Recent Blog Posts
-
The Times' Rorshach Geithner Story
Apr 27 20099:04am EDT -
Sinking Animal Spirits
Apr 27 20098:04am EDT -
Counter-cyclical Urban Policy
Apr 26 200910:04am EDT -
Be Your Own Counterfeiter
Apr 26 20099:04am EDT -
Being Tim Geithner
Apr 25 200912:04pm EDT -
Notes From a Press Conference Naif
Apr 25 20099:04am EDT -
What Good is the News?
Apr 25 20098:04am EDT -
Stressful Enough
Apr 24 20092:04pm EDT -
Not Regretting the Pound
Apr 24 20091:04pm EDT -
Introducing the New Ford Squeeze
Apr 24 20099:04am EDT -
Non-Economic Questions of the Day
Apr 24 20099:04am EDT -
The Stress Test Blind Alley
Apr 24 20098:04am EDT -
Happy Hour
Apr 23 20099:04pm EDT -
Recovery Without Rebalancing
Apr 23 20096:04pm EDT -
The Shape of Your Recession
Apr 23 20095:04pm EDT
Links
- Felix Salmon
- DealBreaker
- Ryan Avent: The Bellows
- The Epicurean Dealmaker
- Chris Anderson
- Ultimi Barbarorum
- MarketBeat
- Michelle Leder
- John Quiggin
- The Panelist
- Andrew Leonard
- Streetsblog
- Brad Setser
- Michael Mandel
- Financial Crookery
- Kash Mansori
- Dean Baker
- Calculated Risk
- Free Exchange
- Curbed
- Lance Knobel
- Econospeak
- Carbon Tax Center
- Overcoming Bias
- Mark Thoma
- Naked Capitalism
- Alphaville
- Barry Ritholtz
- Alexander Campbell
- The Bayesian Heresy
- Brad DeLong
- DealBook
- Greg Mankiw
- Deal Journal
- FP Passport
- Carl Bialik
- Marginal Revolution
- A Fistful of Euros
- Dan Gross
ExpressJet's Cashflows, Part 2
I spoke to ExpressJet's investor-relations chief Kristy Nicholas today, in the wake of my blog entry last week about the company. She helped clarify a couple of issues:
Firstly, the 100% holdback on credit-card income isn't nearly as damaging to ExpressJet as an increase to 50% was to Frontier. ExpressJet says it's likely to have $18 million tied up in credit-card holdbacks on any given day in 2008; that's not chump change, but it's still only about 1% of the company's 2007 revenue of $1.7 billion. Most of ExpressJet's business is contract flying, mainly for Continental, and none of that business is affected by holdbacks.
Secondly, all of ExpressJet's auction-rate securities are backed by student loans, and they're all triple-A rated, for what that's worth. The company did take an $8.7 million charge against its portfolio of auction-rate securities, because when it asked some investment banks to bid on its portfolio, that was the number that came back. But so far ExpressJet has not realized any losses on its $65 million ARS portfolio, and Nicholas said that she's started to see "a little bit of traction in the last week or two," with some auctions starting to succeed again.
In the meantime, the student-loan-backed ARSs are paying very high rates of interest, on the order of 18-20%, in stark contrast to some municipal ARSs which have much lower maximum interest rates. As and when the auctions start clearing again, ExpressJet will of course sell (or not roll over) its holdings. But so long as the market remains locked up, the company is getting a healthy income on its unfortunately-illiquid investment.
None of this means that ExpressJet is out of the woods, by any means. My personal feeling is that the share price is being held up by takeover hopes more than anything else, and that the credit-card companies have good reason to be very worried about ExpressJet's counterparty risk. But give Nicholas points for imaginative spin, at least: "You hope to see your holdback percentage go up," she told me, "because that means you're selling more tickets." Nice try.
