The Bear Room, page-2610

Zombie companies were predicted to crash and burn long ago and the banks and institutions cut them loose accordingly. Along comes private equity - a vaster than vast pool of money willing to lend by accessing market rates, assuming risk and adding monumental margins in exchange for short term cashflow lending, equity and tasty assets. We've seen 2 of these elements in ZIPs borrowings and it has strung out the inevitable for a bit longer.

Right now ZIP appears to have $80 mil in the bank, down from $160 mil 6 months ago, among $350 mil restricted, up from $300 mil 6 months ago. Less access to cash, more need to put up additional security, zombie companies are being strangled to death

Regulators across the world are deeply concerned about the role of private money propping up a false economy with the result that the system could crash as a result and the Australian Government has committed to sourcing out methods to monitor and regulate them.

ZIP gives us a classic example: a loan of $150 mil at 15%. Paid out early with a $89 mil penalty and with costs of $50 mil to raise the funds to do it. After paying $13.125 mil interest - a cost of $302.5 mil. That is a classic example - ZIP would never have been able to get that funding elsewhere and in any productive society those costs of keeping a zombie company operating should not be acceptable. Now ZIP can keep on dong what it has been doing for many years - extracting revenue from customers, transferring it to the company's directors and management, while having shareholders prop up the shortfalls. Borrowed time but ZIP will never be able to stand on its own 2 feet IMO