Air Canada IPO Takes Flight

[Fido]

.. Still wondering where the $2 Billion is coming for the distribution....

your answer is here:

from mrlupin

The 2 billion dollar distribution to investors is in the form of Aeroplan income trust units

[Mitch Cronin]

your answer is here:

from mrlupin "The 2 billion dollar distribution to investors is in the form of Aeroplan income trust units"

... ...and I'm damned sure that's plain English to some folks.

[Dork]

"Aeroplan trust units"....not sure exactly what that means. Does the money exist?..that's all I would like to know.

Didn't ACE/AC take a hit in the 3rd QTR due to pre CCAA liabilities with Aeroplan of $180 million? Now if I understand the explanation given, Aeroplan has $2 Billion to give away for a distritibution. I am not sure of the clarity of the path/trail of the money.

Just a regular guy trying to figure things out.

[dagger]

"Aeroplan trust units"....not sure exactly what that means. Does the money exist?..that's all I would like to know.

Didn't ACE/AC take a hit in the 3rd QTR due to pre CCAA liabilities with Aeroplan of $180 million? Now if I understand the explanation given, Aeroplan has $2 Billion to give away for a distritibution. I am not sure of the clarity of the path/trail of the money.

Just a regular guy trying to figure things out.

ACE owns those units of Aeroplan. The shareholders of ACE are going to get those units, so they will own shares of ACE and AP. Right now, they own AP indirectly. After they get the shares, they will own AP directly.

No cash is required. It doesn't impact the cash either company has.

Think of it another way.

You and nine other people own shares in a restaurant that also has a "beverage room" off to the side. You 10 owners decide that you will separate the ownership of the restaurant and beverage room, and each owner will hold the same percentage of the restaurant and the beverage room, even though no cash is used or changes hands. They owned the entire complex before, and they still own the entire complex after the beverage room is turned into a separate business, but they now have two separate shareholdings. The assumption is that the market was undervaluing the entire complex prior to the split, and that by splitting up the complex into two, the value assigned to the two businesses together will be greater to what they were valued as one entity previously.

Also, if you 10 owners go out and sell more shares of the restaurant, your ownership of the restaurant is diluted, but only the original 10 owners own the beverage room.

The $180 million charge was non-cash. For book-keeping purposes, it assigned a portion of Aeroplan's non-cash liabilities to ACE, but no cash changed hands.

[GDR]

You and nine other people own shares in a restaurant that also has a "beverage room" off to the side. You 10 owners decide that you will separate the ownership of the restaurant and beverage room, and each owner will hold the same percentage of the restaurant and the beverage room, even though no cash is used or changes hands. They owned the entire complex before, and they still own the entire complex after the beverage room is turned into a separate business, but they now have two separate shareholdings. The assumption is that the market was undervaluing the entire complex prior to the split, and that by splitting up the complex into two, the value assigned to the two businesses together will be greater to what they were valued as one entity previously.

Also, if you 10 owners go out and sell more shares of the restaurant, your ownership of the restaurant is diluted, but only the original 10 owners own the beverage room.

On the other hand the owners could have decided that instead of putting the value of the beverage room into there own pockets to invest elsewhere, they could have sold the beverage room to other investors and used the cash to pay down their mortgage thereby improving their ability to withstand a down turn in business in the event of some calamity or another.

[dagger]

On the other hand the owners could have decided that instead of putting the value of the beverage room into there own pockets to invest elsewhere, they could have sold the beverage room to other investors and used the cash to pay down their mortgage thereby improving their ability to withstand a down turn in business in the event of some calamity or another.

Then again, being investors in a fickle business like restaurants which can go belly up rather quickly because of any number of reasons, despite the best efforts or intentions of its owners, they decided it was smarter to isolate the profit of the beverage room and try to recapitalize the restaurant with more outside money.

[deicer]

I would like have a better understanding of the overall ACE /AC financing concept.

Read the Enron transcripts

[dagger]

Read the Enron transcripts

Actually, AC's old pre-CCAA books were more Enron than anything they have now. There were some very creative out of country, off-balance sheet structures for aircraft. But the US closed the loopholes after Enron.

[Fido]

Then again, being investors in a fickle business like restaurants which can go belly up rather quickly because of any number of reasons, despite the best efforts or intentions of its owners, they decided it was smarter to isolate the profit of the beverage room and try to recapitalize the restaurant with more outside money.

To further the analogy:

One investor may have been in need of cash and he can now sell the shares in either the bar or the restaurant without affecting the value of the other business.

[ccairspace]

...The assumption is that the market was undervaluing the entire complex prior to the split...

