As was pointed out to us by a poster - AER is buying debt(bonds) at a discount. This is great for many reasons. Beyond the obvious strenghening the balance sheet - it signals that the management believes that they have no great need for cash as was posted previously. They guaranteed BK for this company. BK means they don't have enough cash to continue the business - why would they be buying long term debt if they had even a small problem - and this is with full knowledge of next years potential pitfalls. The plan is they will be selling some of the planes leased to Aeroflot - at a profit. This should generate more cash that can be used to strengthen the balance sheet. Overall as I dig deeper and deeper into this company - I like what I see - but of course the market hates them. Time will tell who is correct!
Overall as I dig deeper and deeper into this company - I like what I see - but of course the market hates them. Time will tell who is correct!"
I like it too! Buying debt is good because the "tell" is that they believe (AER management) that they are both smart and confident. Smart in that its a good use of funds and confident in that they have the flexibility to do that now.
It is also good on another front. They indicated in conf call from last quarter of discussions with "soveriegn welath funds" it may be the same folks they gave these leased aircraft to. This may indicate that such discussions are going well and they have a 'monetization' factor in their favor that they may tap into later.
Another way to look at it is this: If the market discounts the $1b+ in shareholder equity, they can monetize it and buy back stock and bonds with the money raised. this company has over $5 billion in assets, which AER managment claims is under market value. If they can monetize those assets - and the deal indicates that they can, which they do buy selling 'leased airplanes' (think of it like selling leased real estate, you get a more or less stable income on an asset that even if the lease falls through can be resold back to the market - they have a path to deleveraging and to raising capital as needed, that will eventually make the company worth closer to book value.