Credit Agreement. The Company also agreed to continue to retain consultant Huron to produce a financial report for the Lenders, to provide cash flow projections to the Lenders, and to reimburse the Lenders’ costs incurred in connection with the Forbearance Agreement. The Company has agreed to hire three firms to market the Company’s excess aircraft and inventory and to hire a financial advisor to advise the Company on raising capital through additional equity financings, debt financings, or other liquidity events, which may result in a sale of the Company. The Company also agreed to pay a forbearance fee of $242,000, a funding fee of $60,000, and a commitment fee of $60,000.

The Forbearance Termination Date is on the earliest of (i) September 15, 2014 and (ii) the date on which Great Lakes commits additional breaches under the Credit Agreement. In consideration of entering into the Forbearance Agreement, the Lenders have agreed to lend the Company an additional $3 million and defer an additional $2 million of amortization payments which were due and payable by September 30, 2014.

Buying time, but since the airline has said that they'll be in negative numbers for the rest of 2014, stay tuned.

Wanna buy an airline?

 

[Autothrust Blue]

At the press conference announcing their shutdown:

"This is the FAA's fault. SEE-YUH!"

 

[fracguy]

can't they just sell the spare seats they took out of the airplanes?

 

[BravoHotel]

An outsider's perspective.

I have following the saga of Great Lakes on this forum for sometime. I am by no means a business person, but one would think if a particular model wasn't working why would repeat the same thing over and over again when you keep getting the same results? Isn't that insanity?

You think the board of directors or who ever is at the helm would try I don't know, maybe reshuffling the business model. Look at what is productive and profitable instead of overextending credit like someone trying to buy their flight ratings. Doh!

 

[Ajax]

An outsider's perspective.

I have following the saga of Great Lakes on this forum for sometime. I am by no means a business person, but one would think if a particular model wasn't working why would repeat the same thing over and over again when you keep getting the same results? Isn't that insanity?

You think the board of directors or who ever is at the helm would try I don't know, maybe reshuffling the business model. Look at what is productive and profitable instead of overextending credit like someone trying to buy their flight ratings. Doh!

The board is just doing whatever they can to buy them enough time to secure employment elsewhere

 

[thevideographer]

I heard they're getting jets

 

[SeanD]

An outsider's perspective.

I have following the saga of Great Lakes on this forum for sometime. I am by no means a business person, but one would think if a particular model wasn't working why would repeat the same thing over and over again when you keep getting the same results? Isn't that insanity?

You think the board of directors or who ever is at the helm would try I don't know, maybe reshuffling the business model. Look at what is productive and profitable instead of overextending credit like someone trying to buy their flight ratings. Doh!

Id say at this point, the most profitable thing to do would be to shut down shop. Of course it will suck for those folks currently there but they must have known this place was in a pickle. Its not like they would really be giving up a seniority number that would be hard to top anywhere else.

 

[surreal1221]

Eventually...eventually...

 

[Vyse]

No board will voluntarily vote itself into unemployment as long as they can convince someone to lend them money, which they appear to have done so.
They are reshuffling, sort of, by going 135. The question is will they run out of loan money before it starts making a difference?

 

[SeanD]

Its incredible this place has lasted this long. Regardless if they go 135 or not, they are still going against the grain. There is something wrong with borrowing money so they can keep their pay low and limit hiring requirements.

 

[FloridaLarry]

Virtually all of us on the outside of GLA believe that their model is broken, probably irretrievably. The Part 135 is a Hail Mary pass which, if it had greased through quickly and brought enough new cockpit cannon-fodder in the door, might have worked.

Vyse asks:

...The question is will they run out of loan money before it starts making a difference?

And, will they run out of people willing to fund more Hail Mary passes? I assume their funders (who also own Silver, let's not forget), don't want to throw good money after bad, so GLA has had to propose something that m-a-y make sense, and allow them to either make a profit (not likely) or cut their losses, either by continued payments at interest rates that Tony Soprano would love, penalties for every amendment they sign, and time to find a buyer for assets, the certificate, etc. When any remaining stringy old meat on the bones has been plucked, then it's Chapter 11 or 7. Or, timing a loss for tax purposes.

