china to invest $500 billions in 5 years, page-32

My concern with a JV. The below post by Raj2008 on 10/03/13:


All you guys who are supporting the NO vote and saying that SDL should walk off the deal really understand the repercussion of that decision. If there was any chance of a counter bid then it would have come by now. Do you guys really understand the scale of investment required for this project - $6 Billion aka $6000 million. Which financial institution is going to fund that kind of money. Even if a funding arrangement were to come, it would be in the form of 30% equity 70% debt. Banks wouldn’t even talk to SDL if it doesn’t have $500 million in its kitty and a firm plan to raise further equity in the future to the tune of $1.3 Billion. If this deal falls through, the SP would be 15c and that means raising $500 million is equal to issuing 3.3 billion shares. Further equity raising of $1.3 Billion would require issuing 6.5 billion shares (At say 20c).

Even if the 35 MTPA generates an EBITDA of $1.75 Billion, the $4.2 Billion Debt would require debt servicing of $300 million p.a. (Don’t forget that before the project starts, the accumulated interest liability would be a further $1 Billion). NP of $1 Billion on an equity of 13 Billion Shares = EPS of .075c. which means SP of 90c on P/E of 12. With $4.2 Billion of Debt the SP would still be 50c in 2020. Would you guys settle for an SP of 50c in 2020 or 45c in 2013??? The choice is not yours because the smart guys running the company and the big money have already done the calculation and they want the TO to be successful because they have their eyes really wide open and not barely open.