Ann: FY12 Production and Revenue Report , page-24

Oakeyflat, you say that a guarantee without security is fairly toothless - the holder of the guarantee, in this case around 15 banks in the Infigen Global Debt Facility, who are owed over $1 billion, can immediately call the guarantee of IEL, and if it can't pay up on the guarantee, they can immediately threaten to drive the holding company, IEL into bankruptcy - this is far from toothless, and is a very strong hand that the banks have to play - that's why banking syndicates demand parent company guarantees, so they can have access to the flagship and threaten it with bankruptcy - once they do that, the whole house of cards comes crashing down pretty quickly.

And don't forget, in many cases (eg., Negative Pledge and Guarantee finance facilities), the parent company guarantee is all the banks have, with no other security, and it works exceedingly well - remember the Hooker Corp $2 billion bankruptcy in the early 1990s? That was just such a scenario, where there was no security at all, and just a parent company guarantee by the listed flagship, just like in the case of Infigen, and the banks called the guarantee, appointed Provisional Liquidators, and everything collapsed and the shareholders lost everything and the banks only recovered cents in dollar - that's pretty convincing to me.

Also, Frogster, re your point about where I think the covenant calcs are at, I've heard calculations that indicate that if the FY EBITDA falls by between $5-10m the 8.5X covenant will likely be breached, so that tells me that they've got no chance to meet the 6X covenant when that comes in for 2016. And when you read the 2012 Annual Financial Report's Remuneration Report where it says that IFN executives are paid bonuses based on their ability to "manage debt compliance", I can only ask more questions on this front.

What's interesting, is that Intelligent Investor came out today with it's review and re-rating of Infigen based on their realization that the parent company guarantee exists and that they were wrong in their previous assumption that the $1 billion loan was non-recourse, and here are their main summary conclusions, which are pretty worrying:


- Their downside valuation is now 14c, which is a long way below the current shareprice of 26.5c, and this is the lowest broker valuation yet reached for IFN that I'm aware of;
- They note that IFN "carefully words" it's disclosures to make things difficult for us to understand;
- They've valued the Australian development assets at zero;
- They note that it is "a real possibility" that the 23 wind farms within the GDF won't generate the cashflow to cover the debt as it falls due;
- They say that "we're not 100% convinced that IFN will sail through the 2016 covenant and never have been";
- They conclude by saying that you could decide that this issue of the realization that the loan is not non-recourse could indicate that the investment thesis for IFN is broken and if so you should sell.

Overall, not good - there is a lot of questioning beginning on this stock.