It will be interesting to see what comes out of the...

It will be interesting to see what comes out of the administrators investigations and audit.

So far, seems that value of inventory and assets has been significantly overstated in the past. Levels of debt are mind boggling - about $50M to Westpac alone. ATO will have a claim on all the outstanding super and there is also the question of unpaid payroll tax from JSW. Word is that this has been going on for more than a year.

Assets for sale will be a problem. Non-operating drills have been stripped to keep operating drills going because suppliers won't extend credit - not surprising if you haven't been paid. The level of stop-credit from suppliers is past the point where the company probably shouldn't have been continuing to operated. We can draw our own conclusions about what that means re ASIC provisions.

Moves already planned to close all of the subsidiaries except for the main east coast drilling operation. Makes sense - it's the only one making a sensible return. JSW has been burning cash for a long time, Reichdrill has no cash to re-develop and its sales program has been very poor.

Look for private equity to be sniffing around looking for a "bargain"on a distressed asset. The only question seems to be how many cents in the dollar Westpac will take. At a guess it will be less than 50%. What they were thinking in extending credit to this point is anyone's guess.

It's a house of cards collapsing. Looking at the debtor ranking, I'm struggling to see how shareholders will get anything out of this. Government and Westpac have the senior claims and that amounts to close to $50-60M. Can't see a liquidator getting anything close to that, and that's without the other creditors.

A PE firm might do a deal to buy the east coast drilling operation and keep it going - they do have operating contracts that can be made profitable. That will only happen is there is a significant write down of debt - over to Westpac again. They might then take it private and rebuild - maybe float again in a couple of years.


Big question is - what have ASIC and the ASX been doing? There is enough information on the problems to warrant a serious investigation. Now that it is all unravelling the employees are starting to talk and the stories so far are incredible. Even if you discounted it by 80% from what's been heard, this has been a seriously badly run company from Day 1. Seems like there is enough there to question basic compliance with the Act.

Nothing in this suggests existing shareholders will get anything. Looks like an investment mistake and a lesson in believing the numbers that come out of reporting. In the case of HDX, official reporting and reality look like coming out in the wash as completely unrelated.

It's a clusterfuck.