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Banking Syndicate Approval - What has changed since?, page-10

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jimk3758

23,128 Posts.

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26/09/16

17:11

Post #: 19428398
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Originally posted by Dr.Who ↑

Illogical thinking. They most certainly do have a choice.

If the company was considered not to have a viable future why persist with it? The loan is small fry for the syndicate members. Time value of money is important to - don't lock up dead money when it can be put to better use (perhaps a lesson there for SH) . Why have approx. $700m tied up in a business that they feel has little chance of paying the interest and zero chance of paying down the principle. The obvious choice if that was the consensus view is to pull the rug and salvage what they can now.

Some might say well just keep it running to farm as much WIP as possible and then foreclose. If that thought enters the mind then it would show an ignorance of how the legal and complimentary services sector operates.

Some might say keep it afloat until a CR can pay down the debt. As previously discussed, the goal of a provider of capital is no different to that of the banks. If a sufficient return cannot be generated in a professional services company now (as against a few years down the track for an exploration/healthcare company) what rational decision could there be to invest new capital. None whatsoever. If it cannot show earnings by this time next year it never will. That goes for banks or potential new investors.

Therefore, yes no choice but to support it because it is the right decision to. Rest assured a thorough risk assessment will have been part and parcel of the advisers report and there is only one logical conclusion. It is a viable business able to pay its way.

Yes, the banks get virtually all the cash in the short term, so what? This is not a mining company raiding the ground for precious jewels to give to the bank and then it is exhausted with nothing left for shareholders.

It is a predictable business that if the ship is steadied and all acquisition activity flushed through the system then the course is set for sustainable cash flows infinity. That position will be known by this time next year and you can bet the syndicate believe it will achieve that goal after short term pain.

Everything is probability based though, so as with everything their is an element of risk things will not pan out as expected. The banks credit-risk committee will know doubt have considered that probability rating and decided it was worthy as support. Evidence by some taking up warrants.

Then again you have forgot more about business than I have ever learned so please correct me where my judgement is suspect.

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It's illogical thinking only because it doesn't fit your illogical thinking. If SGH was a JB Hi-Fi or Harvey Norman consumer goods type operation banks would have put SGH in admin in a heartbeat. Because there was really nothing to sell off they decided to let SGH trade on. That is logical thinking like I have said many times before. I think the banks are feeling more confident they will be paid back with interest but if they pulled the pin it would have been a big loss.

SGH Price at posting: 38.0¢ Sentiment: Hold Disclosure: Held
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Banking Syndicate Approval - What has changed since?, page-10

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