Cirrus: Yesterday, a Rumor – Now, it’s a Fact
The story has gone from “rumor” to “news,” to “fact,” as developments came into place overnight, and through the morning hours of Wednesday (“EXCLUSIVE Rumor/Scoop: Cirrus Takes in a Bundle,” 08-22-01, ANN).
We can now confirm what was only rumor yesterday: Cirrus Design has received $100,337,000 in cash, from Crescent Capital of Atlanta (GA), an investment arm of the First Islamic Bank of Bahrain. The money covers 58% of the Duluth (MN) company, on a fully-diluted basis. [Note: Crescent claims figures of $143 million, total; and 61% ownership --ed.]
(Other Crescent Capital transactions include: Caribou Coffee Company, Inc., the second leading non-franchised coffeehouse in the United States; Lee Industries, the number-one manufacturer of commercial paving equipment; DVT Corporation, a provider of technology-based machine vision systems; WaterMark, the leading water paddle sports manufacturer; Yakima, a leading manufacturer of sports-related racks and rack accessories for vehicles; and MediFAX-EDI, a leading provider of health care information services.)
The financing package virtually eliminates company debt in favor of equity. This releases cash flow for production rate increases and continuing product development. Further, the transaction pays Cirrus’ shareholders a cash capital distribution dividend and introduces more working capital into the company.
Cirrus CEO Alan Klapmeier called us yesterday, and, in an exclusive ANN interview, he told us what it was like, as the financial maneuverings (among several suitors, at first) were taking place: “It’s been hugely time-consuming. We’ve been walking on eggshells.” Not only can the wrong deal ruin things; even the right deal, improperly handled, can be trouble in the short run. That’s one big reason why everyone at Cirrus has been so reticent of late.
Large-scale financing a new General Aviation company has been trouble for decades. As Alan said, “The hardest part is convincing the financial markets that there is a future in GA.” Their understanding is limited, and shaped by some, well, wrong, notions. “The strange part about the financial world,” Mr. Klapmeier says, is, “They say, ‘sales are down, there is no market;’ instead of saying, ‘sales are down – there is a market, for someone with the right products.’” They are supposed to ‘buy low, sell high,’ right? What happened to the part about ‘buy low?’ we wondered.
Alan told us how he sees the market develop: “As more-user-friendly products [easier-to-fly, more-reliable aircraft] come out, more and more people will be able to fly. This isn’t about a ‘totally new product.’”
How does a GA company get a hundred million in financing,Â
…especially in a spooked financial climate? Alan paraphrased Winston Churchill: "This is, as he said, ‘The end of the beginning.’ In other words, you ‘grab your boots and pull up really hard, until you fly.’"Â
In other words, you keep on, producing a good product, and making sure the details get done, as you scrape every day to afford the people, the tooling, and the materials you need. If you tug hard enough, and long enough, on your own bootstraps, someone may just notice. When there is a good plan, and the customer base to back it up, things can happen.
Much has already been made of the source of the money, and political innuendoes are inevitable. The only thing is, there’s no politics here – it’s pure economics.Â
As Klapmeier explained, we should think of it as “…a whole bunch of our oil dollars coming back.”
Plans – what would you do with a hundred mil?
It’s not as though the money just dropped out of the sky – its use has been planned for a long time. Alan continued, “This should allow us to accomplish what we’ve wanted to. We’ve got two airplanes certified; we’ve got a great big backlog. Now we can look at future developments – the current aircraft, and eventually new airplanes.” It’s not all for the future, however: “This allows us to pay off a whole lot of debt we’ve accumulated, and have that deep-pocket capital partner, that buys into our vision.Â These guys ‘get it.’ They’ve looked at GA, and have come to the conclusion that we were right.”
Everybody at the shop is really happy, and even, dare we say, relaxed, right now. There are more things than ever that need to be done, but, as Alan said, “Having the money sure will be nice.”