Factory Closed Down?

[Bravoman]

25 minutes ago, steingar said:

Whatever our insider says or doesn't, the truth is fairly self evident.  The company is opening and closing the factory will nilly, treating the highly skilled employees like disposable assets.  Had I the money I'd not buy a new Mooney, no way.  No way to be certain I'd get an airplane after the check was cashed, no way to be certain there'd by anyone to honor the warranty.  I doubt they could even sell a handful of airplanes after all this.

I have wondered what happens to the factory warranties on the recently sold planes. Just up in smoke or is there some sort of insurance policy on them that covers this contingency? If they evaporate that is a big monetary loss to the buyer.

[steingar]

In a bankruptcy you become one of the company's creditors.  For this I don't know.  There's no debt, so there won't be a bankruptcy.  If the company simply shuttered and liquidated the factory I imagine there would be some entity against which one could seek recourse.  That said, good luck getting anything out of a Chinese entity.  Mooney is done selling aircraft in America.

Edited January 9, 2020 by steingar

[Oldguy]

11 hours ago, tmo said:

Guys, just  "don't feed the trolls" and "carry on" :-)

In Polish we have this saying / proverb that a spoonful of wood tar will spoil a whole vat of honey.  I think the English version is about flies and ointment.  Let's not let them!

In the South it is:

"Never wrestle with a pig. You just get dirty and the pig enjoys it."

Applies to so many things on the interwebs, doesn't it?

[tmo]

XKCD for those who haven't seen it.  Explained here if anyone wants to do a "deep dive".

And also something about being beaten by experience...

ps. try hovering the cursor over the comic

[steingar]

1 hour ago, 1980Mooney said:

I am curious to know if you are simply assuming that there is no debt in Mooney. 

Here is where I get really fuzzy.  Mooney is owed by a  Chinese entity.  I doubt strongly that the Chinese entity could borrow money from an American financial institution to resuscitate Mooney.  Indeed, I doubt Mooney's owners could borrow from anyone to resuscitate Mooney.  On paper it really didn't look like a money winner, especially when trying to certify a brand new clean sheet diesel aircraft made from advanced materials and do it in a hurry.  I always thought that Soaring America Corporation had some Chinese government component. The only thing that really makes sense to me is the Chinese might be willing to dump some cash if it means that they get a door open to develop GA in China.

If Soaring America borrowed money, they almost certainly did so in China at the behest of the Chinese government.  I can't imagine any moneylender anywhere would be gullible enough to loan them money for Mooney.  It makes no financial sense to anyone with enough financial sense to be involved in finance.  So if the debt is foreign, who do they declare bankruptcy here in the US?  I genuinely don't know.

I doubt in the strongest terms that there is any debt associated with Mooney.  I can't believe anyone with money would be stupid enough to lend it for that.

[Steve B]

Here is where I get really fuzzy.  Mooney is owed by a  Chinese entity.  I doubt strongly that the Chinese entity could borrow money from an American financial institution to resuscitate Mooney.  Indeed, I doubt Mooney's owners could borrow from anyone to resuscitate Mooney.  On paper it really didn't look like a money winner, especially when trying to certify a brand new clean sheet diesel aircraft made from advanced materials and do it in a hurry.  I always thought that Soaring America Corporation had some Chinese government component. The only thing that really makes sense to me is the Chinese might be willing to dump some cash if it means that they get a door open to develop GA in China.
If Soaring America borrowed money, they almost certainly did so in China at the behest of the Chinese government.  I can't imagine any moneylender anywhere would be gullible enough to loan them money for Mooney.  It makes no financial sense to anyone with enough financial sense to be involved in finance.  So if the debt is foreign, who do they declare bankruptcy here in the US?  I genuinely don't know.
I doubt in the strongest terms that there is any debt associated with Mooney.  I can't believe anyone with money would be stupid enough to lend it for that.

Reread 1980Mooney’s post above: short version - even if there isn’t “debt” as you typically think of it - is a loan from a bank - there are trade creditors (suppliers, tax authorities etc) and employees. These entities can demand payment and, if the US entity doesn’t have the ability to pay, can eventually get to a bankruptcy. They can’t reach back up the chain to the parent - but they can force resolution in the US. The parent could then put more money in to satisfy those obligations, or, probably more likely, allow for a bankruptcy (or other liquidation) process to play out.





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[carusoam]

Ummm, dad... I’m gonna need another loan...

How does that work?

Is this a company that needs to follow the usual guidelines of a US public company?

Or is it privately owned, and has to pay its bills as expected?

