Under a liquidation scenario, I agree that the receivables would be harder to obtain and need to be discounted substantially. However, under a going concern basis, the creditors have to be paid from the proceeds in the normal course of business.
So, from the banks perspective, continued trading and a major retrenchment of the business will see the receivables book and the payables book reduced. They get to receive their interest payments for a bit longer, but unless goodwill is turned into cash on a partial divestment, the tangible assets that could be liquidated to repay secured debt will dissipate into the pockets of trade creditors first.
Note the big reduction in net working capital over the first six months of the year - what cash could be taken from inventories and receivables while postponing payments to creditors appears to have been done. Taken alongside the probable discount that needs to be applied to the remaining receivables and inventory, I think the banks would be getting more than a little twitchy. HST may need to demonstrate that they are close to being able to convert some goodwill to cash through sale of a subsidiary or assets.
HST Price at posting:
16.0¢ Sentiment: None Disclosure: Not Held
