There is an analysis of the covenant on page 59 on the 4E. On my...

There is an analysis of the covenant on page 59 on the 4E.

On my read they've subscribed to debt reduction of circa $90M before Feb next year; $45M of this will come from new capital and the rest comes from shrinking the balance sheet.

Feels to me like there is a fair bit of cognitive dissonance on the part of SIV management which appears to be abating somewhat as lenders have asserted themselves over the business. Comments like this on page 29 really highlight this for me

"The Company has also agreed to moderate its growth through the waiver period."

Contrasted against

"The Company has renegotiated its financial covenants during the waiver period and the Lenders have reduced the minimum repayments required on its Tranche B facility to provide sufficient working capital"

I.e. management are worried about growth the banks are worried about not vaporising working capital and causing the insolvency (hopefully) everyone is seeking to avoid.

Again to me, smacks of management still thinking they will trade out of this

Time to accept reality SIV
1. More equity and less debt in the business (cost of capital up)
2. High rate of return required by debt and equity investors (cost of capital up again)
3. Stop trying to grow in the face of dead set hostile capital markets.

Growth needs to be negative in order to meet the demands of lenders or you need to front up to equity holders and ask them to double down at a historic cost of capital of >40%, neither is a particularly attractive prospect for an equity holder, but certainly better than running out of cash.

End of the day equity holders pay for the sins of management and at least my read is that destroying the franchise by demanding debt repayment from paying customers (which is what i assume you need to do to rapidly reduce your debt levels) is an inferior pathway compared to raising at 3x historic earnings.

All eyes on you, Allan.