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Discovery Air Rescued

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Here are more details... not good....

 

Northern News Services

Published Wednesday, January 21, 2009

SOMBA K'E/YELLOWKNIFE - Discovery Air has penned a deal with the territorial government to borrow $34 million dollars, aimed to help the company and its Northern subsidiaries stay in the air.

 

Discovery owns Great Slave Helicopters, Air Tindi and Discovery Mining Services and employs about 275 Northern workers.

 

The deal, announced Monday, will work as a loan and is expected to help Discovery recover from what it recently called "the rapid deterioration in general business conditions" - otherwise known as the economic slowdown. The majority of the cash will be used to refinance $33-million of debt, which was acquired in 2007 when the company entered into a loan agreement for a portion of the $35 million-plus purchasing price of Quebec-based military training company Top Aces.

 

In it's most recent quarterly statement, for the period ending Oct. 31, 2008, Discovery widely acknowledged if the loan - which comes to term Feb. 1, 2009 - was not refinanced or extended the company would be in serious trouble: "The Corporation recognizes ... the Corporation could be placed in a situation by its lenders where it is not able to operate."

 

The same financial statement puts Discovery's overall long-term debt at $145 million -- $40 million of which is set to come due within one year. In the nine months ending Oct. 31, the company has brought in $132 million in revenue - but only $8.8 million in net earnings.

 

"We've been in the market for several months looking around to various sources in the south and some of the more typical lenders from Toronto," said David Jennings, chief executive officer and interim president of the company.

 

Jennings said he found out about a funding program in the North called the Northwest Territories Opportunities Fund through a consultant.

 

"Our company believes very strongly in the Northern economy," said Jennings, adding long-term growth for the company hinges on it having a big presence in the North.

 

"This was a deal that appealed to us for that reason -- so we could keep the strong presence in the North and keep the Northern companies stronger," said Jennings.

 

The multi-million loan, which has a 48-month term and bears a 10 per cent yearly interest, comes with several strings attached.

 

One is to move it's nine-person London, Ont. corporate headquarters to Yellowknife, and another is to run its Great Slave Helicopter flying school in the North.

 

Both conditions will benefit Yellowknife as the company works to build growth in the North, said Jennings.

 

"It's more pilot jobs, it's more mechanic jobs, it's more administrative jobs -- in Yellowknife and throughout the North," he said.

 

Discovery cut six Yellowknife positions late last November partly in response to a decline in business from the slowing mining exploration scene. Jennings said it was too early to tell if the cash injection from the territorial government would mean putting people back in those jobs, but did say it should mean no further lay-offs.

 

"We don't expect any further layoffs, and depending on how this funding had gone it could have been a possibility. I'm not saying it would have been a possibility, but it could have," he said.

 

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Sorry I have led you astray as part of the 8.5% has to do with the tax in the Province you live in. Personally I don’t care if you believe what I have to say. What I would suggest is you call your broker or find 1 and ask them 2 questions.

1. Would they consider DA a low, Medium or high-risk investment?

2. Do they believe DA got a good deal on this loan?

If you don’t want to do that then check out this article.

Globe says Discovery Air a risky stock to explore

 

Discovery Air Inc (C:DA) 
Shares Issued 134,461,555
Last Close DA.A12/16/2008 $0.14
Wednesday December 17 2008 - In the News

The Globe and Mail reports in its Wednesday, Dec. 17, edition that Discovery Air closed Tuesday on the Toronto Stock Exchange unchanged at 14 cents. The Globe’s Steve Ladurantaye writes in the Eye On Equities column that with$33-million in debt due in February and fewer workers needed to be flown into remote job sites in Northern Canada, Versant Partners says Discovery Air faces a great deal of uncertainty. Versant lowered its ratings on the company's shares from "buy" to "neutral." As well, Versant cut its 12-month price target by 78.5per cent to 15 cents from 70 cents. Versant downgraded the shares to” speculative buy" from "buy" in the Eye On Equities column on Sept. 17. It was then trading at 57 cents. The brokerage suggested the likelihood of weak growth in the next year and a short-term management vacuum could cause problems. Clarus Securities analyst Steven Gold rated Discovery Air "buy" in The Globe on July13, 2007. It was then trading at $1.79. He gave the stock a 12-month target of$2.30. In the same Globe item Wellington West analyst Greg Colman heaped praise on Discovery Air, as did Greg Eckles, a manager of Morgan Meighen &Associates' closed-end Canadian General Investments Fund

 

BARC I would say bull---- on the 275 full time northern employees but I am sure it is close to 200

Personally I think the VIH deal fell apart because the in house fighting started before it was done and it was all about who will be the Mommy and who will be the Daddy. What I can’t believe is the VIH didn’t sue DA’s *** off after they made a public statement about VIH’s books not in order. A statement like that would sink most companies. Banks, Investors and suppliers get real nervous when they hear things like that especially in public. Rumor was the press release went out before they even told VIH. It wouldn’t surprise me none the place was being run by an Idiot.

 

Anyone that calls the Media and shows up in a Santa suit to buy a company is an idiot. Who the **** asked him to play Santa with my money? No wonder this all went for ####. He defiantly played Santa. $100,000,000.00 plus in cash plus millions of shares to GSL owners. $40,000,000.00 plus and 40,000,000 shares to Tindi and then the all time Santa $5,000,000.00 plus 5,000,000 shares for Discovery mining that owns 6 to 10 pickups and some tents.

Then the idiot stands up in front of a pile of business people in Yellowknife at the Discovery grand opening. Proceeds to tell them all that he bought GSL because 1 day he was in the park trying to pick up this chick. Things were going real well right until this other guy sat down. The chick found out he was a helicopter pilot and wouldn’t give Taylor the time of day. So you know what he did he went out and bought him self a helicopter company. Boy that showed here.

 

End of my Rant I need a DRINK

 

 

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What a crock of crap. People scream with outrage when the big 3 auto makers get a bailout, and now this. Don't get me wrong, I wish no ill-will upon GSHL nor the staff, and most certainly don't want to see them go under. Unfortunately, when you take a huge loan like this during economic times like these, and you already have outstanding loans, the writing is becoming "on the wall". I don't know of too many companies in the world, period, that could take a financing arrangement like this and somehow miraculously come up with $30+ million plus interest on top of other financing. Good luck to all at GSHL. Tough tough time ahead.

 

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Guest SidewallPuncture

so, are they gonna be able to pay their bills?? I'm kinda concerned...*looking at the small pile over my shoulder*

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I would be interested in knowing where you can get a 8.5% dividend in this economy

 

 

Bank of Montreal pays a dividend of about 9% right now, and most income trusts are at least that and way way above, but those are distributions for the most part, which are a combination of dividends and interest.

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I was just "playing" a little and kind of forgot about it back in the haydays but I just recieved an automatic "sell" paper from my broker @ 22 cents. :blink: I was only in for 1000 @ 750.00 C, but that tells me enough. Hindsight being what it is in this or any market (not to mention FLYING LOL!) I shoulda sold at 1.50!!! :shock: Greed is a terrible thing :rolleyes: Good luck to all you boys up North...Fly Safe

 

Zazu

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