Hi All,The reason why it is 70% debt and 30% equity, is to...

Hi All,

The reason why it is 70% debt and 30% equity, is to allign with bank's requirement of LVR ratio of 70/ 30 in terms of debt/ equity. In simple words, the new partner would come up with 30% of 4 billion in return for shares in SDL. The market value of the shares would probably be calculated depending on SDL bargaining power. However if you look at the news, there are a number of parties interested in SDL. So I would envisage that SDL shares would be sold at a premium to current market value. Also note that the new partner would have an uptake agreement to purchase Iron ore at market price from SDL.

The equity injection of 1 billion would satisfy the banks requirement to loan 3 billion. So the bank would take charge of SDL assets until the loan is paid off.

From this we note the following:-

(a) the new partner would have a max of 30% of shares in SDL. However, this percentage may decrease if SDL management includes the payment of the $1 billion dollar by combination of shares and future delivery of iron.

This is only my thoughts.