Operating & Financial Highlights

• Due to air travel restrictions implemented in response to the Covid-19 outbreak, the Company was forced to temporarily suspend all commercial flights on March 22nd, 2020. The Company currently expects to re-start a scaled-down operation on June 1st, 2020, although this date could be delayed as a result of further travel restrictions.
• For 1Q20, Copa Holdings reported net profit of US$74.3 million or earnings per share (EPS) of US$1.75, as compared to net profit of US$89.4 million or earnings per share of US$2.11 in 1Q19.
• Operating profit for 1Q20 came in at US$98.7 million, representing a 12.6% decrease from operating profit of US$112.9 million in 1Q19. Operating margin for 1Q20 came in at 16.6%, compared to an operating margin of 16.8% in 1Q19.
• For 1Q20, consolidated passenger traffic decreased 16.3% on a 14.4% capacity reduction. As a result, consolidated load factor for the quarter decreased 1.9 percentage points to 81.5%.
• Total revenues for 1Q20 decreased 11.4% to US$595.5 million. Yield per passenger mile increased 5.8% to 12.8 cents and RASM came in at 10.8 cents, or 5.8% higher than 1Q19.
• Operating cost per available seat mile (CASM) increased 3.8%, from 8.7 cents in 1Q19 to 9.0 cents in 1Q20. CASM excluding fuel costs increased 8.0% from 6.1 cents in 1Q19 to 6.6 cents in 1Q20, mainly as a result of flight cancellations in March due to the Covid-19 outbreak and, later in the month, the unexpected grounding of the Company´s fleet, resulting in a significant year over year capacity reduction.
• During 1Q20 the Company drew US$145 million from its available short-term lines of credit.
• Cash, short-term and long-term investments ended the quarter at US$ 1.13 billion, representing approximately 43% of the last twelve months’ revenues.
• Copa Holdings ended the quarter with a consolidated fleet of 102 aircraft – 6 Boeing 737MAX9s, 68 Boeing 737-800s, 14 Boeing 737-700s, and 14 Embraer-190s.
• Subsequent Events
• Given the uncertainty related to the Covid-19 crisis, including the effect on future air travel demand, on April 26, 2020 our Board of Directors postponed dividend payments for the remaining quarters of 2020.
• Throughout the month of April, the Company obtained unsecured, committed credit facilities with three local banks, for an aggregate amount of US$150 million dollars. These facilities remain unutilized.
• On April 30, 2020, the Company further bolstered its cash position by successfully closing a US$350 million convertible senior notes offering, maturing in 2025.

Update: New Copa Notes To Pay 4.5%

Copa had no comment, but with over $1 billion in cash and short term assets, the $350 million private placement appears to be part of the company strategy to shore up defenses for plummeting revenues and the oncoming recession due to the Coronavirus COVID-19 Pandemic. Copa’s relatively strong balance sheet puts it in a strong position compared to regional rivals such as struggling Avianca (NYSE: AVH, BVC: PFAVH) and LATAM (NYSE:LTM, IPSA: LTM)

Terms:

• The notes will be senior, unsecured obligations of Copa, will accrue interest payable semi-annually in arrears and will mature on April 15, 2025, unless earlier repurchased, redeemed or converted.
• Noteholders will have the right to convert their notes in certain circumstances and during specified periods.
• Copa will settle conversions by paying or delivering, as applicable, cash, shares of its Class A common stock or a combination of cash and shares of its Class A common stock, at Copa’s election.
• The notes will be redeemable, in whole or in part, for cash at Copa’s option at any time, and from time to time, on or after April 17, 2023and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of Copa’s Class A common stock exceeds 130% of the conversion price for a specified period of time.
• The notes will be redeemable, in whole and not in part, at Copa’s option in connection with certain changes in tax law at any time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a make-whole premium.
• The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.
• Copa intends to use the net proceeds from the offering for general corporate purposes.

Gran Colombia Gold is a Canadian-based gold and silver exploration, development and production company with its primary focus in Colombia. Gran Colombia is currently the largest underground gold and silver producer in Colombia with several underground mines in operation at its Segovia and Marmato Operations.

The company indicated in a statement that it has continued to take the necessary steps to improve operating cash flow from its Segovia Operations. Gold production at the Segovia Operations in the fourth quarter of 2014 was 22,427 ounces, up 21% from the third quarter of 2014, driven by an increase in production sourced from the contract miners which accounted for 86% of the fourth quarter production. As this will be a key source of material for the company as it continues with mine development and mechanization of operations in the company-operated mining areas at the Segovia Operations in 2015, the company has negotiated a contract amendment with the primary contract miner that is expected to generate cost savings, based on current production and gold prices, of approximatelyUS$700,000 to US$900,000 per month commencing today. The company is continuing to work with SRK Consulting (U.S.) Inc. (“SRK”) to optimize its mine plan at the Segovia Operations to improve future cash flow.

