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New Flyer buys NABI


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http://www.newswire.ca/en/story/1188099/new-flyer-announces-acquisition-of-north-american-bus-industries-inc-and-extends-senior-credit-facility-to-2017

WINNIPEG, June 21, 2013 /CNW/ - (TSX:NFI; TSX:NFI.DB.U) New Flyer Industries Inc. ("New Flyer" or the "Company") today announced the acquisition of North American Bus Industries, Inc. ("NABI") from an affiliate of Cerberus Capital Management, L.P. for cash consideration of approximately $80 million, virtually all for the satisfaction of affiliate debt. The acquisition excludes discontinued operations in Hungary and substantially all related assets and liabilities. NABI was founded in 1992, and was known prior to October 1996 as American Ikarus. The completion of the acquisition and related financing transactions is subject only to confirmation of the required wire transfers of funds which is expected later today.

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From the link, it appears that NF basically wanted NABI's aftermarket parts operation, which raises the question discussed in the NABIs being junked thread whether New Flyer is now on the hook for the settlement; no reason not to think that it isn't.

Cerberus selling out isn't a surprise, given that (1) it is mostly in the business of flipping companies [warning to those of you at Jewel, which is supposedly on the block again, like Cub Foods was] and (2) was losing its customers [such as LACMTD].

However, what I am not buying is that NF would be retaining NABI manufacturing in Alabama as NABI LLC actually assembling NABI buses. Just like Cerberus/NABI didn't keep Optima and Blue Bird transits around long, I can't see NF assembling an inferior bus, and if the labor situation is similar to that 8 years ago, by a work force with inferior skills, nor undercutting bids for LFRs and Xclesiors with a NABI. Maybe, like taking over Daimler/Orion work, that is only to work out existing contracts (of which there must be some to justify the $80* million price, when Cerberus bought it for $2 million from the Hungarians).

_________

*Corrected here and below.

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From the link, it appears that NF basically wanted NABI's aftermarket parts operation, which raises the question discussed in the NABIs being junked thread whether New Flyer is now on the hook for the settlement; no reason not to think that it isn't.

Cerberus selling out isn't a surprise, given that (1) it is mostly in the business of flipping companies [warning to those of you at Jewel, which is supposedly on the block again, like Cub Foods was] and (2) was losing its customers [such as LACMTD].

However, what I am not buying is that NF would be retaining NABI manufacturing in Alabama as NABI LLC actually assembling NABI buses. Just like Cerberus/NABI didn't keep Optima and Blue Bird transits around long, I can't see NF assembling an inferior bus, and if the labor situation is similar to that 8 years ago, by a work force with inferior skills, nor undercutting bids for LFRs and Xclesiors with a NABI. Maybe, like taking over Daimler/Orion work, that is only to work out existing contracts (of which there must be some to justify the $60 million price, when Cerberus bought it for $2 million from the Hungarians).

Maybe New Flyer will make NABI a more competent bus company with them running things if they are actually interested in keeping the main company afloat at all. As far as the settlement, I believe New Flyer will not have to deal with that as they were not a party to the lawsuit for defective buses when the court papers were filed and documented... only those mentioned will be held responsible.

As far as Jewel goes, OT here, I haven't heard of another reselling. But we're not owned directly by Cerberus, but yet a subsidy of them.

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Maybe New Flyer will make NABI a more competent bus company with them running things if they are actually interested in keeping the main company afloat at all. As far as the settlement, I believe New Flyer will not have to deal with that as they were not a party to the lawsuit for defective buses when the court papers were filed and documented... only those mentioned will be held responsible.

As far as Jewel goes, OT here, I haven't heard of another reselling. But we're not owned directly by Cerberus, but yet a subsidy of them.

Your first point is wrong. It appears that New Flyer bought the entire company, including its liabilities and the Press Release says:

In April of 2013, NABI entered into a settlement agreement with a customer which provides for an aggregate payment obligation of $9.25 million over three years, of which $6.25 million remains to be paid by NABI. In addition, NABI is required to contribute an additional aggregate amount of at least $5 million over the next five years in the form of parts and services rebates (or cash in lieu thereof). NABI's obligations under the settlement agreement will remain in place following the acquisition.