-a-

[LANCECASPER]

3 hours ago, steingar said:

Here is where I get really fuzzy.  Mooney is owed by a  Chinese entity.  I doubt strongly that the Chinese entity could borrow money from an American financial institution to resuscitate Mooney.  Indeed, I doubt Mooney's owners could borrow from anyone to resuscitate Mooney.  On paper it really didn't look like a money winner, especially when trying to certify a brand new clean sheet diesel aircraft made from advanced materials and do it in a hurry.  I always thought that Soaring America Corporation had some Chinese government component. The only thing that really makes sense to me is the Chinese might be willing to dump some cash if it means that they get a door open to develop GA in China.

If Soaring America borrowed money, they almost certainly did so in China at the behest of the Chinese government.  I can't imagine any moneylender anywhere would be gullible enough to loan them money for Mooney.  It makes no financial sense to anyone with enough financial sense to be involved in finance.  So if the debt is foreign, who do they declare bankruptcy here in the US?  I genuinely don't know.

I doubt in the strongest terms that there is any debt associated with Mooney.  I can't believe anyone with money would be stupid enough to lend it for that.

The U.S. borrows from the Chinese every day by selling Treasury bills, etc.

The Chinese don't have debt, they have a surplus. Back around 2008 when the U.S. had a $13 Trillion National Debt, the Chinese had nearly a Trillion dollar Surplus. The U.S. now has a $23 Trillion Debt and almost $7 Trillion of that is held by Foreign Countries (if you stacked $1 bills, $7 Trillion  stacked would be 441 miles high or 2,328,480 feet).

The Chinese would not need to borrow money from anyone, let alone a U.S. Financial Institution. The Chinese buy American companies for intellectual property. The few relative dollars they put into a company is peanuts compared to what they learn. China has been massively building infrastructure which includes aviation. What they have learned by owning Mooney and Cirrus will bear fruit in China down the road, if not right now. They will also produce airplanes with much more discipline in China and sell them globally. This exercise might just have been to learn how the FAA approval process works.

https://usdebtclock.org/#

 

If the Chinese wanted to keep Mooney going it would be no problem for them. I'm pretty sure they have learned what they wanted to learn and are now moving on. 

[RobertGary1]

If Mooney does not declare bankruptcy they are still liable for warranty claims and the company can be sued for failure to honor that commitment. In fact getting out of warranty liability is a primary reason many companies declare bankruptcy.

 

-Robert

[EricJ]

37 minutes ago, carusoam said:

Is this a company that needs to follow the usual guidelines of a US public company?

Or is it privately owned, and has to pay its bills as expected?

-a-

The list of privately-owned companies in the US that don't pay their bills is extremely long.

A debtor would only force bankruptcy if they thought it was worthwhile, e.g., they could obtain assets that made the cost of the bankruptcy process profitable.   It might be difficult to assess the cost of that fight against a private foreign entity, and with uncertain returns I suspect most wouldn't pick that fight.  I think even the TCDS (a potential asset) has been demonstrated over the last decade to not be very valuable.  I don't know who owns the real estate, and any equipment and tooling is also of limited value due to location, condition, etc..   Corporations default on commercial loans pretty regularly and stay in business without declaring bankruptcy.   When things get to that point all kinds of weird stuff can happen.

So the owners could pay to maintain whatever they think is worth maintaining, e.g., the TCDS, real estate, equipment, inventory, etc., but if they decide it's not worth paying to maintain that stuff or honoring warranties, they can declare bankruptcy and it goes to whatever creditors there might be out there or whatever the applicable laws dictate for disposal.   I don't know where Mooney is incorporated, TX?  DE?  

We'll just have to spectate and see what plays out.   Given that it is a presumably well-funded private foreign entity that owns it, we can only speculate.   But speculation, usually rampant, uninformed speculation, is what the internet is for, so... 

[Steve B]

Delaware .

 

 

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[TGreen]

54 minutes ago, RobertGary1 said:

If Mooney does not declare bankruptcy they are still liable for warranty claims and the company can be sued for failure to honor that commitment. In fact getting out of warranty liability is a primary reason many companies declare bankruptcy.

 

-Robert

Yes, but that is not a case that any lawyer would take on a contingency. Nor is it a case that any client should pay a lawyer to bring. Considering the cost of drafting the complaint, serving, proving up the case, getting a judgment and then a writ of execution -- in all likelihood the return on investment would be negative.

[cliffy]

4 hours ago, 1980Mooney said:

I am curious to know if you are simply assuming that there is no debt in Mooney.  Clearly lots of cash flowed into Mooney International Corporation.  But unless you have seen the accounting books you don't know if it's immediate parent, Soaring America Corporation, used an equity infusion or used a debt instrument to Soaring America to book the cash transfer.  Saying it another way, Mooney may have a massive IOU debt to Soaring America and Soaring America could be Mooney's biggest creditor.  It's just a matter of how they have financed the business.  Additionally there may be some third party debt and there may be vendor advances and payables. Additionally if there is debt of any sort you don't know if it is secured or unsecured.  Since it has been reported that Mooney has welched on its commitment to pay employees holiday pay, we may assume they have no cash.  But Mooney likely has ongoing cash expenses for security, utilities and property taxes in Texas are due this month.  There may be outstanding law suits and new ones may be filed so there are probably bills from lawyers piling up.

