this should be quick, page-10

The naivety of views being expressed in some of the posts in regard to how many shares the company should "give" the PXUPA holders astonishes me! As if the company is going to do the hybrid holders a favour by offering them 100 PPX to 1 PXUPA or more!

Firstly, it would be up to the PXUPA holders, not the company or the PXUPA Trustee, to decide whether any offer below $100 per PXUPA or equivalent is acceptable to them or not. Having been issued notes at $100, with no upside beyond that figure, with no voting rights, and not having been paid interest for many periods, it's ridiculous to see people still dreaming that PXUPA holders will acceptable a low ball offer because PPX holders wish so in their own self-interest.

Secondly, the company won't offer a deal to PXUPA holders unless it must. And today's statement from the company indicates that there are compelling reasons for the company to negotiate with PXUPA holders. Sure, the shareholders can wait out until the profit improves and, hopefully, share price goes up with it. But do you really think that PXUPA market price won't go up as well if that happens? And with this would go any opportunity for the company to buy out PXUPA holders at prices significantly lower than $100.

At the moment the ordinary equity left is only around $85 million. And there is a reason why the Balance Sheet classifies this $85m as "Total equity attributable to holders of ordinary shares of PaperlinX Limited". It is because the rest of equity ($276m) belongs to the hybrid holders, as the Balance Sheet also so says. Any offer below $100 per PXUPA would be an attempt to transfer value from PXUPA to PPX holders, which might be acceptable to the PXUPA holders up to a point, and for reasons we all have covered before, but not if it is an attempt to "steal" most of the value from hybrid holders as some posters have been arguing for ad nauseam.

If PPX holders can wait out for a few years, so can PXUPA holders. The reward for the hybrid holders then would be $100 (plus missed last two interest instalments), as compared to a higher-risk PPX equity equivalent to the PXUPA market price of $8 or $9 some are arguing for. That would a return of over 11 times from the low ball figure being talked about.

But the cost of waiting to the PPX holders in the meantime would be lost opportunities to de-risk the company, attract a predator, and/or transfer more value from PXUPA holders to PPX holders than would be possible at higher market prices. Once the company is out of woods, the PXUPA will be able to see the full par value being realised, so they may be even less willing to negotiate.

So take your pick!!!

(Holding both PPX & PXUPA, with equal amount of investment in each. Have been an investor in both since the beginning).