Perform a Credit Analysis of ATNI, include information from ATNI’s SEC 10k form.
https://ir.atni.com/node/
ANSWER
ATNI is an investment company that, openly and by use of subsidiaries, possess and
operates telecommunications trades in North America, Caribbean, and Bermuda (About US,
2016). Besides, the company owns and operates renewable energy business in India. ATNI
Company was formed in 1987 in Delaware and, it started its operations in 1991 and turned a high
percentage of the activities to stockholders in 1998. The company has been engaging in various
tactical acquisitions and investments that have helped in improving growth by the use of the
money collected from instituted operational units for re-investing in the existing trade. ATNI has
developed and aims to uphold resources that will support operational subsidiaries and for
improving client acquisition, retention, as well as satisfaction while upholding favorable
operational efficiencies. ATNI looks for firms that provide development opportunities or likely
tactical benefits, but need extra capital investment to implement their business plans (About US,
2016). The paper aims to analyze credit and financial statement of ATNI Company using the five
Cs- capacity, capital, collateral, conditions and character. Companies prepare financial reports to
attain the unique needs of specific users and, these statements are limited, and they are not
prepared for the public, instead, for management and other internal users (Minnis & Sutherland,
2017).
Credit Analysis
Based on ATNI Company’s credit statements, the company can pay loans on time, and
the rationale behind this is, the company recorded an increase in interest in the 2018 and 2017
respectively and, the increase was as a result of increase in cash returns and marketable
securities. Therefore, based on the company’s financial statement, it is clear that, as at 31st
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December 2019, the company had complied with all its financial commitments and there were no
outstanding loans and, the net of $8.0 million of excellent operations and standby credit letters
had $192.0 million and this shows that the company is in a position to take another loan.
Accordingly, the company has enough assets that can be used by lenders as securities when
applying for a loan. According to Sauria et al. (2015), before approving for a loan, lenders
consider business cash flow, the plan to pay the loan and the likelihood that the business will be
able to pay. Based on the financial ATNI financial statements, the company has good cash flow
and enough assets that will enable it to pay all loans.
Secondly, capital is the money that business invest personally, although it can be lost if
the business fails. Possible lenders love checking if a company has used its assets and has taken
the financial risk to launch the business before asking for a loan. Besides, Sauria et al. (2015)
stated that lenders like to know how a company handles debt. The company has recently made
several investments in its three operating segments that are considered relevant, and which can
grow financially, and they include international and United States telecom and renewable energy
in India. Besides, the company used stockholders to start its business, and this shows that there
was no reliance on loans. The company had approximately of $162.4 million of cash as at 31st
December, 2019 and out this amount, foreign subsidiaries had $40.6 million, which is an
investment outside the United States. The company also has a history of internally funding the
working capital requirements, but in July 2019, an agreement between FirstNet was entered
which provided an option to repay construction expenses and any interests for eight years.
Therefore, this shows that the company has effectively used its internally funded working capital
to grow and expand business operations, and it shows that the company stands to benefit from
external lenders.
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Third, Sauria et al. (2015) defined collateral as the security that can be provided to
lenders, for instance, assets, and homes during agreements that they can be taken by lenders
when a business fails to respect the financial commitments to repay loans. However, guarantees
are a different form of collateral whereby individuals or other companies sign a document
committing to pay a mortgage when the company fails to pay. As at 31st December, 2019,
ATNI’s statement shows that the company had total fixed assets of 605,581, which can be used
to fund loans in case the business fails. Further, the company can use its renewable energy
investment in India to pay the mortgage because, the land at India seems impossible to purchase
limiting company’s operations.
Fourth, Sauria et al. (2015) defined conditions as whatever a company plans to use once a
loan is approved, for instance, to increase the working capital, adding operational equipment, or
expanding the inventory. Often, the lender must know this before approving a loan, and if there
are sensitive working conditions are facing a business, lenders must be reassured that the
business will adapt to manage productivity and expenditures. Based on the information provided,
the company can use the loan to shift its renewable energy investment in India which faces an
issue of buying the land and thus, limiting business operations. Besides, the company can raise
the working capital.
Lastly, character means that possible lenders should know that the company can be
trusted to pay the loan and although they can never be entirely satisfied, they review the payment
history of a business (Sauria et al. 2015). Besides, it is essential to have reliable and authentic
references. In this case, ATNI has a good history of honoring its financial obligations and, as at
31st December 2019, the company did not have any outstanding loans. Besides, the company
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uses its fixed assets and warranties during the loan agreements, for instance, one
communications Debt.
Strengths and Weaknesses
Strengths
The company has not been affected by issues of inflation in its consolidated operations,
as presented in the report. Besides, the company has many fixed assets that are used during loan
requests as sureties if it fails to pay. Further, the company has excellent employee benefits plans
that provide pension as well as other retirement benefits, which helps to retain skilled employees.
Weaknesses
One major weakness of the company is that its facilities are limited by operational
history, which causes challenges to forecast the future of productivity. The entire company’s
facilities lack operational history, and the prospects of the productivity of these facilities are
based on presumptions and estimations made with no lengthy operational benefits. Further, the
company’s revenues depend on the productivity of power purchase agreements and the flows of
cash from these agreements are affected by the capability to gather payments from off-takers.
Thus, when customers fail to pay or when they breach such contracts, the company’s revenue is
negatively affected.
Summary
The report indicates that the company faces both losses and an increase in revenues from
one year to the other and thus, the management should check the loopholes that result into losses
such as, unnecessary expenses and find measures to prevent that from recurring in future, for
instance, the renewable energy investment in India faces losses and, the management can decide
to shift it to another country or close it. Besides, cash provided by regular operations of the
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business is helpful to maintain other daily services within the company and in the report, it is
clear that the company faced a reduction of the operational activities from $115.9 million to
$87.9 million in 2017and 2018 respectively. Due to this, the management should assess the
causes of this reduction to prevent it from recurring in 2020.