just got back from suspension boys. thought i'd continue on...

just got back from suspension boys.

thought i'd continue on where i left off. for those who don't remember, i have some major gripes with this dog. those who think vpg will ever see double digits again are seriously kidding themselves

so what is wrong with vpg? well

1. she will breach her european debt covenants and probably australian covenants again at june 30 this year. valad is currently negotiating with its european lenders. the european debt is not due until 2015 so the fact that valad has to re-negotiate it is a clear sign that she will breach covenants. valad is confident lloyds will restructure, but i'm not so sure. imo there is a high chance they will call the debt in, which means one thing. if they are able to refinance, the margin will go up by 400 basis points at least. period. how will valad pay this interest when it can barely cover its current interest bill?

also, wouldn't it be funny if she defaults again on her aussie debt after restructuring it just a few months ago. imo there's a very real possibility that will happen. their current gearing is 47% against a covenant of 55% which doesn't give them much room to move. imo the aussie banks deliberately put in such a low ceiling so she defaults again and they bang another 200bp to the interest margin.

2. valad is predominantly a property developer. problem is the development business is currently being valued at 0. not just for vpg, but also other companies like gmg, fkp. so when you wonder why valad is 7c, there is your reason. the tangible property assets barely cover the debt, and the remainder is worth 0 according to the market.

3. scarbrough. these clowns paid $2bn for the so called "value add platform". how much is scarbrough worth today? well they've already written $1billion off. i'd say 300-500m max. nice investment that one!

4. NTA of 51c. are you serious? how much do you think she'll loose when she reports in august? i'd say another $300-400m for the last 6 months. that's realistic considering valad's "asset value" was about $2bn at december 30 and values have fallen 15-20% since then. so NTA will be sliced in half to 25c. and that's just this financial year. what about 09-10, will she have negative NTA?

imo this one is headed for administration. these guys should be locked up for the scarbrough acquisition.