Second Right Answers

[Prince of PAWOBs]

Okay, so it looks pretty dim for the moment. Don't panic!

Actually, maybe you should, because I have a question to put to all of you.

If Dr. Bronner and Retirement Systems of Alabama invested $240 million to keep US Airways afloat, is there any way for US employees to simply buy RSA and Bronner out? Could the employees simply give up what RSA put in to get rid of them and then start dealing directly with whoever is left over to work on repairing the airline?

The reason I'm asking this question is twofold: First, I don't know if it's even possible to do such a thing. Second, if US could make RSA "go away", it might be easier to fix the problems the company is having without meddling from sideline investors.

Considering the drop in the stock price and Dr. Bronner's attitude toward US, I think it might be easier to start fixing problems at the airline if there was one less player at the table.

So, please feel free to educate me with an answer to my question. The longer the explanation, the better.

Oh yeah......happy 100th to me!

 

[flyin2low]

Oh yeah......happy 100th to me!

100th claim for the night?

 

[jimntx]

Okay, so it looks pretty dim for the moment. Don't panic!

Actually, maybe you should, because I have a question to put to all of you.

If Dr. Bronner and Retirement Systems of Alabama invested $240 million to keep US Airways afloat, is there any way for US employees to simply buy RSA and Bronner out? Could the employees simply give up what RSA put in to get rid of them and then start dealing directly with whoever is left over to work on repairing the airline?

[snip]

Considering the drop in the stock price and Dr. Bronner's attitude toward US, I think it might be easier to start fixing problems at the airline if there was one less player at the table.

So, please feel free to educate me with an answer to my question. The longer the explanation, the better.

Oh yeah......happy 100th to me!

[post="170795"][/post]​

Prince, the phrase, "Considering the drop in stock price," is what would make your proposal both attractive to the RSA and illegal at the same time. RSA's $240 million bought stock in US Airways. That investment is now worth $99 million (last figure I saw). It is illegal for a publicly-traded company, regardless of whether it is listed on the NYSE or traded OTC, to pay one investor more for his/her stock than the company would pay for the stock of other investors.

For instance, if 1 share of stock sold at market at $240 at the time that RSA invested, and that share is now worth $99, only if US Airways had the cash to pay every single investor $240 for each share of stock tendered, would it be legal to pay RSA $240 each for it's shares of stock. Call me a pessimist, but my guess is that they do not have that much cash on hand right now.

What makes the stock market work is that everyone who invests in stock assumes the risk that he/she could lose their entire investment. That's the risk that RSA took when it took common stock as collateral for its investment. RSA has grown under Dr. Bronner's management from an almost broke system to one with assets of $25 BILLION. It didn't get that way by being naive about its investments. $240 million respresents less than 1% of the total value of the assets.

Dr. Bronner is not cold-hearted or mean-spirited. He is not "out to get" US Airways employees. He is a money manager. The reality is that no company--other than a non-profit, maybe--is in business for the benefit of its employees.
As they say in the mob, "It ain't poysunuhl. It's just business."

 

[funguy2]

I am not sure such a scheme would work anyways... Let's say some kind of Employee buy-out plan did occur where Labor Groups gained majority control of the company...

Bronner would be out... Probably Lakefield too... Definitely Glass. But who would run the ship? I can envision a scenario where the unions cannot agree on who the CEO should be. Every union would advocate somebody who had their own best interests first. Who is going to make the hard choices to close a hub, or a res center when that means putting employee-owners out of a job? Who is going to negotiate new labor accords... If the employees are in control, it is more likely that they would ratify increases, not decreases or break-even agreements.

And what happens when the pilots believe (as a certain pilot here seems to) that out-sourcing heavy MX is more cost effective and just as safe, and the IAM disagrees? The outcome would depend on who got their CEO in office, which goes back to how would you find a CEO...

Furthermore, UAL's ESOP did not work because UAL's employee-owners forced through big contract raises for themselves.

Even if this were possible, I don't think it could be successful because there are just too many self-interests involved.

 

[usair_begins_with_u]

LOL.. Who in their right mind would buy this POS?? If there were any value, UAir debt rating would not be ccc-, and investors all over would be pumping cash in @ $1.77 a share.

Total Assets (exluding Goodwill & other intangibles) = 5.5Billion
Total Liabilities = 8.3Billion

Net Income -143 Million

Yeah.. thats a great deal... I want to buy that!!!!

Even in the short run, their solvency looks like total crap, even IGNORING their cash resrictions.

Look at this one: (current ratio, the ultimate measure of Solvency)

Total Current Assetts: 1,876,000
Total Current Liabilities: 2,525,000

.74

This figure should always be above 1 or the firm does not have enough assets to meet its liabilities and is therefore technically insolvent.

 

[Prince of PAWOBs]

So, the bottom line is, aside from feasibilty issues, it would be pointless to do such a thing.

I think I've got the idea now. Thank you all for the insight.

 

[Segue]

Who would pay the bills when costs continue to exceed revenues? You would still have that little problem to deal with.