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Leucadia National Corporation Message Board

mastermind_not 20 posts  |  Last Activity: Jun 23, 2015 3:04 PM Member since: Apr 23, 2010
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  • Reply to

    just playing around with the numbers

    by hoopsyah Jun 23, 2015 11:30 AM
    mastermind_not mastermind_not Jun 23, 2015 3:04 PM Flag

    RBC raised based on the news:

    RBC Capital raised their target price on shares of Fly Leasing (NYSE:FLY) from $22.00 to $25.00 in a research note issued on Tuesday. The firm currently has an “outperform” rating on the stock. RBC Capital’s price objective would indicate a potential upside of 57.73% from the company’s current price.

    (Link at seeking alpha)

  • Reply to

    FLY competition

    by chronart Jun 23, 2015 12:41 PM
    mastermind_not mastermind_not Jun 23, 2015 2:03 PM Flag


    I'm a long time FLY shareholder, and I also got into AER (based on my experience with FLY) at a fairly good time.

    Re: AER, I don't really see AER and FLY as competitors at this point. Sure, they are both in the aircraft leasing sector. But they aren't chasing the same deals at this point -- AER management wouldn't even blink at a small deal that could move the needle for FLY. AER clearly has the more "shareholder friendly" management team, but that's more about capital allocation decisions, not the business model per se.

    I can't keep very close tabs on AYR, but my view is that AYR is more of a direct competitor for FLY. I've always thought that there should be consolidation in the space, like a merger of AYR and FLY.

    Ultimately, FLY's sub-par performance has been a function of the outsourced management model with BBAM. There hasn't been enough alignment of interests between BBAM managers and FLY shareholders -- although I understand that BBAM/FLY is now spinning the 8% equity investment of BBAM managers. Ultimately, I believe that FLY will need a more independent and more focused Board to overcome its historical discount to its peers. But all that said, BBAM seems to be as competent and as experienced as the management team at AYR. So my complaint isn't so much about the management team or operational business model; it's about the outsourced management deal.

  • mastermind_not mastermind_not Jun 17, 2015 5:09 PM Flag

    Jeez, someone gave me a "thumb's down"? LUK shareholders are a humorless bunch ... which I understand, as a long-suffering LUK shareholder!

  • Reply to

    Waitin' for Natan

    by edsha28 Jun 11, 2015 11:35 AM
    mastermind_not mastermind_not Jun 17, 2015 1:12 PM Flag


    Here's the nuance. Why would the individual partners of BBAM, who as a block have an effective veto against Onex, want to sell to Onex or anyone? At some point, the individuals (Zissis et al) will want to retire. But until they want to retire, they have no incentive to sell equity and lose the effective block against Onex.

    From an Onex perspective, this investment is challenging because they are basically "locked in" with the individual partners of BBAM. Maybe the BBAM governance docs have some kind of liquidity mechanism in the distant future, but maybe not.

    So I agree that Onex is important, but I don't believe that they are the "controlling player." I believe that they are stuck in bed with the individual partners of BBAM. They may be able to reach a consensual deal to change the paradigm, but I probably wouldn't be interested if I were Zissis et al.

    p.s., good to see the "old timers" still following along with the (slow) FLY saga!

  • mastermind_not mastermind_not Jun 17, 2015 1:03 PM Flag

    Ha, that quote is right on the money.

    "Soothing words of greatness giving way to a stagnant mediocrity."

  • mastermind_not by mastermind_not May 29, 2015 4:34 PM Flag

    Interesting article from Bloomberg.

    It's currently on the LUK headlines (Yahoo Finance), but as time goes by, search for: Jefferies Is Poaching the Big Banks’ Loan Business With Help From the Fed

  • Reply to

    more notes on the LUK Annual Meeting

    by gsb214 May 29, 2015 1:34 AM
    mastermind_not mastermind_not May 29, 2015 4:30 PM Flag

    Really good (and comprehensive) notes. Thanks for alerting us!

  • mastermind_not mastermind_not May 26, 2015 3:55 PM Flag

    Good notes. Thanks for posting!

  • Reply to

    Other possibilities

    by tradelink21 May 20, 2015 4:50 PM
    mastermind_not mastermind_not May 21, 2015 4:32 PM Flag

    You may have seen this ... excerpt from an article summarizing the transaction. Pretty sloppy writing, so I'd take it with a grain of salt for now.

