I see it as a matter of can GJT service their debt. Most lenders around the world are ignoring LVR to a large extent. My rough calcs on their debt servicing abilty are:
INTEREST PAYABLE ANNUALLY Senior debt 54 bln yen at 2%pa = 1.08 bln yen pa Mezz bonds 9.8 bln yen at 10%pa = 908 mln yen pa
Total interest payable per annum 2.06 bln yen
INTEREST CAPITALISING Mezz bonds 9.8 bln yen at 5%pa = 490 mln yen pa Convertable bonds 1.2 bln yen at 15% pa = 180 mln yen pa
Total interest capitalising per annum 670 mln yen
NET OPERATING INCOME PER ANNUM (NOI) NOI per annum 4.53 bln yen NOI after interest payable annually = 2.47 bln yen
NOI after 1 bln yen amortised to senior debt = 1.47 bln yen
NOI after allowing for capitalising interest = 800 mln yen (that's $100M AUD at current exchange rates).
As best as I can make out the net income generated by the property portfolio comfortably covers all interest obligations including even the very onerous mezz and convertable bonds and the requirement to amortise 1 bln yen per annum from the senior debt. My gamble by owning GJT is they will refinance hopefully some time soon and the picture looks far healthier. Either this or equity from elsewhere will see the value in taking over the fund and paying out the mezz and convertable bonds. I haven't seen anywhere an early payout penantly in the mezz and bonds deals.
GJT Price at posting:
$2.05 Sentiment: Buy Disclosure: Held
