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| Re: Inside look DesignLine USA troubles: lawsuits, stock market, borrow $, debt, etc... (198012) | |||
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Re: Inside look DesignLine USA troubles: lawsuits, stock market, borrow $, debt, etc... |
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Posted by JAzumah on Thu Jun 10 18:24:00 2010, in response to Re: Inside look DesignLine USA troubles: lawsuits, stock market, borrow $, debt, etc..., posted by Brightonr68 on Thu Jun 10 17:40:31 2010. Doesn't look so. You need $40M in cash minimum to build $50M in buses. The gross profit is usually 30%, with the warranty reserves and non-manufacturing costs reducing that number down to 5-10%.In theory, if I wanted to bail them out, I could go to a contract funder and get 70-80% of the value of those contracts right now. I would have to pay 8-12% interest, but since the build time is less than one year, it isn't a game breaker. You buy out all of the investors and you assign the cash flow of the contract to the financing company. The MTA is large enough to be acceptable to most funders and its credit rating would probably yield a 9% interest rates. The equipment component would be satisfied by a lien on the finished goods. It seems to me that no one at DesignLine knows how to finance the company. A reverse merger is a technique used to raise cash through the IPO process. They picked a bad time to try and IPO as the appetite isn't there in the market. In addition, the public reporting requirements and compliance is a royal pain in the rump. The only way I am picking this up is because I was on a quest to get financing of size for a long time and it is only recently that I have figured out how to do it. You run into all kinds of distractions and get money quick schemes that are dangled by hucksters playing on your greed or need. I'm still mad about the $350 I lost in the process. The vendor issues are going to be a big problem. Quality issues are typical for new manufacturers trying to build things quickly. As Orion knows, it is better to be late and throw in free buses than to toss buses out when they aren't quite ready. However, one set of vendor problems will drive up the cost for all the other vendors as they hedge. Remember, most vendors factor and get an advance of 80-90% on DesignLine's cash. If DesignLine takes too long to pay (more than 2-3 months), the 10-20% reserve held is gone. After another month, the vendor now OWES the factor the advance they receive for that part! If I had access to what I know and have now, I would have bought Millennium in August 2008. While $1M+ bus service contracts aren't easy to get right now, a three bus contract would meet the minimum guidelines of most contract finance companies. Since they built buses that physically work, quality control means tightening things up. That isn't the worst problem in the world. |
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