Looks like the Canadian government will be subsidizing a couple of American airlines, after not having put a penny in to help AC in its restructuring. According to this morning's FINANCIAL POST, the Export Development Corporation holds $3.7 billion worth of aircraft loans on behalf of Bombardier: $1.6 billion with DL and $2.1 billion with NW. [NAVCAN is also on the list for $1.9 million from NW [the paper irroneously reports this figure as "billion".]
EDC provides exporters an assurance of being paid for their foreign orders, and in this case covers Bombardier's contracts with the two airlines and their wholy-owned regional subsidiaries. [EDC does this for all exporters who sign up with it. For a percentage fee, EDC takes over the contract debt and ensures the Canadian company gets paid for its goods from foreign buyers. If these buyers reneg on payments, EDC not the exporter, goes after to collect the money owed.]
While secured creditors will get something, all contracts are now open for review which means EDC will likely eat at least half of what it's owned. Or it can take the aircraft back. Much of the Bombardier contracts/loans come from a special Cabinet controlled pool of loan guarantees known as The Canada Fund.
CNN is just reporting that both airlines may also "default" on their pension plans and like UA, transfer this obligation to a federal guarantee fund, which already is overdrawn for $30 billion or so. Www-wds.worldbank.org::
Toll-free in the USA and Canada: 800-852-7323, or 919-677-0977. Fax: 919 give the same answer (or at least reciprocals of one another) only if both goods
http://www-wds.worldbank.org/external/default/WDSContentSeered/INDEX/multi0page.txtHOME |
The question is, whats the market for all these RJ's..... ;) Either way we knew lending money to keep jobs in Quebec was going to cost us BIG sooner or later. I guess it was sooner ;) Maybe its time to rethink the govt loaning money for any new planes.... for the few Quebec jobs. :(
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http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20050917/REDC17/TPBusiness/Canadian
MONTREAL -- Delta Air Lines Inc. and Northwest Airlines Corp. owe Export Development Canada $3.7-billion for aircraft financing, but the federal agency says it hopes to keep the jets flying at the insolvent airlines. michael.bordo.googlepages.com/SuddenStops05-08.doc::
finally two groups, one with GDP above $8100 and original sin level of Bordo and Meissner ( 2006a) using a larger sample of 30 countries find a fairly
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Research suggests that at one time, commercial telegraphs and railroads had Ot- owing to. Rsl- resolve. pa- Pennsylvania. sac- Senate Committee. Pcu- preclude.
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The question is, whats the market for all these RJ's..... ;) Either way we knew lending money to keep jobs in Quebec was going to cost us BIG sooner or later. I guess it was sooner ;) Maybe its time to rethink the govt loaning money for any new planes.... for the few Quebec jobs. :(
A good point for the overall policy debate, but don't forget the Dash-8 product manufactured at Downsview (Ontario) gets the same support from the EDC as the CRJ...
Incidentally, the same support goes to the Embraer in Brazil (from the Brazilian equivalent of the EDC), Boeing (Import-Export Bank of the United States of America) and Airbus in Europe.
These loans are a tool of economic policy and are used to level the playing field among the various aerospace manufacturing nations. Without the support Bombardier is at a disadvantage relative to other suppliers...
Shareholder:
I am not quite certain that your comments are wholly accurate...
Having worked at EDC at one point in my career I am familiar with types of financing you are referring to. The EDC product you cite specifically is their "trade receiveables insurance" which ensures that the vendor receives payment for 90% of the value of thier receivables in the event that the buyer defaults (in exchange for the payment of a nominal premium). This normally applies only to goods shipped with terms of net 30-90 days where there is a risk that they buyer will not pay.
It is unlikely that Bombardier had used this tool to facilitate the operational leasing that Delta and Northwest have with these aircraft once they are delivered.
It is more likely that EDC provided an operating lease to both airlines and, as such, are in the same position as GE and others with respect to their aircraft leases.
You are partially correct to say that the contracts are open for review. They are actually open for affirmation, renegotiation or repudiation by the bankrupt company - however this does not necessarily mean that EDC will lose large amounts on the transaction. If Delta and NW repudiate the leases then the aircraft go back to the lessors and can be placed with other carriers.
Having been involved in the Canada 3000 bankruptcy of four years ago, I can tell you that GE was in a big hurry to have Canada 3000 repudiate the lease it had for the recently delivered A340 which sat on the tarmac at YYZ. As far as I know they were able to place that aircraft with another operator while the ink from the judges pen was drying.
Lastly, while the Cdn government did not assist AC directly during its restructuring the US equivalent (Import-Export Bank of The United States of America) did by virtue of its operating leases on the 767 fleet.
MBALLB
Looks like the Canadian government will be subsidizing a couple of American airlines, after not having put a penny in to help AC in its restructuring.
EDC provides exporters an assurance of being paid for their foreign orders, and in this case covers Bombardier's contracts with the two airlines and their wholy-owned regional subsidiaries. [EDC does this for all exporters who sign up with it. For a percentage fee, EDC takes over the contract debt and ensures the Canadian company gets paid for its goods from foreign buyers. If these buyers reneg on payments, EDC not the exporter, goes after to collect the money owed.]
While secured creditors will get something, all contracts are now open for review which means EDC will likely eat at least half of what it's owned. Or it can take the aircraft back. Much of the Bombardier contracts/loans come from a special Cabinet controlled pool of loan guarantees known as The Canada Fund.
CNN is just reporting that both airlines may also "default" on their pension plans and like UA, transfer this obligation to a federal guarantee fund, which already is overdrawn for $30 billion or so.
In one of DL's motions to the bankruptcy court it applied (and was granted) the right to pay pre-petion claims to foreigners, including the government, NAVCAN, airport authories and other vendors.
http://www.newswire.ca/en/releases/archive/September2005/16/c0590.html
OTTAWA, Sept. 16 /CNW Telbec/ - The Financial Post reported today that,
". . .air traffic controller NAV CANADA is owed US $1.9 billion by Northwest."
This statement is incorrect. As of September 16, 2005, there are no monies
owed by Northwest Airlines to NAV CANADA.
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OT: Canada one of larger secured creditors at NW and DL