Not much US market for the 1900-Ds, unless some night freight operator needs to replace older 1900s with newer aircraft (do packages need more headroom? ) or some sub-Saharan operator in Africa needs more airframes. Lots of Brasilias also parked. I don't know what they're carrying on their books as 'good will' but it can't be too large a number!

But these guys have a long history of survival.

 

[jwp_145]

Virtually all of us on the outside of GLA believe that their model is broken, probably irretrievably. The Part 135 is a Hail Mary pass which, if it had greased through quickly and brought enough new cockpit cannon-fodder in the door, might have worked.

Vyse asks:


And, will they run out of people willing to fund more Hail Mary passes? I assume their funders (who also own Silver, let's not forget), don't want to throw good money after bad, so GLA has had to propose something that m-a-y make sense, and allow them to either make a profit (not likely) or cut their losses, either by continued payments at interest rates that Tony Soprano would love, penalties for every amendment they sign, and time to find a buyer for assets, the certificate, etc. When any remaining stringy old meat on the bones has been plucked, then it's Chapter 11 or 7. Or, timing a loss for tax purposes.

Not much US market for the 1900-Ds, unless some night freight operator needs to replace older 1900s with newer aircraft (do packages need more headroom? ) or some sub-Saharan operator in Africa needs more airframes. Lots of Brasilias also parked. I don't know what they're carrying on their books as 'good will' but it can't be too large a number!

But these guys have a long history of survival.

They don't even own their aircraft... Raytheon owns all of the aircraft, and has had to restructure the lease/debt agreement in an effort to some day get their money.

 

[Inverted]

The only thing worth anything is their 121 certificate.

 

[FloridaLarry]

JWP 145 said:

They don't even own their aircraft... Raytheon owns all of the aircraft, and has had to restructure the lease/debt agreement in an effort to some day get their money.

Their present financing bought out the Raytheon notes in 2011 (Raytheon did take a bath, in getting out of the aircraft financing business after selling Beech.), so GLA now does own all their B-1900Ds (28) and E-120s (6). All aircraft are mortgaged to the hilt - they are pledged to their banking firms as surety for the loans, so their net value (if much) won't help the airline, since the bankers would collect their pound of airframe before GLA saw a penny on any sale. Or pending some deal to share the proceeds as a way of re-capitalizing GLA.

In fairness to GLA, it's worth noting that their 4 year aircraft note started at $24M in 2011, and has been reduced to $15.2M now. They have also drawn $9M of a $10M note for operating monies, expected to be revolving.

Inverted said:

The only thing worth anything is their 121 certificate.

Yes, and maybe the EAS contracts. They would probably need DOT's approval to transfer them to a new firm or ownership, but under the right circumstances...

FAA approved Maintenance shop in Cheyenne is only worth something if they no longer need it (ie: Chapter 7). I suppose it could be sold & leased back, or sold and contracted for maintenance, but operating costs would rise yet again.

All other GLA assets are chump change.

 

[KSCessnaDriver]

The problem with this 135 plan, is, EAS contracts are on a 2 year cycle. So, when it comes time to bid any of the 135 runs they've got now, they're going to have to compete financially with other 9 seat planes, with a 19 seat plane operating costs. They simply aren't going to be able to compete with a 402, 208, or PC12 even. And its not like GLA is known for exceptional service. I'd expect the local communities (which do get a say in the process) to vouch for anyone other than GLA, come time for renewal.

 

[Itchy]

Toast.

 

[Vyse]

What is a 121 certificate worth? The only data point I have is the Shuttle America certificate which RAH bought for a million.

 

[Inverted]

What is a 121 certificate worth? The only data point I have is the Shuttle America certificate which RAH bought for a million.

So GLA selling their 121 certificate would be the most profit they would generate in that case lol.

 

[hook_dupin]

The most recent 10-Q is far more alarming than the forbearance notification. The airline managed to have a $4M loss on $13M in revenue. Their current ratio (ratio of easily liquidatable assets to short-term debt) is 0.6. The stockholders are screwed.....

 

[eightballfreight]

I might be the only dude in America that thinks the 1900 is a viable commuter in a few select markets, but that's cool.
GLA though needs to go though.