Ann: Half Yearly Report and Accounts , page-7

From my understanding the following is the case

1. the deferred Margin does not attract interest

2. there is no requirement to sell the assets after June 2014. It is at the discretion of the Manager. If assets are sold the debt including the deferred margin must be paid before any return to unitholders.

3. At 31 December the debt consisted of

$99m + $40m deferred Margin

this is all debt and all owed to the noteholders . THe only thing is the deferred margin DOES NOT ATTRACT INTEREST.
This means the average rate of return on the noteholders investment is dropping dramtically. ie they are only getting interest on the $99m yet they are owed $139m
This makes the noteholders likely to cut a deal to get paid out sooner

4. While it is true the deferred margin is payable in full there is no requirement to sell up the assets in 2014 and pay back the balance especially the deferred margin as it is an interest free loan. The net present value of only $32million confirms this . If we were required to sell all and pay this debt back in 2014 the net present value would be much closer to $40m , with only 2.5 years left until June 2014

5. the idea of the debt manager is to try and strike a deal with the noteholders to accept something less than the full balance of the deferred margin for repayment now. Something much closer to the net present margin. Also the debt manager would also negociate for the early repayment penalty to be waived . At present that penalty is only $1m being 1% of the outstanding principal of $99m

6. so its not a one way street we do have some bargening power. The real reason to cut the deal is to free up the restrictions on selling. ie the CDO have very low values and possibly as Dargie said could eventually be worthless. at present we cannot sell and get atleast some return because of the sale restrctions. But if we cut a deal we are free of those restrictions and could sell such risky assets

7. this fund is in WINDUP. It will not return to lending and will not pay distributions in the form of income!. While fund is now in a postive postion of interest income now exceeding interest expense( largely do to the no interest on the deferred margin) we have significant tax losses for both income and capital. assuming realisations go well we will receive distributions in the form of capital returns once all debt has been repaid. Again the idea of doing a deal on the debt is the expediate this process and hasten the return of capital.

8. The nta at face value is just over 60cents. this inculdes the deferred margin at full face value. The market to market value at 37cents is a much better guide to our eventual return. yes there are risk that assets will fall further but there is also the possiblity that they could rise, especially the euro loans that have fallen signifcantly.

9. since the announcement of the debt manager ther has been significant interest in MXQ you will not increased volumes as the price has risen . If a deal can be done with the noteholders the market price of MXQ will surely rise substantailly as the timing to the final recovery and return to until holders will draw signifcanlty closer.

The above is just my view please do you own reseach