Romatique is correct; we basically have a stalemate or...

Romatique is correct; we basically have a stalemate or prisoner’s dilemma.

I understand that Andrew Price is working well IN the business.

Good luck to him. I hope the business survives and prospers because this will improve the bargaining power of the hybrids.

His board needs to work ON the business.

It seems incapable of this at present. By way of example, as recently as 21 August 2013, it stated:

“… the board and management of PaperlinX have no fiduciary obligations in relation to PXUPA holders”.

That is unambiguous and is indicative of this board’s incapacity to accept its reality.

This statement was in an ASX announcement titled “Market Update in Relation to PaperlinX SPS (Hybrids)” available from the ASX at http://www.asx.com.au/asxpdf/20130821/pdf/42ht1d8tj98mv5.pdf

It’s on page 2/4, Question 1, bullet point 3.

The above statement could be reworked as:


“By ignoring our fiduciary obligations in relation to PXUPA holders, we continue to ignore our obligations to the ordinary shareholders and employees of the company”.


Resolution of PaperlinX’s capital structure will only occur when three things happen:

(1) The Board stops treating retail hybrid holders like fools – the Board should now realise that not many shareholder activist groups are as doggedly persistent as PIGS (check out the famous quote about persistence by Calvin Coolidge);

(2) Hybrid holders accept a reasonable but not unconscionable "haircut"; and

(3) Ordinary shareholders accept a severe dilution, as presently we (PIGS) believe from detailed enterprise value analysis that the ordinary PPX shares are worth next to zero in the absence of a capital restructure.

Anyone who understands business and balance sheets has known this for a long while.

As at June 30, 2013, PaperlinX has issued capital of $1,895.6M and only $85.2M (4.5%) left. Someone has to pay for this and it’s logically those who elected successive incompetent boards.

But for the hybrids PaperlinX wouldn't exist today. Does anyone here seriously believe a business can lose 95.5% of its issued capital and survive?


It’s a classic prisoner's dilemma.