no substance in the weekend afr article, page-26

whitebeachlover,

My take is that VPG in any other market circumstance would present a totally acceptable credit risk profile to support borrowings. Debt to equity ratio (even after horrible markdowns) is something of the order 30 ~ 40%...plenty of headroom. And unless all the tenants have left the building, taking into account cost reduction initiative etc, surely VPG is generating sufficient cash to meet its interest liabilities...

The basic "rules of lending" were if you can show that you can afford to carry the debt (ie pay the interest) then that is half the battle. The second rule is that in the unlikely event you can't pay your interest bill and therefore probably the principal due, then is there sufficient fat in the secured assets to realise on sale under forced sale conditions the value of that principal plus incidental costs.

They were the rules of lending...nothing more nothing less and anything else was irrelevant.

More recent markets however have brought to the table uncertainty at every level...at one stage bankers wouldn't lend to bankers!!!!. So what we have now in the market is people totally bewildered by under what conditions will lenders advance monies...increasing security doesn't seem to be an ingredient; increasing credit margins helps but it is not conclusive;

Right here right now we are second guessing a thousand things about CBA and then trying to understand where VPG is in that space. It's a mess

Again, 333 have hopefuilly been appointed to help CBA define what its rules should be...use VPG as a case study as IMHO its a low risk.

Did I answer your question?

Cheers

PS PPX made an announcement this morning post breach of covenants. Financiers there have basically recognised the berach,, taken the opportunity to extract higher margins and assumed greater control of distributions not otherwsie reducing debt.... is this the recipe ie affording banks greater control.. I don't know but it does need to be resolved for VPG to return to fair value.