ing increased substantial holding, page-14

Interesting comments by all. (thanks by the way, normally I am sitting here on this one twiddling my thumbs by myself).

Blye I believe that all of the debt is in Aus. From what I know there is no FX risk or hedging. ( I know there are some NZ properties, however I do not remember talk of hedging apart from interest rates )

I think that banks will support this trust for a couple of reasons.
The sector overall is relatively resilient.
The operators are mostly well known, established operators with other hotels outside IEF.
The manager is good quality.
The quality of hotels owned by the trust is very good, allot of them have had significant capex spent in recent times.
I presume that the relationship with the banks is probably quite good still.
Whilst you see the size of IEF as a hinderance when dealing with banks, I see it as a positive in many ways. (We are small potatoes as far as the banks are concerned, we are easy to understand and we have tangible Aus assets).

Currently we are within our LTV's and have relatively sensible capitalisation rates adopted on our portfolio. I am cognisant of the fact that we are getting close to our LTV covenant, as I am sure Daniel is.

Can any one shed some light on to the interest rate hedges? If we renegotiate an extension with the bank on worse terms than we currently have will the hedge shield us? Alternatively, given our weighted cost of debt is quite high when viewed against the current cash rate (even if you take a much larger margin into account), could a renegotiation of debt in any way make our life easier? Sorry, as I said previously havent had to deal with debt hedging myself so I need to try and wrap my head around the mechanics.

The course of action that I think is most likely.
IEF renegotiates a tiered debt contract with ANZ. Increased margin and drop of base rate may leave us in around the same current position interest cost wise.
I believe that the LTV covenant will be tiered so that if we breach the current level covenant will will be up for an additional margin of 150/250bps until we reduce the LTV.
This is my guess as to what will happen. What do I base this on? Merely what I am seeing else where (limited view mind you as I dont work in treasury).
As long as we can keep up the ICR & accomodate a period of higher interest costs should we breach the initial LTV tier I think we will be fine.
IEF will have to suspend significant capex plans, and will have to put the Panthers JV development plans on hold, all though I expect that would have been parked already.

I am at a loss to see how this one will fail. I hate to say that, but it has so many things that a number of other problem AREITS dont at the moment that I think put it in a better position. If I wasnt so overweight IEF already I would go in. However I would be cognisant that there is a significant risk that divs may stop for a period as part of a finance restructuring deal. This would only be possible whilst the trust operates at a taxable loss due to writedowns etc. If it continues to make a profit it must distribute 95%? of that profit to holders to comply with the Aus REIT rules (i belive).

Interested to know what you guys think of my reasoning above.

Looking for all input.

Cheers