Lattitude Set to Cancel Deal on Collapsing HUM Consumer Business, page-21

Perpetual Note

The commercial substanceand terms of the perpetual note aredescribed in Note 19d of the Annual Report and slide 23 of the 27/10/15 presentationre the acquisition of F&P Finance. “Change of control” is not defined but Isuspect- from the context of the F&P presentation- it means a takeover ofHUM as a listed co, not the sale of HCF. This would make sense, as the note is a liability of the HUM group as a whole, and the note holder would be concerned with the credit-worthiness of HUM (as a whole) to repay its note. The references in HUM’s statements and the Explanatory Booklet are all consistent with repayment being voluntary and solely at the choice of HUM. The owner of the note, Haier Group, has no right to redeem for cash. Moreover, even on a change of control Haier’s only choice (if HUM doesn't pay up) is whether to do nothing or convert the P Note into HUM Shares at an effective price of about $2.00 each!!

This all looks veryone-sided, but the “poison pill” is that the coupon rate on the P Note increasesat 2% pa. In “year 6”- which is roughly FY 21/2- it is already 10% pa, and it keeps on rising. Thus there is a very strong incentive for HUM to redeem it ASAP. It is already very expensive debt. The note liability isapprox A$55m at 30/6/22, and HUM had unrestricted cash of $132m at 31/12/22 (earningpeanuts), so they should repay it now