Originally Posted by
nomess
Any idea what the exit clauses are here for PAG? I don’t think they planned on funding a bleeding Saab operation.
I don't think that anyone outside of the inner circles at Rex and PAG would have all the details but basics of arrangement were presented to shareholders back in late 2020. You can find the relevant document
here.
From memory the basics are:
- a total of $150 million in funding available for drawdown at Rex's discretion within a three year period.
- funding to be used by Rex to "establish, launch, operate and expand Rex's Australian domestic Regular Public Transport jet operations". Interestingly, the document specifies the operating aircraft right down to type and configuration.
- drawdown is by way of Rex issuing convertible notes/warrants with a face value of $1, and a conversion/strike price of $1.50.
- conversion of the notes/warrants to shares at PAG's sole discretion.
- there were some conditions precedent relating to early conversion but those having passed, maturity (when PAG can convert) is five years from the first draw down, extendible by up to one year. PAG also have the option of electing to convert any time from the end of the three year draw down period.
- 4 percent interest on the notes subsequent to drawdown (interest not payable during the extension period if PAG elects to extend).
- if PAG elect not to convert to shares, Rex has to pay the drawn down amount back.
- PAG get two board seats.
Happy to be corrected on any of the above if memory has failed me (a little more frequent these days).
Bottomline, PAG are tied to Rex for a minimum of another two, and maximum of another three, years from 15 March this year.
I cannot imagine that things are evolving as predicted/hoped for by either party when they entered into the deal. Thus far, it has been a better deal for Rex than PAG, in that 4 percent interest on that sort of sum for a business of Rex's financial stature is below market rates.