Originally Posted by
dera
I believe AAG does have that amount "sitting around" and do not need to tap into a line of credit to do so. They list almost 15 billion in short term investments and just under a billion in restricted cash.
The short term problem they have is that 19.2 billion of current assets is pretty much spoken for, since they have 18.9 billion in current liabilities. So they will have to refinance the older debt that they got with much lower rates than what they currently can borrow. Burning through the 19 billion in liquidity only pays down 2.5 billion of debt. They still have 36 billion of long term debt left after that.
They keep saying they will pay down 15 billion in the next 4 years, they just do not have the cashflow to do right now and they need to pull some rabbits out of a hat to successfully do so. I am excited to see how they manage this.
You are partially correct. Digging in to the details they have $14.5 Billion “sitting around” but the balance ~$3.4 Billion is in lines of credit.
So we are both right, you perhaps a little “righter” than me.
But I agree about the cash flow issue. Even in 2019 - before COVID - AA wasn’t turning out that much net income, only about $1.5 billion a year. It is difficult to see where they will find the net income to meet their goals with the increased cost of the debt service they have recently incurred at far higher interest rates, let alone what will happen if interest rates go up which will increase the costs of their lines of credit almost immediately.
Still, you can certainly understand them wanting to pay off those senior secured notes at 10.75 and 11.75% as soon as possible, but like you, I’m not certain they can do it.
Time will tell I suppose, but with any prolonged significant inflation or recession, their financial plan looks fairly shaky. Unless there is another PSP.