Saturday meeting with Tim

Sun Apr 12 05:06:54 EDT 2009

I know the news is disappointing but I’m certain Tim is as surprised as we are. First, when this was initially proposed he did not know the engine was run out. Second, I have complete confidence in Tim to say that he is not simply trying to unload 976. He did think he could bootstrap us and was/is eager to try. Third, if you have ever run a business through trying circumstances like the economy we are in now you can understand a reluctance to use whatever credit you might have remaining (if any)on anything that is not an absolute requirement. It is sound business judgment.

Given the zero time engine need, Bill Eason is the critical point right now. If he agrees to “finance” the engine and other repairs we might have a deal.  If he can’t, we probably have nothing.

To answer another question, Sean commented  previously that he “thinks” 976 has 4100 hrs TT – but he never confirmed this even though I asked for full specs from him.

Bill’s comment that we should consider only the note (18,000) and the engine/squawks (20,000 – my estimate) as the max we would be willing to pay for 976 is the correct strategy at this point, in my opinion.  The problem is how do we pay for it.  

Enjoy the day. Happy Easter to all.

Bob

From: eefc-core-bounces at workingcode.com [mailto:eefc-core-bounces at workingcode.com] On Behalf Of Steve Gordon
Sent: Sunday, April 12, 2009 1:38 AM
To: 'Eagle East Flying Club Core Team'
Subject: RE: Saturday meeting with Tim

I have to echo Todd a bit here because I feel like I missed something.  First let me say I don’t believe for a second that Eagle East is trying to sell us on bailing them out; they are simply trying to work within their means to reach a mutually beneficial agreement.  However, given the new information discovered today, it is possible that Eagle East is not able to lend us the support we need.

If Eagle East’s notion of playing the bank was that we have to front the total cost of 976, then how is that not simply an outright sale?  Was Sean referring to the yet to be determined amount of equity Eagle East feels they hold above the 18K note?  Is that the only amount that Eagle East has proposed to finance for us?  That does not sound attractive to me; not in the least.

According to Tim the reason he is unwilling to sign Eagle East’s name to a new loan for us is because he may someday need credit to support Eagle East.  If Eagle East acted as the “cosigner” if you will, then it hurts Eagle East’s ability to acquire new loans in the future.  Please correct me if I misunderstand this part.  

So we have determined that 976 requires an engine overhaul and likely a few more thousand dollars in squawks (new transponder, radio, etc).  I wonder then where Eagle East is going to get the money to perform the maintenance.  I understand they can perform the labor and finance the labor costs, but parts need to be paid for.  I know I’m just speculating, but it seems unlikely that Eagle East will agree to finance the entire cost of the overhaul and maintenance we need to get 976 flying safely – they would have to take a significant financial hit to do so.

The reality is that this club, be it 976 or otherwise, can only succeed by either requiring a very substantial up-front cost to all of its members or by securing a loan.  I believe that a substantial up-front cost would drive away membership (I know I have my limits), and would require a more complicated equity share system.  I am speculating that Eagle East’s ability to extend financing will be very limited.  If Eagle East is in fact unable to provide the financing we require, then it seems that the only way to get this club off the ground would be for Eagle East to put their name on a bank loan.  Someone in the group said they heard Tim say “I want a club out of Eagle East”.  It may come down to how badly they want this club.  

Boy I hate to sound like a downer.  I suppose we’ll all know more on Tuesday.  Bob I., thanks for the productive discussions with Sean and Tim.

Thanks,

-Steve

From: eefc-core-bounces at workingcode.com [mailto:eefc-core-bounces at workingcode.com] On Behalf Of toddmbs at yahoo.com
Sent: Sunday, April 12, 2009 12:47 AM
To: Eagle East Flying Club Core Team
Subject: RE: Saturday meeting with Tim

Well this is certainly a turn of events.  

With this scenario, EE isn't playing "the bank" at all.  We would be coming up with the entire amount up front, paying off their loan giving them a profit.  He then takes out a new note for $10k?  I don't see the financing part of this at all.  Why do they need that money if they were supposedly going to bank roll us?  My idea of EE playing "the bank" is EE takes out another loan and WE pay it!  

This is suddenly coming back around to looking like Tim just wants to unload the plane because he can't sell it and can't pay to put a new engine in it; and it feels like he's pulling a sales pitch on us.  I wasn't there to read Tim's face or anything, but that's what it's sounding like in so many words.

