donder10
Posts: 6944
Joined: Sun Oct 21, 2001 5:29 am

Do Northwest Have A Lot Of Debt?

Wed Mar 06, 2002 2:29 am

Hi all,
can someone tell me how much debt NW have?Although their long haul fleet is generally oldish,their short haul fleet is quite young and Im not sure if they have paid for the 333s yet.
Cheers,donder
 
HlywdCatft
Posts: 5232
Joined: Mon Jan 29, 2001 6:21 am

RE: Do Northwest Have A Lot Of Debt?

Wed Mar 06, 2002 4:09 am

I don't know about Northwest finances, but from what a lot of people say on here Northwest is one of the best off.

As for aircraft, you can bet those DC-9s are paid off as most of the other planes because they own the majority of their aircraft and not lease them.

I would assume that Northwest doesn't have a lot of debt.
 
sfointern
Posts: 1104
Joined: Wed Oct 10, 2001 1:19 am

RE: Do Northwest Have A Lot Of Debt?

Wed Mar 06, 2002 4:58 am

Yes.

The important thing to look for here is Net Worth. Northwest's debt outstrips its valuable assets.

Only Northwest and US Airways currently have a negative net worth. US Airways is worth less than -$1 billion. Northwest is not far from a $0 net worth.

This takes into account stock price, owned aircraft, owned airport facilities, etc.

Northwest is what they call "highly leveraged" (massive losses from the Republic merger, early 90s), which is why they are so conservatively managed.

Amazingly, though CO has huge debt, it has invested its valuable assets so wisely that it has a respectable net worth.

Despite what people think about United, it still has the 3rd highest net worth behind AMR and DAL, respectively.
 
bobnwa
Posts: 4463
Joined: Fri Dec 22, 2000 12:10 am

RE: Do Northwest Have A Lot Of Debt?

Wed Mar 06, 2002 6:06 am

SFOintern,

The debt that Northwest has is not a result of the Republic "merger" buyout. Northwest paid cash for that transaction and incurred no debt. The debt that Northwest has is the result of the leverages buyout by "Wings Associates" in the early 90's. This leveraged buyout used the assets of Northwest to buy its shares.

At that time Northwest has the strongest balance sheet in the airline industry and was ripe for a leveraged buyout
 
TWFirst
Posts: 5752
Joined: Wed Apr 19, 2000 5:30 am

RE: SFOintern

Wed Mar 06, 2002 6:34 am

Bobnwa is correct.

NWA may be highly leveraged, but they don't have a problem with liquidity. Comparatively, they have a high amount of cash reserves and they also have a large amount of unencumbered assets to borrow against. In addition, they're spinning off Pinnacle airlines, which is expected to raise a significant amount of capital (I think $400 million)... whether they use that for debt reduction or expansion I don't know.
An unexamined life isn't worth living.
 
sfointern
Posts: 1104
Joined: Wed Oct 10, 2001 1:19 am

RE: Do Northwest Have A Lot Of Debt?

Wed Mar 06, 2002 8:17 am

Bobnwa-- My bad, thanks for the correction.

TWFirst:

Net worth takes into account cash and unencumbered assets. Either way you have it, NWA at this point either has a negative or near 0 net worth. (Well the spinoff might help).

Liquidity is not a problem as long as you can borrow! The simple fact is NW's debt rating hinders its borrowing power.
 
TWFirst
Posts: 5752
Joined: Wed Apr 19, 2000 5:30 am

RE: Do Northwest Have A Lot Of Debt?

Wed Mar 06, 2002 8:47 am

>>Liquidity is not a problem as long as you can borrow! The simple fact is NW's debt rating hinders its borrowing power.<<


Gee, thanks professor. Gee, maybe I shouldn't have bothered with the MBA and just visited airliners.net so a teenager could explain to me that debt rating hinders borrowing power.  Insane

Northwest's debt ratings are comparable to other majors. Northwest has a variety of ratings on its various notes/bonds etc., but its ratings are similar to that of AMR's. You can go to Moodys.com to check.


And I disagree that net worth is the most important thing to look at anyway. Debt-to-equity ratio is a more valuable indicator. All airlines market caps are depressed right now relative to before 9/11, so net worth is skewed.
An unexamined life isn't worth living.

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