    If this deal goes ahead, analysts suggest that the sale of the aircraft would improve FLY Leasing’s (if the company is assumed to be one of the BBAM affiliates mentioned in the presale reports from S&P and Fitch, which Wells Fargo analysts Gary S. Liebowitz, believes is the case) book value/share and reduce its aircraft remarketing risk, says Liebowitz. He assumes the ECAF fleet may include around $0.7B of FLY aircraft and that the sale of that fleet could “generate a book gain of about $75M – i.e., adding around $1.50 to book value per share. Also, we believe that if a large portion of FLY’s fleet is sold at a premium to book value, the stock’s current P/B multiple (a group-low 0.82x) becomes even more difficult to justify”.

  • Reply to

    Phase 1 Takeover Arbitrage?

    by tradelink21 May 20, 2015 4:34 PM
    mastermind_not mastermind_not May 21, 2015 4:26 PM Flag

    What U.S. based lessor? There aren't any meaningful U.S. based lessors to my knowledge. Because nobody would establish an airline leasing company in the world's highest tax jurisdiction.

  • Reply to

    Any news this morning?

    by edsha28 May 20, 2015 9:41 AM
    mastermind_not mastermind_not May 20, 2015 4:31 PM Flag

    Jeez, huge volume today ... like 5x or 6x average daily.

  • Reply to

    Why not a buyout?

    by hoopsyah May 8, 2015 3:00 PM
    mastermind_not mastermind_not May 19, 2015 2:05 PM Flag


    There are a couple reasons that a private deal may not work. One, a private deal may trigger repayment (change of control) conditions in some of the debt docs, and the refi costs or cost of new debt may not be attractive. Two, and more significant, is the management contract with BBAM. If a private buyer took FLY private, it would have to take the BBAM contract "as is," which apparently is not attractive to the market -- hence FLY trading at such a material discount to book, unlike its peers. Because the BBAM contract is not attractive to the market, it's very unlikely that it would be more attractive to a private buyer.

    If a buyer wanted to terminate the BBAM contract, that would likely be very costly. So a go-private deal is not an easy solution ... all FLY's issues point back to the BBAM contract.

  • Reply to

    CC take

    by edsha28 May 8, 2015 4:39 PM
    mastermind_not mastermind_not May 19, 2015 1:56 PM Flag

    Okay, they borrow money at a lower cost. But is the benefit of that lower cost debt worth the dilution to shareholders from the stock offering? Remember, FLY/BBAM's historical position was that "shares are trading at a significant discount to fair value / market value." But if you issue new shares at an even bigger discount than the market discount, what does that say about your credibility?

    Anyway, water under the bridge. But you can't just look at one side of the transaction (lower cost of debt) without the other (significant dilution of existing shareholders).

  • Reply to

    CC take

    by edsha28 May 8, 2015 4:39 PM
    mastermind_not mastermind_not May 13, 2015 12:35 PM Flag

    Amen to that.

    However, karma is a b!tch, and Onex may get hoisted on its own petard. Onex will need liquidity at some point, both with respect to BBAM and FLY. Onex knows that it cannot dump FLY shares into a market that does not support the "outsourced management" model. If FLY would actually start repurchasing shares, it might drive up the PPS to a point that Onex could exit. But that seems unlikely, given past actions.

    Watch out for a "sweetheart" deal where Onex sells its $11.41 shares back to FLY at a premium. They'll argue that FLY couldn't purchase the shares in the market without extraordinary transaction costs, blah blah blah. And watch BBAM take an origination fee for "arranging" the buyback. Hopefully not, but wouldn't shock me given the July 2013 stock offering foolishness.

  • Reply to

    CC take

    by edsha28 May 8, 2015 4:39 PM
    mastermind_not mastermind_not May 12, 2015 9:18 PM Flag

    I'm late to the party here! Good to see "old timers," meaning suffering long-term FLY shareholders.

    - I agree that Q2 sounds mediocre ... the results are highly sensitive to End of Lease revenue.

    - The new "Return on Equity" calc seems pretty silly. Seems like it will bounce around from quarter to quarter, depending on End of Lease revenue in that quarter.

    - I agree with others that, although FLY *should be* repurchasing shares, it very likely *will not* repurchase shares.

    - On that note, however, remember that Onex was provided with a sweetheart deal to purchase ~ $25m in FLY shares at $11.41 in Dec 2012. Onex is going to need liquidity from its investment in BBAM/FLY at some point. I wouldn't shocked if FLY uses the repurchase authority to repurchase some of the Onex shares ... and I wouldn't be shocked if FLY pays a sweetheart "premium" ... sell low, buy high, seems to be the principle underlying the July 2013 stock offering.

    - Despite the mediocre Q2, FLY is still one of my largest positions. BBAM is rationally chipping away at the cost of capital. Zissis is one of the most seasoned players in the industry. BBAM is trying to "highgrade" FLY's portfolio, shortening aircraft lives and extending lease terms. All good.

    - I didn't find the accounting explanation too concerning. FLY is (finally) selling some aircraft below book value. They are accelerating depreciation of those aircraft, sort of like an impairment.

