Ann: Completion of Sale of Eastern European opera, page-2

re: Ann: Completion of Sale of Eastern Europe... This asset sale is a positive step towards sustainability but it is far from enough to solve the 2014 credit cliff. Timber company---GNS failed when its creditors no longer willing to roll over its lending commitments. IMO PPX shareholders should be alarmed. Should PPX continue to lose money on its remaining oversea operations in 1H2014, the company is likely to find itself harder to borrow externally---Even if it did, the terms are going to be harsher that the company can hardly afford.

Usually I don't speculate much on AGM events, but we are at extra-ordinary times aren't we? In short, IMO the AGM may disappoint hybrid holders.

The theaory goes like this: When a company is near insolvency such as PPX, there will be conflict of interest between shareholders and debtholders. The formal is like longing a call option, they want to take on risk because the downside is already limited while the upside is unlimited; the later is like shorting a put option (in the money), they want to preserve captial and against all kinds of risk taking because they are on the edge of a huge downside. Since the ultimate objective for management is to maximize shareholder value, I suspect IN THE COMING AGM the board will still announce significant capital injection towards turing around its remaining businesses and investing in growth projects(pakaging, signs and display) while keeping creditors on the edge, morals has no place in situation like this---I'm afraid that hybrid holders have to compromise on the matter.