chances vpg go under, page-17

Sydney I think you have it all ass about.

"European Industrial Property (EIP) fund extension
All investors in the European Industrial Property fund (EIP) have voted in favour of extending the effective fund life to 2013. The current gross value of the fund is €470 million (as at Dec 2008) and the IRR since inception is in line with the target return of 12%. Existing debt is in place with the term aligned with ultimate fund expiry by 2013"

The fund return since inception is circa 12% which is the target. The unitholders have voted to extend the life until 2013 which coincides with the existing debt expiry. There is nothing to do with interest rates.

2013 is the ultimate expiry date of that particular fund. This date is coterminus with the debt instrument.



"Asset impairment review process
Valad is in the process of preparing its half year accounts and is undertaking its six monthly asset impairment review. This review is ongoing, but Valad advises that it expects there will be SIGNIFICANT REDUCTION TO CARRYING VALUES, particularly with respect to its VCS and Crownstone investments.
VCS and Crownstone represent the Group’s preferred equity and mezzanine lending activities, and at 30 June 2008 had a book value of $610 million. An investment with a book value of $82.4 million has been realised for $65 million since that date.
Having regard to the continuing rapid deterioration in credit and property market conditions over the last six months, Valad believes that the recovery of its VCS and Crownstone book values are at significant risk.
Valad will continue to support existing positions only where appropriate."

I dont disagree that the underlying security value may have dropped by 30% (depending on the property style etc). This effects the security base of the loan that they have provided. It may not effect the underlying borrowers ability to continue interest payments? It may not effect the ability to recover the full amount of the loan at a point in the future (or now depending on whether the security has been provided by a head company with other assets etc).
Its not good that the security base will be written down but its not the end of the world either. What would be worse is that the underlying borrower can not meet interest payments??

I hope this helps clear up the confusion Sydney.