Ann: Debt Update , page-49

VivaLasVegas,

I work very closely with the insolvency industry. Company directors have a statutory and fiduciary duty to act in the best interests of its shareholders. The Corporations Act 2001 amongst many other obligations, requires under Section 588G A director must prevent insolvent trading by a company. The duty to prevent insolvent trading is possibly the most important of the directors duties. A situation when such duty to prevent insolvent trading occurs is when a business is insolvent or likely to become insolvent and a debt is incurred or the director fails to prevent the debt from being incurred. The Corporations Act 2001 defines insolvency in Section 95A of the Corporations Act 2001 as a company is solvent if the company is able to pay debts as and when they fall due and payable. and A company who is not solvent is insolvent. An administrator of the company is appointed under section 435A, B or C of the Corporations Act 2001.

There have been instances where action has been taken against company directors for breaching their statutory & fiduciary duties by having adimistrators appointed when the company was not in fact insolvent. Refer to 'Downey v Crawford (Downey)'.

At this point MDT is not insolvent. They, whilst in breach of certain loan coventants, have been able to meet their debt obligations & refinance the debt facilities with short maturity dates. Even if the lenders of the Head Trust Loan were to call 'default', this IMHO would still not necessarily meet the criteria to have adminisrators appointed - asset sales, cap raising & alternate financing would all be considered before an administrator would be appointed.

Why is it taking so long for the Head Trust Loan to be refinanced? Well, that is great question. I can only assume that management has been negotiating with the lenders hoping to have the facility extended under its current terms, maybe with a few changes to the debt covenants i.e. LVR requirements. It is now clear that management have been unsuccessful in their negotiations with the lenders to have the facility extended - they have not stated that alternate financing arrangements cannot be sought. I still believe the Head Trust Loan facility will be refinanced, but I'm uncertain on the terms under which it will be refinanced.

$50m is not a lot of money for a company like Macquarie Bank. IMO I believe that Macquarie Bank will agree to provide the finance (under favourable terms to its shareholders) in order to avoid the bad publicity that would come with MDT potentially being placed into administration. Remebering that we have sufficient ICR to service all of the non-recourse CMBS debt facilities.

I highly doubt that management would've placed all of its eggs in one basket with regards to the extension of the Head Trust Loan facility - they no doubt would be working in the background on alternate financing arrangements.

It will be interesting to see how things play out over the coming weeks.

Cheers.