worst case scenario, page-27

Question has been answered prior to the AGM glexi .....

Turns out Magna was never really going to simply issue a subordinated debt facility to CCU, it was always going to be an equity deal (which at least improves my view of Magna).

The problem was that:

a. CCU did not have enough head-room to issue enough equity to "deal" with its cashflow problems; and

b. shareholders would have complained if a direct equity deal was done with Magna as the upcoming deal is going to hand control to Magna .... much better from a PR perspective to do another rights issue, underwritten by Magna, and then have Magna assume majority ownership when it takes up its share and mops up the (no doubt very large proportion of) rights not taken up by other shareholders.

Lets assume that the loan funds are sufficient to cover working capital requirements until such time as CCU becomes cashflow positive (in itself a huge leap of faith). If this were the case, CCU will need to raise about $6m to repay its Magna and CBA loans in December.

It will be able to issue approx 25% x 330m shares = 82.5m shares.

To raise $6m, these shares will need to be issued at no less than 7.3cps. This is a discount of 48% to today's closing price. The last cap-raise was done at a 44% discount ..... it already looks line-ball to me.

GLTA.

PS: Just once I'd like to see a Board / Management team share some of the pain. The CEO is on $400K plus "incentives". If he's got so much faith in the company and his ability, why not reduce his salary to $100K until such time as the company becomes cashflow positive. If he's any good at all, he should only need to take this cut for 3 months. The Board should take no remuneration for the same period.

If anyone from Magna reads these posts ... "wake up! These guys only have jobs due to your generosity! Apparently all CCU needs to do is get the ball mill working properly. Can't you find anyone with the requisite skills to get this done at $100K/year, with a promise of $400K/year once they have delivered?"