bnbg - looking to the future..., page-24

dogby, you also need some statistical help. I will give you that help.

The crux of this debate is in your statement above as follows:

"However, you have to ask yourself - what is the MOST LIKELY outcome ?

I think the most likely outcome is $0.
I think the chance of any return from BNBG is more like 1%"

The concept all of you are hacking away at (badly) is called an expected return analysis.

You state above that you think the most likely outcome is $0 and the chance of a return is 1%. If this was the case, logically the bonds would be trading at 1% (and in fact this is where they may trade upon relisting).

SM states that buying the bonds at $4 with a prospect may give you a chance of a return of $100. Basically the market is saying there is a 4% chance of this happening, which really is odds of 25-1 of getting back to $100 (which I must say looks remote).

However, if BNB trades on for a few years yet and sells down its assets in an orderly manner, there could well be some leftovers eventually for the bondholders (I think the ords have been screwed for sometime myself). That at present is an unknown question.

The question we need to ask ourselves and debate is what chances do BNBG have of every having a value and is rightly pointed out above it depends on what chance BNB have to recover in the medium term and how much less their servicing costs are going to be in this environment.

One key question that we do not know the answer to yet is that is there any possibility, if the banks preference shares continue to be serviced and the debt is reduced, at which point does the company consider servicing its BNBG and similar style bonds again. That is the key to your returns. Could be a tough one to work out.