Hmmm... what was that definition of the verb "assume" ?

I remember when I received (30 years ago??) shares in the British Columbia "something something" that were worth $5.00 each at the time, given free to taxpayers or BC residents. I can't remember what happened to those pieces of paper, but they became worthless and I don't have them anymore.

If the market is indeed undervaluing the ACE complex, then those shares in Aeroplan may be worth $2 billion, and ACE shareholders received dandy dividends. Their real worth will only be determined, however, when they are resold.

As for the AC IPO, that is just way too dodgy for me. After reading the posts in two concurrent threads, I figure that AC Inc. is going to get the entire pension shortfall on its books (minus ACTS). I don't envisage a lot of happy campers a couple of years from now, as I also think that the deficit will be used prominently in contract negotiations.

I understand the strategy that ACE Milton ( ) is employing. I simply think that a lot of the manouvering is smoke and mirrors.

ccairspace

[GDR]

Then again, being investors in a fickle business like restaurants which can go belly up rather quickly because of any number of reasons, despite the best efforts or intentions of its owners, they decided it was smarter to isolate the profit of the beverage room and try to recapitalize the restaurant with more outside money.

The restaurant is less likely to go belly up if it retains the capital in the business which does not in any way negate the fact that the retaurant has to run at a profit.

I understand why the investors want to get their money out as quickly as possible but to get a divesture of $20 on a $25 investment that has already gone to $38 seems a little more than excessive.

[Dropzone]

Read the Enron transcripts

Yes all 300,000 pages..........

[mo32a]

I remember when I received (30 years ago??) shares in the British Columbia "something something" that were worth $5.00 each at the time, given free to taxpayers or BC residents. I can't remember what happened to those pieces of paper, but they became worthless and I don't have them anymore.

BRIC SHARES

Q. What are BRIC shares?

A. In 1979, under the administration of Premier Bill Bennett, the BC government granted each British Columbian five free shares in the British Columbia Resources Investment Corporation ("BRIC"). The name was eventually changed from BRIC to Westar Group Ltd.

Q. What is the status of BRIC shares at this time?

A. A class action suit was filed against Westar. The claim according to Miller Thomson LLP (the law firm representing the Plantiff in this claim) "alleges that in 1992, the Pattison Defendants took control of management of Westar, and that after that time they increased their ownership of Westar through a series of unlawful acts by abusing their management and insider position, ultimately taking Westar private in 1997." More information about BRIC and the claim can be found at www.westarclassact.com .

According to Miller Thomson LLP, as of February 2004, the status of the shares are as follows:

"In 1995, shares were consolidated at a ratio of 125 to 1. Therefore, for example, 5 bearer shares are worth .008 (or 0.8%) of one post-consolidation share. In 1997, the consolidated shares were subject to a compulsory buy-out at $70 each (i.e., 56 cents per bearer share). The proposed class action alleges that this was a significant under-valuation, but even if the value of 5 bearer shares is doubled, or tripled or quadrupled, you are still looking at a small value ($10-$20).

We (Miller Thomson LLP) believe, although we are not positive, that the time for redeeming bearer shares expired some time after the share consolidation which occurred in 1995. Assuming this to be true, the question of whether bearer shares are now worth anything at all will depend on the success of the class action. Even then, the value of 5 bearer shares, for example, will be small.

The BC Supreme Court declined to certify this matter as a class action. The BC Court of Appeal dismissed the appeal of the Supreme Court's decision. We are currently re-applying for certification on the basis of an amended statement of claim, which application will be heard in March 2004.

To await the outcome of the litigation, you will need to hold on to the shares for a few more years, unless the inconvenience of doing so is greater than the value of $10-$20.

Your rights as a shareholder are to participate in the class action. All other shareholder rights have been extinguished."

[mrlupin]

Many thanks for the comments on the accounting. Still wondering where the $2 Billion is coming for the distribution...did you mean to say that the money doesn't exist?

Just a regular guy here trying to figure out a few things.

Dork,

The 2 billion dollars is the approx value of all the remaining Aeroplan shares that haven't been put on the market in some sort of stock offering.

They might have an approximate value of 2 Billion but they haven't been put on the market yet so have no liquidity attached to them.

If ACE were to put them out in a stock offering and every share was to be purchased, ACE would have two billion dollars in extra equity, but would have to pay out 100% of the Aeroplan profits to the shareholders in the form of dividends. There is a certain cost to "giving them out" to existing shareholders(ACE doesn't get the 2 billion). On the other hand, such a give out makes shareholders happy. It increases stock value on a short term basis.

Remains to be seen what kind of long term plan our leaders have for us.