GMG has signed a $300m finance facility underpinned byMacquarie...

GMG has signed a $300m finance facility underpinned by
Macquarie Bank Ltd, to use to repay all its 2009 debt expiries. As
part of the facility, Macquarie will receive 414m GMG options,
exercisable at $0.30 with a two year term.
• Further strategic investments on similar terms to the Macquarie
investment are being sought, likely to be the tune of ~$200m. If a
further $200m is committed (assuming 69m options are granted for
every $50m) and all the options are converted, they would represent
19.9% of shares on issue. Could this be a pre-cursor for a Macquarie
driven privatisation? It seems to make sense, with the possibility of
the spin-out of the industrial assets into a REIT at some stage in the
future.
• Existing liquidity will be used to repay the $460m syndicate facility
due to expire on Sunday whilst the Macquarie injection will provide
sufficient liquidity to repay $225m of expiries due in September and
December. GMG is in discussion with these single foreign lenders to
extend these facilities to provide incremental liquidity. We conduct a
liquidity analysis overleaf including an assumption that distributions
are suspended through to FY11. We estimate GMG is ~300m short
for its May-10 expiry. It will need to sell assets, re-finance debt or
get further capital injections to absorb this expiry. The ICR covenant
could also be tested as funding costs rise. We forecast 1.85x in FY10.
• GMG has raised capital and is seeking more with conversion options
at 30¢. The raising dilutes the upside to existing holders and shows
the dire liquidity situation GMG is in. Our $0.79 GMG NAV needs a
better capitalized balance sheet to be realised. This means a material
sale (e.g. the UK and European operations) or further capital
injections. Both of which would likely dilute our NAV. The best
medium term outcome appears a privatisation, its main impediment
being bank change of control provisions on the debt. Maybe this
provision can be negotiated with further capital injections.