REX to transition to ATRs, start domestic jet ops

[crosscutter]

I do not have intimate knowledge of the funding agreement between REX and PAG Asia Capital. I know this though:
1. PAG would give REX $1.50 per share in what is essentially a cash for equity swap.
2. The first $50M gives PAG a 23% stake in REX
3. However, the remaining $100M gives PAG a far less attractive conversion rate. PAG would then have a 48% stake in REX.
4. The current share price is $1.24 and the YTD trend is bad. Put it all another way…REX has a total market Capitalisation well less than the $150M in the PAG agreement.

Now LF might matter nothing to you or I, but do they matter to PAG? Without them it’s game over in the Jet space….and how keen will they be to inject the remaining $100M? In a congested domestic market, load factors means more to REX than anyone when their half year government grants and subsidies represented 1.5 times their entire passenger revenue. Private Equity will decide, and you can be sure they are watching LF carefully.

It matters not what level of debt QF have, or the finances of Virgin (Bain). The first decision point will be for PAG capital to show their intent, commitment and stomach to keep playing.