getting closer to the agreement, page-23

>why wouldnt the banks take a bigger equity stake in the d4 and pay out the bondholders?

Because the subordinated debt is very cheap money!

If you were to position capital in BNB at this level of subordination - you would be after 20%+ pa

Remember, the '08 half announced a profit of about $175m with a guidance on the second half up 10% or so on the first half!!

Incredible!

The last quarter of '08 has seen global asset deflation. When you have leveraged assets, in an asset deflation environment - at some stage you will not have asset value to cover the debt. This effect has been driving people's asset pricing behaviour.

It is no mistake that we are getting the rubbish news stories about how we are about to enter a "Japanese" situation - 10 to 20 years of asset deflation - slow to no growth.

If you think the value of asset is going to decline, why would you pay a premium, now, when you could wait and get it cheaper?

However, I am betting (by holding BNBGs) that the asset deflation we are seeing will be short and sharp. The actions currently being taken to reinflate will result in the return of inflation. I am betting (by holding BNBGs) that some degree of refinancing will be possible in the short term and that in the medium term asset prices will be restored (along with inflationary expectations).

Of course, the immediate risk is "the deal". If we get 2 years to restructure - I will be well pleased - plenty of time for high inflation expectations to drive up the price of our remaining assets.