A Lament from the EOB
A position holder recently posted the following on the Eclipse Owner's Board.
Thank you Vern,
For talking to us again. I understand your need to keep some tight lips on inside technology development. I also believe that your drive and ambition has pushed this dream to where it is today. I've been with you since the EAA article on march 12, 2000 (yes I remember the date). I also was 12th in line in may 2000 to buy the gold position.
If you could provide some information to the customers on how you plan to fund the ramp up, and provide the customers an alternative to the unsecured $700k loan to the company it would go a long way to raising values and confidence which is at an all time low as discussed by Mike Press.
When you tell us nothing, we can only assume your only plan is to use the 60% deposits for current Eclipse carry costs and we all know this money is not then available to pay for airplane engines, wings, and tails. There has been some discussion that the Eclipse cashflow will be solved if we can just get the production to ramp up. Those of us that have invested in, or been involved in senior management (I am a CPA, investor in manufacturing, and run my own company with over $100m in debt.) I and some of the customers know that in fact Eclipse will need a huge revolving line of credit to ramp up production. Some of us know that Prat, Fugi and others will not ship or even make parts unless they know they will get paid. If you are using our deposits to pay current expenses, which I hope you will tell me I'm wrong, then you can not use your receivables from us for collatoral to get the line of credit. I have heard the hedge fund loan already has the other assets pledged, I hope I heard wrong from an Eclipse investor, so please tell us your plan. We are only customers but we have a huge stake with you in this company.
Another alternative, and you have been great at being creative with alternatives, would be to show customers that you do not need our deposits now to pay current expenses. A short reprieve with discounts to pay the deposit just doesn't do it. Yes, our deposit agreement gives Eclipse the right to 6 months of free money and I think we are all OK with that. We also all knew our initial deposit was at risk at some point. What we did not bargain for is that our $700k deposit would be called on a projected delivery schedule that most of us do not believe is realistic, and that this $700 k additional deposit is an unsecured loan and appears that it is being used not to build airplanes but as risk capital to cover costs during delays. This, if true, is not right. Please tell us you have received additional capital investments and that our additional deposits are in cash and available to pay for airplane parts.
This alternative to build confidence is as follows:
1) Eclipse uses a realistic track record of deliveries to project future deliveries.
2) As an alternative to the 60% $700k deposit 6 months before delivery, the customer can post an irrevocable bank letter of credit in the same amount which is called when the customer can take title and have a real asset.
3)Eclipse is then entitled to a 10% increase in the contract purchase price.10% x $1500000 = $150,000 / $700,000 = 20% for 6 months, and is a 40% annual return for Eclipse and it's investors.
4)Eclipse can use the letters of credit as collatoral for borrowing against.The banks have access to Eclipse financial information and should be funding this capital-not the outside customer.
In the interest of full disclosure, I have been a customer since day 1 2000. My original position of 277 gold (even though I was the 12th buyer, I was given a later position because of escrow to certification). In january 2007, when deposits were being called on what I thought was an unrealistic delivery, I traded my delivery position to 716. THIS MEANS I AM SUGGESTING ECLIPSE INCREASE MY PRICE 10% in return for lower risk on my deposit. I know at least one other customer who had this same idea.
I love Vern and I love the Eclipse. Let's rebuild the confidence for Vern's dream.