Ann: Unmarketable Parcels Sale Facility Update, page-6

I read your post and emphasis on debt reduction and I am not really sure what you are referring to.

BOL essentially has 2 types of debt on its balance sheet:

1. Lease debt that is directly tied to equipment finance (i.e their mobile cranes). They have about $58.6m of amortising lease debt to finance $72.6m of "Right of Use" assets. These leases have terms of between 1 to 5 years and are amortising at about $25m annually (in effect the depreciation expense of these right-of-use assets). The facility turns over as they sell old gear and replace with new gear - in the December half they amortised $14.6m (so reduced the debt by that amount) and bought $21.4m of new equipment.

I view this facility as "good" debt - clearly tied to the financing of depreciating assets, but not overly leveraged on the total portfolio of plant and equipment - on top of the Right of Use assets, they have a further $82.7m of unencumbered plant and equipment.

2. Balance sheet debt. This they have been amortising and we have seen it reduce from $9.4m to $7.3m on a net debt basis over the past 6 months. It was as high as $24m a couple of years ago, so they have been nicely reducing this. However, the current $7.3m net debt liability is not large relative to their annualised EBITDA (ex right-of-use depreciation so we are not double counting) which is running at circa $26m annually - in effect, they could pay off the residual of that debt within about 4 months if they absolutely had to (excluding working capital movements and capex).

So on any measure, I believe that BOL does not have a debt problem (unlike where it was about 6 years ago) and has a P&L that is sound and trending strongly in the right direction. Its current total liabilities are very sound relative to generated cash flows, are within their targets and are appropriate for an equipment heavy company.