UAL Borrows $2 Billion
#11
Unencumbered refers to an asset or property that is free and clear of any encumbrances, such as creditor claims or liens. An unencumbered asset is much easier to sell or transfer than one with an encumbrance. Examples of common unencumbered assets are houses free from mortgages and other liens, cars with paid off loans/notes, or stocks purchased in a cash account.
https://www.investopedia.com/terms/u/unencumbered.asp
https://www.investopedia.com/terms/u/unencumbered.asp
#12
Banned
Joined APC: Oct 2019
Posts: 923
SOMEONE is going to take a huge haircut with this, debt holders, employees, someone. Let’s all pray this thing blows off in the shortest amount of time to at least hit bottom, not there yet.
#13
Unencumbered refers to an asset or property that is free and clear of any encumbrances, such as creditor claims or liens. An unencumbered asset is much easier to sell or transfer than one with an encumbrance. Examples of common unencumbered assets are houses free from mortgages and other liens, cars with paid off loans/notes, or stocks purchased in a cash account.
https://www.investopedia.com/terms/u/unencumbered.asp
https://www.investopedia.com/terms/u/unencumbered.asp
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#14
Gets Weekends Off
Joined APC: Sep 2016
Posts: 774
Thanks. So for us, that'd likely be airplanes we own, tools, parts, etc? Would any of those things actually sell for close to the value they're expecting? In other words, is that $20 billion likely to only actually fetch $10 billion, while crippling the operation?
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#15
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Joined APC: Dec 2018
Posts: 1,085
That does not paint the entire picture. Liquidity gets you through the short term, but if you have to encumber a large amount of your assets to do it, then that becomes a MAJOR long term problem because the cash required to pay down those loans simply will not be there. Of course any company will do what it takes to get through the short term, but if they rack up too much debt to do it, it will become a long term issue. This is the fundamental problem that AA has, while it’s short term liquidity might be adequate, if this goes on for an extended period of time, they have over $30B in debt vs $42B (annually) or so in revenue, and this revenue number will come down big time. When you have more debt than revenue, situation gets serious.
SOMEONE is going to take a huge haircut with this, debt holders, employees, someone. Let’s all pray this thing blows off in the shortest amount of time to at least hit bottom, not there yet.
SOMEONE is going to take a huge haircut with this, debt holders, employees, someone. Let’s all pray this thing blows off in the shortest amount of time to at least hit bottom, not there yet.
every leveraged business will run into issues if the revenue stream goes a way - it is just a matter of time.
#16
Thanks. So for us, that'd likely be airplanes we own, tools, parts, etc? Would any of those things actually sell for close to the value they're expecting? In other words, is that $20 billion likely to only actually fetch $10 billion, while crippling the operation?
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And, FWIW, an airline can be fully leveraged with no unencumbered assets without crippling the operation. Debt can be a useful survival tool as long as one can make the payments. One recent example is CAL prior to the merger.
#18
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Joined APC: Oct 2012
Position: 737 FO
Posts: 328
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