Thanks towie. In my opinion, the writedowns are substantially...

Thanks towie.

In my opinion, the writedowns are substantially unrelated to the performance of the assets of BBI. They reflect however the ineptitude of management in their asset sale programme and hedging strategies.

Due to the recent impairments, the book values of BBI's assets are increasingly reflecting their sale value under distressed conditions. As distinct from measuring their assets by their "net present value" which is the total of their estimated future cashflows discounted by inflation plus interest (if applicable) plus a required rate of return (relatively low for BBI's assets).

I refer to the CBA transaction by way of analogy. It demonstrates how a sale process goes when the seller (HBOS UK publicly known to be struggling and under pressure) meets up with a cashed-up buyer (CBA). However you are quite right about the differences. During that transaction sentiment was almost saying that the world was going to end tomorrow and today sentiment is better. Thus in that transaction perhaps there was not so many buyers to compete with CBA. Nevertheless, there still were some other potential buyers namely the three other major banks or even a well-capitalised company like QBE.

In this case, there are a few potential bidders yet BBI due to its PUBLICLY DISCLOSED position of weakness will lose because whilst it holds the assets they are encumbered by all sorts of obligations.

My posts contain opinion and speculation only. Under no circumstances should you rely upon them.