BAL balance sheet analysis, page-4

BAL is likely to have insurance for any class action, assuming they arise and they are successful. It's highly likely there are law firms working on this as I type. So if there is a settlement, the key is what is covered by insurance and what the deductible might be. Insurance is not my area of expertise but I can explain the amount they have to fork out.

Assuming a lump sum payment, this would need to be funded by working capital. To the extent that there is insufficient working capital (i.e. cash), it would need to be funded by debt. However, the funder is highly unlikely to allow a one-off payment to be funded via the working capital facility as

(a) the working capital facility is to fund temporary cashflow needs, not a permanent outflow
(b) given BAL has given Fonterra a second ranking charge over its assets (still subject to bank acceptance), the bank won't want to dilute its capital position.

Assuming BAL won't be restoring its cash position anytime soon, give the low NPAT numbers and high inventory, a capital raising is the only way of fundingthe non-insured component of a large class action settlement.