I should have read to the bottom before speculating.

Also, nobody is directly owned by Cerberus. The Cerberus acquisition of NABI was by some new company with a Hungarian name that was a subsidiary of Traxis Group NV, which would imply it was a Dutch company, but it was later announced that it was a subsidiary of Cerberus. The only difference may be that the new owners of New Albertson's LLC (which according to the Tribune story on doing away with the Preferred Card is the current subsidiary) is Cerberus and some other investor.

Also, if you want to get into subsidiaries, the Press Release indicates that a good chunk of New Flyer's money came from Marcopolo, apparently a Brazilian bus manufacturer with worldwide interests.

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So if what Busjack says is true, why would New Flyer buy a company that owes $36 million in liabilities?

Somehow they must have thought it was worth at least $116* million.

Only that big liability was disclosed; you don't know (unless you audited both companies) what other liabilities both have. On New Flyer's side, it is indicated that the purchase is being financed by both a Marcopolo purchase of an equity interest in NF and a credit line, and then talks about New Flyer's leverage ratio of debt to some accounting measure of earnings.

But, as you can note from above, while I'm buying the Press Release's line on synergy, I'm not buying the maintaining complementary product line statements.

But since you put it that way, NF must think there is some value there, or it would have let NABI go out of business, sort of like Orion was allowed to do, with NF picking up some assigned contracts between Orion and NY MTA.

_______

*Corrected

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I guess also you would have to think of it like this. New Flyer is buying a competitor and is taking them out of the bidding race. Most likely now New Flyer is hoping it can secure all those LA contracts where NABI thrives. These contracts are big business, they can make or break (in NABI's instance) your company. NF is starting to control the market by buying the competition. How many bus companies are left that are viable bidders? For CTA that seems like only Nova and for Pace Thor industries/Eldorado national. (Orion is out of the bidding now.) I wonder why Gillig doesn't get more contracts around here?

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I guess also you would have to think of it like this. New Flyer is buying a competitor and is taking them out of the bidding race. Most likely now New Flyer is hoping it can secure all those LA contracts where NABI thrives. These contracts are big business, they can make or break (in NABI's instance) your company. NF is starting to control the market by buying the competition. How many bus companies are left that are viable bidders? For CTA that seems like only Nova and for Pace Thor industries/Eldorado national. (Orion is out of the bidding now.) I wonder why Gillig doesn't get more contracts around here?

With regard to LACMTD, it already did. That's why I said NABI was losing its customers.

There may be an issue of the competitive field being reduced (i.e. it appears that only NF and Nova qualify for the big deals, although Gillig and ElDorado National are also there), but if in fact that was the result, the government would move to block it under the antitrust laws. However, the government probably views this as bus assemblers coming into and going out of business as they have since the 1980s, when GMC and Flxible lost their dominant positions.

Updated: As far as existing contracts, the Press Release states that NABI has 593 EUs firm and 986 EUs of options. By comparison, the NF blacklog was about 1900 firm and 5700 options.

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Wouldn't keeping the Alabama plant open be good for NF?? It would help it comply with the Buy America Act that much easier.

It might be, depending if NF has the demand to use the capacity.

On the other hand, as soon as NABI took over Optima, it closed the Optima plant, but NF's Press Release says it will use the Alabama plant.

In further news, NF has another Press Release saying that the transaction already closed. Apparently it didn't need regulatory approval, or it was approved before the proposed deal was announced.

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It might be, depending if NF has the demand to use the capacity.

On the other hand, as soon as NABI took over Optima, it closed the Optima plant, but NF's Press Release says it will use the Alabama plant.

In further news, NF has another Press Release saying that the transaction already closed. Apparently it didn't need regulatory approval, or it was approved before the proposed deal was announced.