Soaring America may choose to throw Mooney into bankruptcy in order to stop the continuing cash drain and limit potential future legal liabilities.  Or others may force it.  If they don't pay property taxes on the plant, which I assume are substantial, the City of Kerrville/School District/County (whichever is appropriate) will move to foreclose on the properties by yearend.  Vendors may be able to place liens on assets for non-payment.

If it does go into bankruptcy they may seek liquidation or alternatively seek reorganization.  If it is liquidation then there is no entity left to seek anything against.  Everyone that is owed anything by the company, (regardless of repayment of debt, vendor payables, warranties on planes, service agreements,  taxes payable, lawyers, pending lawsuits, utilities, etc) are creditors as you point out.  They all have to get in line in order to make their case to get a share of whatever asset can be turned into cash.  Each party has to make their case to the bankruptcy judge that they should get some sort of priority.  Those that are secured may get 100% of what is owed while others that are unsecured may get cents on the dollar or nothing.  All parties will be hit with legal expenses further reducing the effective settlement, if any.  Once it is settled everyone gets what they get and there is no further obligation or recourse for anything.

If it is the reorganization route then the legal entity will survive, although it could have a different name.  Everyone that is owed anything is still a creditor but they need to make a case that they should get priority on being repaid (or warranty protected) from what might be a viable ongoing business.  The equity holders usually get crushed.  The problem is that some assets have to be turned into cash or someone needs to bring new cash to the company.  In that case the warranties could survive and be approved by the court if the judge believes that the "New Mooney" is viable enough to service its ongoing obligations.

Bankruptcy 101 Have seen it many times in this business for the 50 years I've been in it. 

We still have no real facts on what has/will/is happening so its all just speculation right now

[Guest]

2 hours ago, LANCECASPER said:

The U.S. borrows from the Chinese every day by selling Treasury bills, etc.

The Chinese don't have debt, they have a surplus. Back around 2008 when he U.S. had a $13 Trillion National Debt, the Chinese had nearly a Trillion dollar Surplus. The U.S. now has a $23 Trillion Debt and almost $7 Trillion of that is held by Foreign Countries (if you stacked $1 bills, $7 Trillion  stacked would be 441 miles high or 2,328,480 feet).

The Chinese would not need to borrow money from anyone, let alone a U.S. Financial Institution. The Chinese buy American companies for intellectual property. The few relative dollars they put into a company is peanuts compared to what they learn. China has been massively building infrastructure which includes aviation. What they have learned by owning Mooney and Cirrus will bear fruit in China down the road, if not right now. They will also produce airplanes with much more discipline in China and sell them globally. This exercise might just have been to learn how the FAA approval process works.

https://usdebtclock.org/#

 

If the Chinese wanted to keep Mooney going it would be no problem for them. I'm pretty sure they have learned what they wanted to learn and are now moving on. 

The national debt clock is sobering, yet very few people pay attention to it.

Clarence

[Andy95W]

Just now, M20Doc said:

The national debt clock is sobering, yet very few people pay attention to it.

And each side blames the other.

[Guest]

Just now, Andy95W said:

And each side blames the other.

The citizens are to blame for not holding their elected officials accountable.  We’re screwing our children and their futures.
I think every smart phone should open to the debt clock for 30 seconds before doing anything else.  

Clarence 

[RobertGary1]

1 hour ago, TGreen said:

Yes, but that is not a case that any lawyer would take on a contingency. Nor is it a case that any client should pay a lawyer to bring. Considering the cost of drafting the complaint, serving, proving up the case, getting a judgment and then a writ of execution -- in all likelihood the return on investment would be negative.

Maybe not individually but as a class someone would.

-Robert

[Ron McBride]

What is Mooney’s liability on the crashed plane.  Wasn’t there a gear collapse also?

 

[bradp]

35 minutes ago, 1980Mooney said:

The warranty is 3 years or 1000 hours, whichever is earliest...right?  Mooney only delivered 29 aircraft in the last 3 years according to GAMA.  On average half the warranty has expired for the group and one of the newest aircraft is gone.  That's a pretty small class.

So I got that going for me ... which is nice.  

[Davidv]

20 minutes ago, bradp said:

So I got that going for me ... which is nice.  

