SGH (ASX) Impending admin?

Originally posted by Jack5588 ↑

Hi Eagle,
I'm a holder of SGH, but I do read your post and understand where you are coming from. However, can you share a bit more details of XEL with me? I'm trying to see whether there is a difference between the two.

My take on SGH is that the lenders is a bit reluctant to do DFE until they are sure it generates a better return than debt. Reason being, if they force DFE and get rejected by SH, they really can's sell off SGH's assets like a mining company or a energy company, they still need people to run it and turn the receivables into cash. It gets messy in my view that the revenues will diminish if they go down that path, but the fixed cost of salary and office expenses will remain. Hence I am guessing, that this is why they are trying to fix the problem before they can confidently propose a DFE (probably why they didn't force DFE but capitalised another $78m debt in the first place).

... But I might be unpleasantly surprised by Anchorage.

In my view, DFE will occur, but not under the current circumstances, because it creates more risk but not necessary more return for Anchorage. If my logic is correct, the banks sold out due to their hands being tied due to Capital requirements (i.e. APRA need more capital for equity investments than debt) as well as reputational implications, but Anchorage doesn't have those constraints. And the best possible way is to turn the business around first, then propose DFE. Something that the current SH can't refuse.... Hence why still holding. But anything >90% dilution at the current revenue/profit level will mean I get something like 1c, if it's more generous e.g. at 70-80%, there is still chance for me to see $1.

Any way those are my thoughts, your view on this matter will be greatly appreciated.

Regards

Jack

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They won't want to turn the business around before they own the majority stake. They will retain more debt than they paid and convert the rest (amount to be confirmed) to equity so they are the ones that benefit from the turnaround.

They can then offload the equity to Krispy and co at a dramatically higher price than the consideration they paid.