The company will continue to work closely with its financial advisor, GMP Securities L.P., as well as gold and silver note-holders to meet all its commitments and matters related to the capital structure of the company, its future debt service abilities, including the associated principal repayments, put options of the Gold-Linked Notes and interest currently in arrears on both Gold-Linked and Silver-Linked Notes.  The company expects that upon receipt of the optimized mine plan at Segovia from SRK, it will bring forward a comprehensive restructuring plan to all stakeholders to include associated consent solicitations required for changes to material terms of the note trust indentures.

The company also announced today that its total gold production for the fourth quarter of 2014 was 29,043 ounces, up almost 18% over the third quarter of 2014. Annual gold production for 2014 amounted to 98,622 ounces compared with 102,792 in the prior year. Segovia’s annual gold production in 2014 was 74,506 ounces, down from 80,226 ounces in 2013, which the company is addressing through its mechanization and mine development program in 2015. Annual gold production at the Marmato underground mine increased to 24,116 ounces in 2014 from 22,566 ounces in 2013. Total silver production from both mines in 2014 was 125,716 ounces compared with 153,649 ounces in 2013.

Photo of Gran Colombia’s Marmato, Caldas gold mine site north of Manizales, courtesy of Gran Colombia Gold

The Ministry of Housing and Public Credit, Minhacienda, completed a successful bond offering today of $1.5 Billion (US), though there was $5 billion worth of demand from 244 institutional bond buyers from throughout the USA, Europe, Asia, and in Latin America.

Minister Mauricio Cárdenas said regarding the issuance, “Its excellent news that reflects renewed investor confidence in the Colombian economy. Its recognition of the flexibility and capacity to adapt our economic policy in light of the volatility of international commodity prices.”

A year ago, Colombia reached a record low 5.6% interest rate on its long bond offering. This rate of 5% breaks that record. A further testament to the nation’s creditworthiness is the oversubscription of $5 billion exceeding the $4.2 billion oversubscription of a year ago.

 Boletín / Comunicado

According to Fitch, the rating actions are the result of the city’s relevant role in the Colombian economy; sound, albeit declining, operating margins and significant cash flow; and the important financial support from Empresas Publicas de Medellin (EPM, Foreign and Local Currency IDRs ‘BBB+’), which helps finance major investments.

The main risks or limitations for Medellin are the political risk associated with the public sector, a manageable but higher debt-burden relative to historical, and low coverage of pension liabilities financed according to Colombian Law. Medellin is the second largest economy nationwide with a strong industrial influence. It has strong socioeconomic indicators as indicated by public services coverage close to 100%. In recent years, the municipality has registered a dynamic economy, with an improvement in employment and security indicators.

Medellin has a good fiscal and financial performance, but its operating margin has diminished in the last years. The decline in margins since 2012 was largely attributable to significant increase in staff expenditure following an administrative reform.

–Long-term foreign Issuer Default Rating (IDR) at ‘BBB’,
–Long-term local currency IDR at ‘BBB+’.

Regarding debt, in 2014 Medellin disposed of $50 million (US) with a development bank. Additionally, in August the city issued bonds for COP $248,560 million in two series with maturities of 10 and 30 years. The proceeds were used to repay domestic debt with commercial banks.

Medellin registered COP1,014,453 million (approximately $414.3 million US) debt as of Dec. 31, 2014, concentrating 60% of it in foreign debt, these are not hedged to the exchange rate risk. By 2014 and according Medellin’s estimations, the interest to operational savings ratio ascended to 5.3%, level significantly low relative to the maximum 40% established by the Ley 358 (Law 358). On the other hand, debt represented 78.5% of current revenues at the end of the year, level below the 80% maximum established as a limit in the mentioned law.

Since the commitment through future budget allocations that the administration has adopted as a mechanism to execution of the development plan, the sustainability indicator rose in 2013-2014. Nevertheless, Fitch believes that credit metrics are appropriate for the risk level assigned, and the indicators will fall in the next years.

Moreover, considering the composition of debt and the payment of ordinary bonds in 2016, the administration is currently considering measures to reduce the risks (exposure to the exchange rate). Fitch will monitor the actions defined.

The 100% participation in the EPM represents credit strength to Medellin due to the important amount of common and special dividends transferred to Medellin from the entity, increasing its financial flexibility. Fitch will monitor the different investment plans of the company and its potential impact on the payment capacity of Medellin.

Pension liabilities could represent a contingency in the long-term. According to FONPET the pension liabilities accounted COP2.6 billion and the coverage is for 15.9%, which have been financed according to Law 549 from 1999.

Rating Sensitivities

An upgrade of the country’s sovereign rating, in conjunction with positive trends in Medellin’s operating performance, could trigger a positive rating action. Future developments that may, individually or collectively, lead to a negative rating action include a significant debt increase (short-term and/or long-term), a significant deterioration in operating margins and deterioration of cash levels.