Originally Posted by
Sunfish
“The assets” let’s look at them.
- A brand recognised throughout Australia. I will call that Marketing capital.
- A business conglomerates of staff and operational processes and systems (including IT and HR) that ensure Virgin is a going concern, even if it is hibernating now.
- Supplier/creditor/customer channels that are mature and workable.
- An AOC and the systems and capability to maintain the same.
- Airport chech in facilities and infrastructure around Australia.
- A considerable market share of domestic travel.
- Motivated and attractive workforce (in the marketing sense)
Folks, non of this stuff came cheap. None of this stuff carries a book value, no matter what accounting principles Deloittes dreams up.
Exactly how familiar are you with basic business accounting practices?
Facilities, infrastructure, IT systems are all valued and carried as assets under Property, Plant and Equipment (or a similarly named line) on the balance sheet.
Further, the balance sheet will carry a line under Assets called Intangibles (or Intangible Assets) that assigns a value to things like market share, brand presence and the like.
And Deloitte doesn't have to dream any accounting practices up - Accounting Standard AASB 138 Intangible Assets has been around since 2004 to deal with just those items.
Originally Posted by
Sunfish
- Bain is naturally trying to get ownership by paying for the rusty filing cabinets and office chairs - with the rest thrown in for free.
And you know this how? Nobody at this stage knows how Bain have valued the business or what they've paid for it.
Originally Posted by
Sunfish
- The Bond holders see the reverse - the huge value of the non financial assets ...
Do they? The bondholders are trying to swap debt that is essentially worthless for the entire business. And nobody has any real understanding of how the rest of their bid is structured.
And what is the 'huge value' of the non financial assets? By any ordinary measure the value of a business as an ongoing concern is determined by either its earning capacity or its free cash flow yield. Just how much money do you expect that Virgin will clear as profits over the next few years? Or how about its free cash flow?
Originally Posted by
Sunfish
... compared to the financial debt - which after all is just money that can and will be supplied by anyone, any time and quickly.
Uh-huh. Just money. And funny, is it not, that when Virgin went looking for some of that 'just money' in the run up to administration, no one was supplying, not at all and most assuredly not quickly?
Originally Posted by
Sunfish
- Deloittes, being a bunch of accountants, however you want to put it, cannot and will not appreciate the non financial assets. In addition, I have observed repeatedly that there is precisely ZERO forensic aviation accounting talent outside Qantas and Virgin, so Deloittes are in the dark about the value of much of Virgin.
Do you know much about Deloitte? For instance, how Strawbridge would have access to the Deloitte Global Travel & Aviation consultancy group to the extent that he needed any advice. And I'm not sure about current arrangements but outside of consultancy, Deloitte used to audit Delta. And then, of course, Deloitte had direct and unfettered access to one of your nominated sources of 'forensic aviation accounting talent' - the entire Virgin finance team!
But sure, yes, let's just assume that they're just a bunch of dumb yokels making it up as they went along.
Originally Posted by
Sunfish
I saw a similar situation when Saint Margaret Jackson and Geoff Dixon presided over the attempted privatisation of Qantas. They characterised Qantas as a rusty old beat up Holden ready for the wreckers. The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
Where to start with this?!
They characterised Qantas as a rusty old beat up Holden ready for the wreckers.
Did they? Qantas was trading at $4.20-odd when Dixon and Airline Partners Australia made their first bid at $5.45 in December 2006. That was a 30 percent premium to market right off the bat. Odd pricing for a rusty old beat up Holden! They eventually went to $5.60 in early 2007 before getting cold feet.
The reality was that all Qantas needed was a bit of a tonic - which it got when the oil price collapsed.
Uh-huh, a bit of tonic, you say?
After APA withdrew their bid Qantas had six or seven months trading above the $5.60 offer price and then down she came. And down she stayed. First oil sky-rocketed (the opposite of collapsing) from May 2007 - July 2008. And then the GFC. And then oil back up again.
The share price would not get back up to the APA offer price of $5.60 until July 2017, nearly a decade after the final offer.
Originally Posted by
Sunfish
So to be optimistic for once, if Virgin got some financial breathing space, courtesy of the bond holders, an enlightened Board who actually have relevant experience instead of being politically correct dummies and a tough but intelligent and fair management - again not steeped in politically correct bull****, then a restructured Virgin has a good future.
How exactly are the bondholders offering Virgin 'some financial breathing space'? For the bondholders to recoup their sixty-x cents in the dollar the airline needs to be refloated. What do you think the time frame will be for that? And what surgery do you think will need to be performed on the business to achieve the sort of share price they need to hit their return target?
Do you think that a pair of Singaporean investment fund managers are going to be more patient and gentle masters than Bain?