Gunga galunga... gunga, gunga-lagunga

Edited January 10, 2020 by Davidv

[GeeBee]

Lot of mis information here. First of all, China does have a national debt, about 5 trillion dollars which amounts to 47% of their GDP. second China as a country is deeply leveraged with total debt that amounts to 300% of GDP. when you consider that the "private debt" is owned by corporations that are often captives of the PLA aka the army, the national debt is much higher. Maybe as high as 80% of GDP

Second the largest foreign  holder of US debt is not the Chinese. It is Japan. Followed by the Chinese, followed by the UK. Japan and China each hold about 5% of the total US debt. Still the largest holder of US debt is US investors. Foreign buying of US debt has accelerated, but that is largely a result of demand for safety in a low or negative interest rate world.

As to the current structure of Mooney, it is largely speculation given the private equity involved. However the lack of a bankruptcy filing at this point is hopeful, but not dispositive.

 

[carusoam]

Lots of mis information here as well...

Wait a minute...   I thought it was tradition to put the disclaimer at the end of the post...  

Speaking of debt clock... we got to visit it as young people in NYC... while amassing tons of student debt. That was eye opening...

being math geniuses, we divided the big number by the number of people in the country... that number was about twice what my schooling was going to cost...

The wars were over, the good times had started, the national debt actually Dwindled and went away... somebody actually turned off the clock... it was dark for several years... then something else happened...

Want to see the debt go away...?   It Goes hand in hand with the expanding economy...  paid overtime for everybody... raises every year... because the companies can afford it... small businesses sprouting everywhere... interest rates that are moderate... (add inflation to the discussion for more detail)

People bought houses, planes and cars... using interest rates that were very moderate...

 

 

Use caution... a financial discussion can easily turn it to a political discussion... 

Nothing locks down a good thread like adding politics into it...

Best regards,

-a-

 

[MooneyMitch]

27 minutes ago, carusoam said:

Lots of mis information here as well...

Wait a minute...   I thought it was tradition to put the disclaimer at the end of the post...  

Speaking of debt clock... we got to visit it as young people in NYC... while amassing tons of student debt. That was eye opening...

being math geniuses, we divided the big number by the number of people in the country... that number was about twice what my schooling was going to cost...

The wars were over, the good times had started, the national debt actually Dwindled and went away... somebody actually turned off the clock... it was dark for several years... then something else happened...

Want to see the debt go away...?   It Goes hand in hand with the expanding economy...  paid overtime for everybody... raises every year... because the companies can afford it... small businesses sprouting everywhere... interest rates that are moderate... (add inflation to the discussion for more detail)

People bought houses, planes and cars... using interest rates that were very moderate...

 

 

Use caution... a financial discussion can easily turn it to a political discussion... 

Nothing locks down a good thread like adding politics into it...

Best regards,

-a-

 

And there you have it.......again.   Wisdom and logic come to light as expressed by none other than Anthony .  

Thank you. 

[KSMooniac]

Here is where I get really fuzzy.  Mooney is owed by a  Chinese entity.  I doubt strongly that the Chinese entity could borrow money from an American financial institution to resuscitate Mooney.  Indeed, I doubt Mooney's owners could borrow from anyone to resuscitate Mooney.  On paper it really didn't look like a money winner, especially when trying to certify a brand new clean sheet diesel aircraft made from advanced materials and do it in a hurry.  I always thought that Soaring America Corporation had some Chinese government component. The only thing that really makes sense to me is the Chinese might be willing to dump some cash if it means that they get a door open to develop GA in China.
If Soaring America borrowed money, they almost certainly did so in China at the behest of the Chinese government.  I can't imagine any moneylender anywhere would be gullible enough to loan them money for Mooney.  It makes no financial sense to anyone with enough financial sense to be involved in finance.  So if the debt is foreign, who do they declare bankruptcy here in the US?  I genuinely don't know.
I doubt in the strongest terms that there is any debt associated with Mooney.  I can't believe anyone with money would be stupid enough to lend it for that.

Keep in mind that there is one principal investor from China that made her money (billions) in commercial real estate and construction. There is not a Chicom government component, at least not on public display, like AVIC with Cirrus, Continental, etc. Mooney makes up a very small portion of her portfolio... Which worries me in that the lights could be turned off and she could simply walk away without feeling a need to mess around with selling anything to someone that might find value in what's left. There's likely been more than 200 MM poured down the Mooney hole with little to show for it thus far, and I can't imagine the scraps are with more than a few percent of that today.

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[MooneyMitch]

I was informed early on (just as the Chinese acquisition came to light), that the Chinese speculate for long term.  Therefore a long term plan was in store for the Mooney acquisition.

As we hear that there are potential buyers for Mooney, the above information is contradictory in nature.

It is confusing indeed. Time will tell .