The vast majority of their debt does not mature for a few years yet (2011) and as per their June accounts, they are comfortably ahead of their covenants (and the $2.7bn debt facility I believe is still rated Investment Grade by Fitch!) - so on that score they do have time on their side to run an appropriate process and consider their options.
This also means that they have alternatives. With the sales of Kwinana, Neerabup, Tamar, Ecogen and Uranquinty they have got something like $1.5bn of debt and commitments off their balance sheet so far - and apart from Tamar, I think all have been at or better than book value.
Their only real issues in the medium term are:
- Repay the balance of the corporate facility (which they seem to have well in hand as per yesterday's announcement);
- Generate enough free cash to repay BNB as scheduled later this year and in 2010 which is the minimum outcome they require from the asset sale program currently being undertaken; and
- Set up their current $2.7bn bank debt position for a refinancing in 2011. This can be achieved by a mix of reduced leverage (ie selected asset sales between now and 2011) plus retaining a portion of surplus cashflow to allow a further reduction in 2011 so that the balance of the facility can be refinanced into an amortising loan. By then, this global financial storm would have blown over and they should find strong interest in an amortising debt facility secured by these quality cashflow generating assets.
All of this means they are not forced sellers, but can pick and choose how best to approach transactional options that allow the above to transpire. They are not under an imperative to sell the whole lot, unless there is a compelling offer. Hence, for the moment, they are still very much working in the interests of the shareholders.
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