I have a fair bit of experience in levereaged buyouts where the leveraged entity has gone private and is inevitably looking for a getout / profitable exit / new listing once it is sorted. In the exit from high debt there are degrees of leverage which are just no no post relisting. SGH didnt go private - but its gearing ratios are toxic for the investment community. I am now a punter - looking for the clues which indicate debt paydown ( Then BOOM)
SGH has bought a degree of dominance in a market segment. I dont think they overpaid. I thought the NIHL cases were a great deal...now I am not so sure. The high leverage is fine if SGH is profitable and has adequate interest cover (and does not shrink a lot )---only when it is clear how and when
leverage is to be materially reduced. NIHL cases seemed to me to point clearly to 18 month - 2 year material debt reduction . The inability of the board to reinforce the " directors have not changed their views on NIHL cases" and instead limit comment to "lost a lot of money" does suggest a change in views . I am pretty clear that if debt reduction plan was all good that the directors would have said so.
What does that mean - well I am thinking and now less sure.
On Escrow - I reckon WalkingEagle is right - but you never know - there might have been some special terms agreed which related to NIHL success. So I dont know.
Mel
SGH Price at posting:
40.0¢ Sentiment: Hold Disclosure: Held
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