gnspa, page-2

Ricee007

Its not that simple GNSPA ( or Forests as Gunns often call them) are not automatically redeemed or converted. In reality on 14 October 2008 there was a one time rate lift of 2.5%. There should be no doubt that 5% above is a high rate yet the MIS industry is seen as having higher risks than most.

Gunns flagged a redemption some time back and yet when it got to 1008 they rolled the instrument and accepted the rate increase.

IMO they have built up the equity base and it seems a better business after all these rights issues.

Yet lets just understand a few things:

1. You cannot force redemption - they can convert to equity and there are minimums and maximums that get adjusted each time the do more rights issues.

2. If Gunns itself is looking good they can just repay your capital and yet you have suffered virtually the same risk.

Look at WFL they are converting their hybrids as the holder had the right to request exchange. So now you get X numner of ordinary shares but the share is trading below the minimum. Then to add insult to injury they now do a heavily discount non renounceable 1 for 3 rights issue so not only dont you get your capital back but you are asked to buy some more. There will also be a huge overhang if everybody wants their money.

These hybrids I think have had their day. Whilst everything was stable it was okay - The world has changed.

Yes there is a good chance of conversion at some point and even redemption but you dont have control over those events so the company will elect to do what suits them and at their own timing.

IMO its a decent return and investment but it is no free ride. Most importantly dont believe GUNNS when they say they are looking to redeem next year. First tell us what the MIS sales will be in june 2010 and the profitability and once you have those secure than you will be able to determine what GNS will do. By the way if the GNS share price tanks so does this. You can access the electronic copy of the GNSPA prospectus in the asx announcements for GNS it was issued in 2005 around september.