For that matter I wonder if they will continue to use the NABI name and models. By NF taking over the Alabama plant versus closing it, it sounds like there's interest in just that as the company is set to NABI specs, or they may just be taking it over to complete existing orders to be manufactured (unless those are now null and void) This undoubtedly would expand NF's product line whether they use the NABI name or not.

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For that matter I wonder if they will continue to use the NABI name and models. By NF taking over the Alabama plant versus closing it, it sounds like there's interest in just that as the company is set to NABI specs, or they may just be taking it over to complete existing orders to be manufactured (unless those are now null and void) This undoubtedly would expand NF's product line whether they use the NABI name or not.

For that matter I wonder if they will continue to use the NABI name and models. By NF taking over the Alabama plant versus closing it, it sounds like there's interest in just that as the company is set to NABI specs, or they may just be taking it over to complete existing orders to be manufactured (unless those are now null and void) This undoubtedly would expand NF's product line whether they use the NABI name or not.

I wouldn't think it would keep the NABI name at all. Honestly I don't even know if there is anything in the NABI's line of products worth keeping. My guess would be that they would finish out any existing orders for the current line, then shift to NF manufacturing, perhaps building 35' and 40" buses in Alabama and building artics in MN. NF may make some design changes to its own brand using NABI designs or parts of them, but anything NABI as we know it will probably cease to exist in the near future.

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I wouldn't think it would keep the NABI name at all. Honestly I don't even know if there is anything in the NABI's line of products worth keeping. My guess would be that they would finish out any existing orders for the current line, then shift to NF manufacturing, perhaps building 35' and 40" buses in Alabama and building artics in MN. NF may make some design changes to its own brand using NABI designs or parts of them, but anything NABI as we know it will probably cease to exist in the near future.

In that the Xcelsiors are completely manufactured in St. Cloud, the breakdown may be Xcelsiors vs.steel buses. NABI had previously claimed to have steel bus body fabrication in the U.S.

With the mention of stainless steel, maybe NF wants to have the capability of building an entire stainless steel bus, like Cleveland has, but there doesn't seen to be demand for that. The only other custom job seems to be the LA Metro 45s, but NABI got out of that business and NF is not buying the Hungarian plant.

Maybe in the future NF will supply four bids (LFR, X, LFW and BRT) in response to a requisition, but I doubt it.

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NABI still had the old Ikarus 416 in its product line. So far as I know, I think it is the last high floor transit bus on the market?

Wonder if NF will keep that unit available.

As best as I'm aware, that's the case. The only active order for "416" high floor coaches is NJ Transit's mega order of 1,200+ buses. NABI also has an active contract with Dallas for CNG low floors.

Milleneum Transit - the successors to Nova for the RTS model - had been marketing high floor buses, but given the way transit agencies are opting for low floor buses (NJT being the only notable exception), I can't see how Milleneum's version of the RTS would be viable, unless transit agencies are looking for a suburban style coach that's not a low floor or an MCI/Prevost.

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As best as I'm aware, that's the case. The only active order for "416" high floor coaches is NJ Transit's mega order of 1,200+ buses. NABI also has an active contract with Dallas for CNG low floors.

Milleneum Transit - the successors to Nova for the RTS model - had been marketing high floor buses, but given the way transit agencies are opting for low floor buses (NJT being the only notable exception), I can't see how Milleneum's version of the RTS would be viable, unless transit agencies are looking for a suburban style coach that's not a low floor or an MCI/Prevost.

Ignoring the guy who thought this forum was a means of getting a job with Millennium, there was the combination of Nova having dropped the model because there was no demand, and the reason NABI got the NJ deal was because Millennium defaulted.

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Using a search engine yielded these two tidbits, undoubtedly related to this:

  • A press release on wsj.com from Cerberus states that Cerberus Operations and Advisory Company turned it around. Maybe it isn't the mess it was when the Hungarians ran it.
  • The Anniston Star previously reported that NABI got state incentives to bring production from Hungary and train welders.

Maybe the time for the deal had finally come.