Why wouldn't Tim be willing to guarantee a loan through EE?  If we fold, then he gets a plane with a brand new engine in it that we had been paying down the principle on (at least 10% of).

Coming up with $300 or even $1,200 is one thing, but I'm not willing to pay $4,000 to buy into 976 (and I doubt anyone else will either).   Now if 15 people wanted to buy a 2001 Cirrus SR22 with a glass cockpit, well you can bet your rear end that I'll come up with $10k before the next sunrise... but not for 976.

I'm perplexed by this new information.  He won't be guaranteeing anything if we just buy it straight out. That defeats the purpose of this entire charade and is no better than all seven of us just signing a personal guarantee on a loan ourselves.

Todd

--- On Sat, 4/11/09, Bob Irving <rhirving at verizon..net> wrote:

From: Bob Irving <rhirving at verizon.net>
Subject: RE: Saturday meeting with Tim
To: "'Eagle East Flying Club Core Team'" <eefc-core at workingcode.com>
Date: Saturday, April 11, 2009, 7:54 PM

Exactly. I told him I didn’t think we could raise the money to pay him $33,000 down.  But he needs to convince Bill to let us finance the cost of the engine with EE.  Let’s see what the result of their meeting is.

From: eefc-core-bounces at workingcode.com [mailto:eefc-core-bounces at workingcode.com] On Behalf Of williammccann at comcast.net
Sent: Saturday, April 11, 2009 7:16 PM
To: Eagle East Flying Club Core Team
Subject: Re: Saturday meeting with Tim

Bob,

Why can't we offer Tim $ 33,000. for 976. Let them put in a new engine at their cost, and clean up the squawks noted by Jim.

The engine is timed out and I don't  think Tim wants to add another $ 10 to $ 15 thousand to the $ 18,000 he already owes.If 15 members 

buy in at $1200 each we could clean up his $18,000. We could finance the balance with Tim , and if the club folds the plane goes back to Eagle.

We should treat this as a business decision , let him take the risk so there isn't a problem with any individual being held responsible.

$ 20,000 for the plane ,$ 13,000 for the engine , he's off the hook and we have a plane. They will profit from the annuals ,maintenance, fuel and any 

add ons that I'm sure we will want to include. It's a start !!!!

----- Original Message -----
From: "James Carlson" <carlsonj at workingcode.com>
To: "Eagle East Flying Club Core Team" <eefc-core at workingcode.com>
Sent: Saturday, April 11, 2009 5:36:19 PM GMT -05:00 US/Canada Eastern
Subject: Re: Saturday meeting with Tim

Bob Irving writes:
> I met again today with Tim and Sean. First,  if we wished to purchase
> something other than 976, Tim can NOT guarantee that purchase.  (That's just
> a business decision on his part - he doesn't want to risk using any
> remaining credit he might have with his bank because he might need it for
> operating capital).  Since none among us would be willing to provide the

Yep; I think that's what we all understood, and it makes sense that he
wouldn't be interested in guaranteeing anyone else's plane.

> personal guarantees necessary to finance the purchase of a used plane -
> further consideration of the 40k/50k/60k options is an exercise in futility.

That seems a shame.

> 15k additional cost (probably a low estimate), EE is expecting that we would
> pay the current note balance (18,000) plus the cost of the new engine
> (15,000) as the "down payment". That's a total of $33,000 or more in down
> payment . ($2,200 each for 15 members/$3,300 each for 10 members/$4,700 each
> for 7 members).  He would be willing to take a note for the balance owed -
> whatever that might be. They will have the hard number for us on Tuesday. 

Ouch.  Maybe there's some wiggle room in there.  I realize they want
to get the $18,000 debt itself off the books in case they need to
borrow, but if we were to just take over the payments for that note
instead, then that'd help their immediate cash position.

$3000 would be a lot to ask for a down payment, but I might be able to
manage it if things ahead look brighter, and especially if we can
figure out how to return that money over time.

> I will hold off on any survey until we get these latest issues figured out.
> Personally, I might go for $2,200 but more than that is a stretch under this
> form of ownership. Comments ????

Maybe we need to talk with a bank.  Depending on the exact liability
involved, I would probably be ok with signing for a loan.  (It seems
that BoA requires insurance on the loan itself, but I'm not sure who
is liable first, and that makes a big difference.)

-- 
James Carlson         42.703N 71.076W         <carlsonj at workingcode.com>
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