Ann: RCR Prospectus - Entitlement Offer, page-26

It is interesting how much of a trap RCR and it's ilk are for their shareholders. RCR had about $85m in net cash at the half year, wrote down $57m on two projects, and is now going to the market for $100m to meet its commitments. It is easy to overlook the contingent instrument facilities, as they do not appear on the balance sheet. I'm a qualified (grad dip) investment analyst (I don't work as one, and not saying I am a great one) and I barely pay attention to this myself, when I look at a contractor's financials tbh.

I think in the financials of contractors it should become a necessity for cash on the balance sheet to be divided into unrestricted and "CIF" restricted cash, or in some other way, that gives investors an idea as to how much genuine margin of safety the business has in it's net cash. It would be very effective in highlighting the contingent risk the business has. RCR's balance sheet was spring loaded for any problem IMO, due to the level of contracts it has. Some of you may remember Forge Group, and the problems UGL had, and there are others. It is very common for miners to have their cash divided in this way. It might be good timing for the financial reporting requirements to be looked at carefully.


Re not having cash to take up the issue. Be wary of clinging on to any sort of psychological loss aversion fallacy. Don't forget that you probably have a capital loss available if you sell your shares a long way under what you paid for them. This can be used to offset future capital gains, and does have a financial value. So you could check out the tax rules and see if you should sell some stock at a loss, and then take up the offer to end up at a certain level of total holdings.