Also, on the topic of this subsidiary or that, note that all the Cerberus press releases talk about "an affiliate of Cerberus."

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Ignoring the guy who thought this forum was a means of getting a job with Millennium, there was the combination of Nova having dropped the model because there was no demand, and the reason NABI got the NJ deal was because Millennium defaulted.

Right, I do recall that. However, Millennium had repeatedly claimed they were continuing to market their version of the RTS even after the NJT fiasco. I have legitimate doubts about that.

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I wish New Flyer would investigate whether manufacturing a 45ft bus would be profitable.

More seats than a 40 footer for those who don't quite need an artic. :D

One of the companies will most likely make one. If there's heavy demand for such a bus, such as in LA, similar to the 45C's, I would believe they would be interested in a similar bus again. Even though NF didn't pick up the hungarian plant, maybe there's interest in making their own model similar to NABI's design.

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I wish New Flyer would investigate whether manufacturing a 45ft bus would be profitable.

More seats than a 40 footer for those who don't quite need an artic. :D

In the motorcoach market, extending a 40' coach to a 45' coach expanded seating from 47 or 48 passengers to 55 or 56 passengers. That translates into an additional two rows of seats. However, these are high floor vehicles. In the case of a low floor bus, that might depend on the design. You might only get one extra row of seats or if designed right, two extra rows which would gain a maximum of 8 seats. With the option of artics, I don't know if there is a market for 45' transit coaches in that there would only seem to be limited markets for them. Though it may not seem like much, that 5 extra feet is critical, especially in right turns or tight turns. The location of the wheels don't change but the back end is elongated. Also going into some terminals or parking lots, that 5 ft is the difference between clearing the bumper and scraping the bottom of the bus. Considering those factors, is it really worth paying a few more dollars to seat an extra 4 to 8 people? Could've been another reason why the NABI Compo bus didn't fare well.

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In the motorcoach market, extending a 40' coach to a 45' coach expanded seating from 47 or 48 passengers to 55 or 56 passengers. That translates into an additional two rows of seats. However, these are high floor vehicles. In the case of a low floor bus, that might depend on the design. You might only get one extra row of seats or if designed right, two extra rows which would gain a maximum of 8 seats. With the option of artics, I don't know if there is a market for 45' transit coaches in that there would only seem to be limited markets for them. Though it may not seem like much, that 5 extra feet is critical, especially in right turns or tight turns. The location of the wheels don't change but the back end is elongated. Also going into some terminals or parking lots, that 5 ft is the difference between clearing the bumper and scraping the bottom of the bus. Considering those factors, is it really worth paying a few more dollars to seat an extra 4 to 8 people? Could've been another reason why the NABI Compo bus didn't fare well.

I was going to bring up the turning problem, which is why there are artics.

There was the proposal for the Compobus on Western (see the description of bus 7800) which quickly died, basically because Hungarian NABI couldn't afford to make it. It was also said at the time that the weight savings promised weren't realized, because the TAs were asking that the rest of the parts (such as the powertrain) be conventional.

Essentially, the Compobus was believed dead around 2005, and only LA revived it. If there is going to be anything light weight, apparently only something like Xcelsior. BTW: New Flyer had the Invero, which apparently didn't sell much either (Google cache).

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Well, looks like NABI will live on under the New Flyer banner...

From New Flyer's Press Release:

New Flyer’s President and Chief Executive Officer, Paul Soubry explained further, “NABI represents a compelling growth platform for us. The addition of NABI to the New Flyer family provides New Flyer with a highly complementary product line, access to new customers, a cost efficient manufacturing platform based in Alabama, and it creates a significant player in aftermarket parts. The Company plans to operate the NABI bus and NABI parts operations under the names NABI Bus, LLC and NABI Parts, LLC, respectively, within the New Flyer group of companies.”

Well I guess this means NABI will finally make decent 60' buses now that it has a manufacturer running things that knows how to do so. Maybe NABI will be back with CTA one day in the future with a more competent owner.

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