reserves, page-53

Mr Taylor,

Why is debt cheaper than equity?

Could the fact that debt never losses because they can sell the companies assets. Is debt really cheap on that basis? I'll hang around until you can point me to a case when equity received no annual dividend and sold the company to geth their money back.

Yep, answer is never.
What return to equity then? Yep, zero.

Basically you are talking through the top of your hat. Wind-baggery.

Debt is fine for an established company with a secure portion of revenue, for example shopping centres with major entities (banks and supermarkets). Blind freddie can see that the shopping centre could take out debt against the rental income from the bank and supermarket, basically no-risk of ever defaulting on the loan and losing your shopping centre.

So, if the Minsheng loan has some nasty hooks in it e.g. miss one payment and we claim $100m return regards of the loan amount, or penalties that add up to something similar, might explain CDU foot dragging. This would not be the first time someone slips in a condition not highlighted in discussions and not using "track changes" in Word to notify the reader.

I speculate but a reasonable reader would see that there could be any number of possibilities that could amount to a nasty.

The other fact to bear in mind, is that Chinese don't have quite the same view on drafting contracts. Western companies go to the nth degree. Chinese Law is weak and poor regarding contracts and the drafting open to wide interpretations. This alone could explain CDU lawyers having quite a field day trying to nail down Minsheng.

What it says about CDU view of debt is that debt should be treated with great caution - appropriately expressed caution for at least two types of reasons as above.

I expect you are a reasonable coot and will acknowledge that your pot-stirring is no longer required on this issue.