Castalia Group

Roger King, CreditSights (Reproduced with Permission) – Telephone #: +1 (203) 904-8365

Executive Summary

• DoJ investigates the potential of noncompetitive behavior in the US airlines industry artificially raising fares.
• Data shows independent airline capacity initiatives, in fact over-expanding this summer and suffering declining yields.
• Capacity growth is limited along the east coast by airport constraints and overall by the geriatric air traffic control system.
• Current industry consolidation was DoJ-approved.
• Most likely resolution has incumbents giving up some slots in New York and Washington to low-cost carriers.
• Buy US airlines bonds and EETC tranches—the industry outlook is very positive.

Relative Value
Now back from August vacation, the Department of Justice can dig into Senator Blumenthal’s postulation of non-competitive behavior in the US airline artificially raising fares. As unofficial amicus curiae, here are some points for the DoJ to ponder: 1) unit revenues on multi-year decline; 2) real yields remain flat; 3) no direct evidence or behavioral patterns of collusion; 4) airport fees, TSA surcharges, and federal fees keep rising; 5) major airports are capacity constrained; 6) advance fare announcements and capacity outlooks are fundamental to reservation systems and financial analysis; 7) DoJ approved the current industry structure; and 8) DoJ does not understand airline industry fundamentals—the core issue. Most likely, incumbents will give up a few slots at controlled airports and this will be a blip. DoJ might slice a sliver off the expanding pie, but the US airline outlook is very bullish. Buy any senior
secured note offered, a scarce commodity (See Report: US Airlines: 2Q15 Review and Outlook).

In August 2009, we stated in a letter to Shareholders and have commented on since, “We believe the [dry bulk] shipping markets represent a disaster in the making and if the ship has a propeller, it should be sold.” Long-term the dry bulk market is still in trouble, with few solutions for shipowners – and solutions available, shipowners are loath to enact. [“Suicide is Painless” is a line from the movie MASH. the dentist “Painless” recovers by morning. Dry bulk shipping’s survival will not be so quick or easy.]

Ten more Valemaxes are on the way. China Ore Shipping (“COS”) recently ordered 7 x 400,000 deadweight (“dwt.”) newbuilding Valemaxes. These seven of these vessels are being built at Shanghai Waigaoqiao Shipbuilding (“SWS”) for delivery 2017-2018. COS is a joint venture between China Shipping Group (“CSG”) and China Ocean Shipping Group (“COSCO”). The balance of the order is expected to be ordered from a yard controlled by China Shipbuilding Industry Company (“CISC”). The ships will be chartered to Vale in Brazil as part of a 25 year contract of affreightment (“COA”). As of the end of September 2015, by the end of 2017 nearly 50 million dwt. of Capesize vessels were due for delivery (i.e., approximately 16.0% of the Capesize fleet). An additional 4 million dwt. on the orderbook is not the solution for the dry bulk market and additional orders that may be forthcoming will not improve the dry bulk market.

Bonhams, the auction house, is holding a scotch auction in New York on November 20th at beginning at 10:00am. A little early to drink in New York and London, but it is past 5:00pm in Hong Kong. – Smile!

Some really stunning bottles are being auctioned off including: –

Ardbeg Single Cask 1972
Distilled 27 Oct 1972, bottled 14 Oct 2004 by Ardbeg Distillery Limited.
Cask number 2780, Ping No. 1, bottle number 41 of 245. In presentation case. Good label. Level: into neck. 70 cl. Single malt, 51.4% volume

Footnote

“There’ll be another scramble to Copenhagen when the world gets word of this one…sadly I didn’t get this until just after the last Bible went to press: as an October 2004 bottling this might have won Whisky of the Year, but we’ll never know! 51.4%. 245 bottles for Juuls Vinhande (Denmark). Rated 97. Jim Murray – Whisky Bible”

The Balvenie 50 Year Old 1952
In cask 26th January 1952, bottled 5th September 2002. Distilled & bottled by The Balvenie Distillery Company.
Cask 191. Bottle number 36 of 83. In wooden presentation case. Good label. Level: very top shoulder. 70 cl. Single malt, 45.1% volume

Bruichladdich 40 Year Old 1964
Distilled 22nd October 1964 by Bruichladdich Distillery.
Bottle number 152 of 550. Level: high shoulder. 700 ml. Single malt, 43.1% volume

The Macallan Millennium Decanter 50 Year Old 1949
Distilled January 1949, bottled August 1999 by The Macallan Distillers Ltd.
Caithness Glass, hand blown crystal decanter. In fitted wooden presentation case with copper-clad crystal stopper. Original shipping box. 700 ml. Single malt, 43% volume

Gary D’Urso, Bonhams, Specialist – Whisky, New York, United States

Greenshields Agri Holdings Plc

29 October 2015 MERGER ANNOUNCEMENT

Greenshields Agri announces merger with Agricultural Management Haddington.

Greenshields Agri, the rapidly growing agricultural company based in South East Scotland, and Agricultural Management Haddington (“AMH”), the East Lothian based farming and farm management company are pleased to announce that they have agreed terms to merge their farming businesses.

The merger will create one of the largest agricultural operations in the Northern Grain Belt and will create the critical mass to allow it to further develop its strategy of investment in the latest technology and machinery to provide existing and future customers with a strong and stable state-­‐ of-­‐the-­‐art precision farming service.

The well-­‐capitalised business will farm over 7,000 acres of good quality arable land from Edinburgh to Newcastle and will control over 18,000 metric tonnes of grain storage including 2 grain driers and weighbridges.

Corn and Soybean Pro Farmer Crop Condition Index (“CCI”) post modest gains…

When U.S. Department of Agriculture’s (“USDA”) weekly crop condition ratings are plugged into the weighted CCI’s (0 to 500 point scale, with 500 being perfect), the corn crop ticked another 0.59 points higher to 376.17. The soybean crop rose 1.3 points to 355.90 over the past week. Both of these ratings are down from year-ago levels when the corn crop had a 386.08 CCI rating and the soybean crop stood at 373.84.