afr today - paperlinx transparency absent

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PaperlinX ‘s decision not to pay distributions on its listed hybrid security PXUPA was a total surprise given the tone of company announcements since the MD’s reassuring Shareholder Briefing in May, which was then followed by a commencement of distributions in June.

There have been no material adverse announcements by PaperlinX, and the Chairman’s address at the AGM was upbeat. PaperlinX defends its actions by reverting to ‘black letter’ law of the Trust Deed which allows hybrid distrbutions to be suspended voluntarily, however these are a financial obligation payable in the normal course of business. What is now abnormal at PaperlinX? What has changed since June? You won’t find the answers in the Company’s announcements.

The latest results show net debt $172M which makes the hybrid ‘debt’ of $285M the major funder of PaperlinX, yet $55M of positive operating cash flow now is now deemed insufficient to service debt of $285M. Holders of PXUPA are being treated shabbily.

PaperlinX repeatedly defends its abysmal results due to difficult trading conditions; however this isn’t supported by the share price performance of its global peers. The Dow Jones US Paper Index ($DJUSPP) is a fair proxy for the global paper industry and is performing solidly. It's time for more transparency and plain speak, not yet another Strategic Review or more gobbledygook.