On the very scant information we have regarding TPG, I have been giving this some additional thought as to what the value of existing equity would be. Here are some thoughts for discussion:
Assumptions :
1) That we would be left with a 10% residual holding in the recapitalised AEJ under the TPG proposal (per the AFR article).
2) Residual debt is $1,550 million
3) Interest rate on debt post refinance is 9%
4) FY2011 normalised EBITDA is $310 million
5) Currently 811 million shares on issue - so suggests that the TPG proposal would issue a further 7,299 million shares for a total of 8,110 million shares on issue.
The rough cashflow available to equity holders would then be:
EBITDA $310,000,000
Interest @ 9% $140,000,000 (rounded)
Ongoing Capex $ 30,000,000 (eg generator refurbs, etc)
Free cashflow $140,000,000
This equates to 1.7 cents per share. Applying a 9 times multiple, this equates to a share price of 15.5 cents per share. The interesting aspect will be what the forward projected EBITDA will be as that will have a material bearing on the outcome (as every $10 million change in EBITDA is worth + or - 1.1 cents per share on a 9 time multiple).
I am sure that there will be further negotiation around the conversion ratios etc, but if we assume for the moment that the TPG proposal sets a floor to whatever recap deal is struck, this gives us a current starting point to the value of shares currently on issue.
Open for discussion.....
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