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Private Jet Maker Hawker Celebrates Goldman's Industry Optimism By PIKing Notes
What better way to celebrate Goldman's recent Conviction Buy optimism on Top 20 Bankruptcy Candidate Textron, and the private jet industry in general, than by clamping down and preserving liquidity at all costs? That's precisely what Textron competitor (and Goldman Sachs portfolio company) Hawker Beechcraft did earlier today. From an 8-K just released:
Item 8.01. Other Events
"PIK" Interest Election
Hawker Beechcraft Acquisition Company, LLC, a Delaware limited liability company (the "Issuer") and Hawker Beechcraft Notes Company, a Delaware corporation (the "Co-Issuer" and, together with the Issuer, the "Company"), may, at the Company's option, elect for any interest payment period prior to April 1, 2011, to use the payment-in-kind ("PIK") feature of its outstanding 8.875%/9.625% Senior PIK Election Notes due 2015 (the "PIK Notes") in lieu of making cash interest payments. The Company is electing to pay PIK interest for the interest period ending on March 31, 2010 as a prudent method to enhance liquidity in the first half of next year. The Company will evaluate this option prior to the beginning of each eligible interest period, taking into account market conditions and other relevant factors at that time.
In connection with this election, on September 28, 2009, the Company delivered notice to Deutsche Bank National Trust Company, in its capacity as Trustee under the Indenture governing the PIK Notes, that, with respect to the interest that will be due on such notes on the April 1, 2010 interest payment date, the Company will make such interest payment by paying in kind at the PIK interest rate of 9.625% instead of paying interest in cash.
It is sad Hawker is no longer public, courtesy of Goldman's very own deep pockets, as this event would have undoubtedly merited another Conviction Buy list upgrade for a company that is so desperate for cash that it is willing to eliminate a meager $40 million annual cash outlay (and in the process make many bondholders very unhappy) simply to survive. After all, judging by the number of ads and sponsored articles in any given issue of the Robb Report, the company's marketing budget is at least as large as the interest expense it is PIKing.
Yet, most oddly, one of these Robb Report ad placements highlights a curious benefit for those considering the critical purchase of a Hawker 900XP: "And now, realize up to $9.8 million in U.S. tax savings when you place your order before the end of 2009." Has the Obama administration, after sternly blasting any and all private jet purchases, made such acquisitions a tax deductible event in order to stimulate yet another soon to be TBTF industry? Zero Hedge will investigate what this latest addition to the US tax/subsidy code is and report promptly to our readers.
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Has Goldman upgraded GMCR to "conviction buy" yet??
Wow. $.75 trailing 12 mos. EPS, $73 stock price, up from about $16 last November. That's reminiscent of the Nasdaq bubble in 1999-2000.
Casino baby.....The brain dead investors who invest in this crap knowing full well it's crap but think they can get out before they lose their money.....good luck....but if it takes these fools money to recapitalize dead companies..........well that's a good thing I guess.
Some trade ideas http://ow.ly/rqwK
Kudlow was just asked on the air if he had a PDA. His response: "No, I have an addictive personality."
Kudlow is off his meds. Send for the men in the white jackets and don't forget to bring the strait jacket.
Looks like someone under Obama slid through an extension of the 2008 "economic stimulus act" that allows for 50% bonus 1st year deprecation of a business jet + the usual MACRS amount (see example below)...
"Buyers are also able to take advantage of bonus depreciation in 2009, with potentially significant tax savings.
http://www.flyingmag.com/news/1585/hawker-beechcraft-sweetens-premier-1a...
more details here:
Economic Stimulus Act of 2008 resurrects 50-percent bonus depreciation for factory-new aircraft. In this latest incarnation, to be entitled to bonus depreciation, you basically have to enter into a binding contract to purchase the business jet in 2008, and take delivery and place the aircraft in service in 2008 or 2009. (If you entered into a contract before 2008, you should check the rules for “self-constructed property” to see whether your aircraft qualifies.) Pre-owned aircraft don’t generally qualify, except for special cases like sale-leaseback transactions.
The term “bonus” has led to misunderstandings. You can’t depreciate an amount greater than your tax basis in the aircraft. For example, if you purchase a jet for $40 million, on the five-year MACRS schedule, in most circumstances you’d be eligible to write off 20 percent in the first year (see table). The new act lets you write off 50 percent in the first year and then apply the normal depreciation schedule to the balance. Thus, you can write off $20 million (50 percent) as well as an additional 20 percent of the remaining $20 million in the first year, so your total depreciation for that year would be $24 million (60 percent). What you are doing, then, is not increasing your depreciation, but accelerating it. The value of the acceleration lies entirely in the time value of money.
http://www.bjtonline.com/money-matters/taxes-laws-financing/s/article/bo...
Tyler
The tax savings are part of the American Recovery and Reinvestment Tax Act of 2009 which brought back bonus depreciation and an an increase to Section 179 Expensing for qualified business aircraft purchases.
Those who use PIK notes....die from PIK notes. THey never get paid....Just more extend and pretend bullshit. PIK notes should die a cold death, as should GoldmanSux.
I looked at that debt when it was being issued, passed on it. The private aircraft pipeline industry wide was just to good to be true. People had placed "orders" for deliveries years into the future and if you looked at the growth it just didn't seem like it could possibly play out. Of course, I was a huge bear at that point so maybe my vision was clouded with reality.
We are also subsidizing small, barely used airports.
http://www.usatoday.com/travel/flights/2009-09-17-little-used-airports_N...
I hate reading that part. "a Deleware limited liability company". It just means a company endowed with legal armoring able to act destructively.
Ah llthe infamous goldman upgrade Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.
good articles; good articles 4 slow news day ..http://www..
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