News: CIM Cimic Group Says Ugl And Cpb Contractors Secure Eci Contract, page-24

I think the selloff over the last few days, quite substantial, around 10%, is to do with the news of Greensill potentially facing liquidation. It's been reported in the media previously that Cimic use greensill for supply chain financing. If Greensill liquidates it will mean that source of funding for Cimic will likely dry up. I'm not sure how much supply chain financing is on Cimic's books currently, and that would need to include half of Thiess which is now off balance sheet. Whatever the amount is, shareholders should assume over the next month or two the amount will have to be paid out of cash or increased debt. I'm not sure whether Greensill do normal debtor factoring (I don't think so but not sure), which is where Cimic's larger exposure lies (although this has been being reduced over the last 2 years, it is still significant). However it does highlight the risk of using these quasi debt arrangements that are not classified as debt, in order to give the appearance of improved cash flow, there is always the risk that a shock event will force it to be repaid in a very short time frame.

I don't know what the impact of a Greensill liquidation will be on Cimic, but the market appears to be pricing in some risk for it.