Aimia Inc. has announced:
that its Board of Directors has suspended payment of all dividends on both its outstanding common shares and its Series 1, Series 2 and Series 3 Cumulative Rate Reset Preferred Shares (collectively, the “Preferred Shares”) effective immediately. This includes the previously declared dividends originally scheduled to have been paid on June 30, 2017, to shareholders of record as of June 16, 2017.
Under paragraph 42 of the Canada Business Corporations Act (“CBCA”), the Company’s governing corporate statute, there are two legal tests that must be met before any dividend can be paid. The Company has concluded that it satisfies the solvency test set forth at paragraph 42(a) of the CBCA.
However, due to a number of factors, the Company believes that the capital impairment test set forth in paragraph 42(b) of the CBCA would not be satisfied on June 30, 2017. These factors include the recent significant decline in the Company’s market capitalization following the May 11, 2017, non-renewal announcement by Air Canada and the high amount of the stated capital account (currently about $1.5 billion for common shares and Preferred shares on a combined basis), primarily resulting from past common share issuances at significantly higher prices than the current market.
In the event the Company is able to pay the previously declared dividends referred to above at a future date, the record date for shareholders entitled to such payment remains June 16, 2017. Dividends on the outstanding Preferred Shares are cumulative and will continue to accrue in accordance with the rights, privileges, restrictions and conditions attaching to each series of Preferred Shares.
“The Company currently has the requisite liquidity to pay these dividends, however the statutory capital impairment test legally prohibits us from doing so. Our business continues to perform well and generate strong free cash flow. We reported $331.7 million of cash and cash equivalents, restricted cash and short-term investments and $225.5 million of long-term investments in corporate and government bonds as at March 31, 2017,” said Robert E. Brown, Executive Chairman, Aimia.
“The Company has been in active discussions with various parties with a view to securing new long-term commercial and strategic relationships post-2020. We believe we have a unique set of assets that are highly valuable and compelling,” said David Johnston, Aimia’s Group Chief Executive. “At the same time, the Company is also making progress on its plan to remove a further $70 million of costs from the Company through its business review and we will provide further updates as developments warrant.”
They also announced:
the resignation of three directors. Joanne Ferstman has resigned as a director of the Company. In addition, as part of the Board of Directors’ ongoing process of renewal, the Board of Directors has also accepted the resignations of Alan Rossy and Beth Horowitz.
Over the past few years, the Company has been on a path to simplify and focus the business, reduce operating costs and dispose of certain non-core assets. Reflecting the changing profile of the Company, the Board of Directors has been reviewing its size and composition against the Company’s current needs. The current Board is now reduced to nine members.
Ferstman joined the Board in 2005, Rossy joined the Board in 2007, and Horowitz joined the Board in 2012.
It’s pretty hard to swallow the idea that this is part of a scheduled review, considering that less than a month ago they announced:
that the nominees listed in the management information circular dated March 13, 2017, as amended, were elected as directors of Aimia. The detailed results of the vote for the election of directors held at its Annual Meeting on May 11, 2017 in Toronto are set out below.
Each of the following 12 nominees proposed by management was elected as a director of Aimia:
On top of the Annual Report comments:
This was also an important year for Board renewal as we added to the retailing, capital markets and financial reporting expertise represented.
Following an extensive search led by the Governance and Nominating Committee, we announced the appointment of Thomas (Tom) D. Gardner and William (Bill) McEwan to our Board of Directors in December 2016 and the nomination of Robert (Chris) Kreidler to our Board for election at our AGM in May 2017.
I mean, either this is a lie or the company has been grossly incompetent in scheduling its review vis a vis the Annual Meeting. I’ll need a lot of convincing before I believe there’s a third option.
All this follows hard on the heels of last Thursday’s announcement:
that Chief Financial Officer Tor Lønnum will be leaving the company in September. Family reasons spurred his decision to seek out a new role that allowed him to return to Copenhagen.
Aimia Group Chief Executive David Johnston, together with the Board of Directors, has appointed Aimia director Roman Doroniuk to act as Interim Chief Financial Officer, effective September 5, while a successor is sought. Lønnum will lead the reporting of the company’s second quarter results on August 9, and then work with Doroniuk until September for a smooth transition.
As far as the stated reason for suspending dividends is concerned, well, having $2-billion goodwill on the balance sheet vs. $115-million of shareholders’ equity doesn’t help matters much, and neither does a Retained Earnings (Deficit) balance of $2.7-billion. I’ll need a little convincing before I believe that “past common share issuances at significantly higher prices than the current market” has anything to do with. Looks more like the company has simply pissed away its capital.
Affected issues are AIM.PR.A, AIM.PR.B and AIM.PR.C.