    Good luck all

  • Reply to

    Oregon LNG - FERC approval 2016

    by mastermind_not Apr 27, 2015 4:33 PM
    mastermind_not mastermind_not Apr 30, 2015 12:56 PM Flag

    No, Jordan Cove is the other one ... see my post below from Apr 28. Jordan Cove is running ahead of Oregon LNG from a permitting perspective. Also, I think that Canada may have at least one terminal under development in British Columbia. But I've been focused on the U.S. facilities.

  • Reply to

    Oregon LNG - FERC approval 2016

    by mastermind_not Apr 27, 2015 4:33 PM
    mastermind_not mastermind_not Apr 29, 2015 3:30 PM Flag

    A quick supplemental comment because I'm looking at the list.

    The six permitted LNG export facilities that are expected to ramp up by 2020 are:

    - Sabine Pass (3 Bcf/day)
    - Freeport (1.9 Bcf/day)
    - Cove Point (0.8 Bcf/day)
    - Cameron (1.8 Bcf/day)
    - Corpus Christi (1.2 Bcf/day)
    - Lake Charles (0.6 Bcf/day)

    9.5 Bcf/day total. All on the Gulf Coast, except for Cove Point in Maryland. As I mentioned yesterday, the other West Coast facility would be Jordan Cove ... that would be the main "competitor" for Oregon LNG. But this is midstream energy / toll road model. Either the Asian customers will commit to purchase the gas ... or they won't build the "toll roads."

  • Reply to

    Oregon LNG - FERC approval 2016

    by mastermind_not Apr 27, 2015 4:33 PM
    mastermind_not mastermind_not Apr 28, 2015 3:20 PM Flag

    Jordan Cove, which is being developed by Veresen out of Canada, is ahead of LUK/Oregon LNG in the same geographic area. FERC is supposed to issue its EIS to Jordan Cove on June 12 (delayed from February 27).

    There are a handful of LNG export facilities on the Gulf Coast and East Coast.

    As I've posted before, there are two big questions here. One, does current and forward pricing of natgas/LNG incentivize Asian customers to commit to long-term contracts? There are some huge LNG export facilities currently under development in Australia and elsewhere in the South Pacific. But Asian customers may want geographic supply diversity -- or maybe not.

    Two, are customers going to take LUK seriously, when it is competing against developers that actually operate in this space? The fundamentals could be favorable, but potential customers may be leery of signing up with a "newbie" in such a complex industry (complex from a commercial perspective and also complex from a political navigation perspective). Who is the commercial partner here?

    But potential for a home run.

  • mastermind_not by mastermind_not Apr 27, 2015 4:33 PM Flag

    Some news last week on the Oregon LNG project. You can search google news for more.

    "The Federal Energy Regulatory Commission (FERC) has issued its notice of schedule for environmental review of Oregon LNG’s Warrenton, Oregon bi-directional terminal. The notice also covers the Oregon Pipeline connector project and the upgrade of a portion of the Williams Company pipeline in Washington State.

    The notice set 12 February 2016 as the date of issuance of the final environmental impact statement, and 12 May 2016 as the 90-day Federal authorization decision deadline. These dates represent the final steps in the FERC approval process.

    Oregon LNG’s terminal in Oregon would be a US$6.3 billion construction project that would provide 3000 jobs during construction, and 150 permanent family-wage jobs when operational. Oregon LNG has agreed to use unionized labor for construction, while preserving a certain percentage of contracts for local and minority-owned businesses. Once in service, the facility will pay about $60 million annually in state property taxes."

    I had to refresh ... LUK already received DOE approval. So FERC approval is the biggest of the regulatory gating items. However, a big question mark is whether Oregon LNG can lock down sufficient long-term contracts to finance the project and move into construction (in 2016/2017). If so, this could be another home run for LUK. (Grand slam? Maybe ... depends on marketing success.)

  • Reply to

    What I learned from the new proxy...

    by besterman2006 Apr 8, 2015 12:09 AM
    mastermind_not mastermind_not Apr 9, 2015 5:08 PM Flag

    I'll have to read it at some point. But exec comp has been out of kilter at LUK for years.

    #4 in particular sounds crazy. Again, I'll have to read it. Are you saying that 50% of 2015 LUK bonuses will be based on PTBI (pre-tax book income) of the opcos ex JEF? How does that make any sense whatsoever? The LUK execs are not running the opcos -- they are running JEF, in anything. The various opcos all have their own management teams. The LUK execs are merely overseeing the opcos at a Board level. The performance of the opcos shouldn't have much, if any, impact on LUK exec bonuses.

    Hopefully something got lost in translation, or that's just plain stupid.

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