No worries Ben, I've written the introduction of my article :P....

No worries Ben, I've written the introduction of my article :P. I'll finish it Monday, sometime.... really (been putting it off for 6 weeks, whoops.)...

At any rate, I think I may have given too much information as a couple of your questions can be found above...

"Q: As you said "GNSPA's payment is not guaranteed""
If it turns out GNS is bankrupt, with $0 of assets and $5000000 of liabilities... and finds this out tomorrow... GNSPA holders get $0. For example.

Gunns do not have to pay GNSPA holders any dividends... it's just that, if they don't, they can't pay GNS holders any dividends. Imagine if GNS pretty much publicly state that they can't afford to pay dividends...

Know anything about BBI? The preference share holders got approximately *half* of their value back... (BBI was plagued by debt and underperforming assets.... and, I won't describe the management...)...

"then what is the criteria of GNSPA to decide how much amount will be distributed to investors"
((BBSW+5%) / 4 * 0.7) ... or $0. In theory, Option A if they can afford it, Option B if they can't. Thankfully, GNSPA is a small issue of 'only' $120M... which makes being able to afford it much easier. Currently, Elders aren't paying any dividends for their preference shares and don't intend to until Q4 2011.

"Is that amount of $ depending on the performance of GNS"
Nup. Either the amount that they are suppose to pay... or $0 if GNS performs so poorly that they can't afford to.

"What is the BBSW "
As I stated, "* BBSW was, 24 hours ago, 4.04% ( http://www.afma.com.au/scripts/nc.dll?AFMAv6:HOMEPAGE ). ". I can't be bothered defining BBSW.... but, pretty much, it's a 3 month benchmark interest rate, set daily.... it'll be close to the RBA target cash rate (RBA currently is 3.75, BBSW90day is 4.04...).

"5% here guaranteed or depending on performance of GNS?"
The deal is, Gunns will pay GNSPA holders 5%+BBSW per annum (less 30% for franking) (if they pay anything at all). At the moment this is $9.04, yet, GNSPA go for $75.20 (last price, offer $74.80 though...). Assume GNSPA are $75.... this is a return of over 12%.... not 5%.

"at least grant 5% for certainty "
As long as Gunns have $120M * 9.04 = $10.85M each year to pay GNSPA holders.... Gunns have around $1Bn in net assets though, IIRC..... so, $11M shouldn't break the bank.

I know I've mentioned several times that Gunns can choose not to pay interest payments.... but, please don't consider this as likely. In doing so, Gunns would be prevented from paying dividends to GNS holders. GNS, GNSPA would have a shareprice collapse. Gunns would struggle to issue any more hybrids (quite a cheap/good way of financing)..... if they have a history of not paying, why would anyone buy any more from them, ever? There would be a massive re-rating, which would make it's borrowing rates more expensive, costing it millions. There would be a shareholder revolt, etc, etc, etc, etc, etc. I don't believe Gunns will fall over, and I feel safe in my investment in the mid-term (10 months :) ).