My understanding is the deed applies only to Australian companies to get out of Corps Act disclosure requirements. If you have a look at the note Paper Associates Pty Ltd is included as part of the guarantee and it owns shares in the various European companies (which are not themselves party to the deed). The debts would be included in the accounts under accounting standards but in my view should have no recourse to head companies. Another possible issue is the underfunded pensions as the regulator has broad power to force parent companies to pay up (see GPG/Coats in which the regulator is preventing payments to shareholders). However I think it is unlikely that they have the jurisdiction to force a Ausie companies to support overseas subsidiaries.
From fearing a possible permanent loss of capital here I have become quite bullish on PXUPA prospects for the following reasons:
1) Value of Spicers Australia, New Zealand and Asia could be 100m (15m Ebit x 7 Multiple)
2) Limited debt remaining at company level per last report
3) Could some of the Canadian cash be available too given there was no restructure?
4) Strong, patient and knowledgeable hands hold the securities meaning there needs to be a favourable deal (80% of the company sounds right to me)
The above is subject to revision after announcement this week but I think if they trade at $7 it will be extremely cheap .
PXUPA only
SRS Price at posting:
1.7¢ Sentiment: Hold Disclosure: Held
