Magellan might call it quits despite Q4 profit

Magellan Aerospace Corp. might not be able to stay in business because of the tough global credit market, despite turning a fourth-quarter profit, the Canadian aerospace company said Friday.

Toronto-based Magellan, which makes airplane parts, said the firm needs to renew a credit facility and an outstanding loan itself worth $50 million. If not, the company said it might not be able to avoid some sort of company insolvency.

"If the corporation is unable to renew or refinance its operating credit facility...and extend its original loan, its ability to continue as a going concern is uncertain," Magellan said in releasing its fourth-quarter earnings.

Magellan said it is looking at the issuance of new securities or debt instruments and the possible sale of firm assets as a way of raising cash.

Decision time

Magellan has given itself a deadline of April 30 to renegotiate its outstanding credit facility — $95 million in Canadian funds and another $90 million in U.S. dollars — or a side deal by which Magellan's chairman Murray Edwards has agreed to buy $25 million, or 50 per cent, of a new issue of convertible debentures falls by the wayside.

In addition, Edco Capital Corp., Edwards's own company which lent Magellan another $50 million, has agreed to extend the repayment period by one year. In return, Edward's capital arm will receive a one-time payment worth one per cent of the outstanding value of the loan and an extra two percentage points added to the loan's interest rate.

Making money

All of Magellan's corporation manoeuvring comes in the wake of decent fourth-quarter results for the company.

Magellan, which also owns Winnipeg's Bristol Aerospace Ltd., popped out earnings of $7.4 million, or 39 cents a share, for the three months ended Dec. 31, 2008. That was a marked improvement compared with a loss of $4.95 million, or 29 cents, for the same period one year earlier.

For the year. Magellan made $12.9 million, or 62 cents a share, versus a loss of $11.3 million, or 71 cents, for the previous fiscal year.

Revenue for the fourth quarter was also higher, up almost 16 per cent to $180.1 million.