I hold PXUPA and quite confident in PPX survival..
here is some outtakes from broker commentary...
PaperlinX also has low net debt for a company of its size. At 31 December 2010, net debt was just $199.8m. However, that represents the high point of the debt cycle for the company and there is normally a swing of around $100.0m from December to June meaning that we believe the company should have approximately $100.0m in net debt at the end of the financial year.
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The working capital surplus and low net debt levels provide us with a level of confidence that while earnings remain poor, the company is a long way from going broke. This view appears to be supported by the bank?s financiers. One of the few positives from the recent announcement is that the company?s largest borrowing facility (in Europe) has been extended from May 2012 to September 2013.
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A $7m-$14m underlying loss is relatively minor for a company that generates revenues of $5.0bn a year. Further, as we?ve pointed out the company doesn?t have balance sheet pressure and the payment of a distribution of approximately $10.5m will have no significant impact on the financial position of the company.
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Another reason for the company to maintain distributions is that suspension of distributions would prohibit PaperlinX from conducting any capital management initiatives. This is normally regarded as just a dividend stopper on the ordinary shares but it would also prohibit a buy-back of the hybrids ? an initiative the company flagged as recently as the half year results announcement in February 2011.
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