ugly result, page-27

To hope to get hybrids (PXUPA) holders to convert to ord shares (PPX) at 1:100 or similar is wishful thinking!

Currently the company is facing the following scenarios:

(1) Trade out of the current situation into profitability within the next 2 years or so. In which case PPX holders would start to get improving price for their shares and PXUPA holders would expect to eventually receive $100 per unit at redemption at some point in the (distant?) future. If PPX holders would want any dividend in the meantime, PXUPA holders have to start being paid interest on $100 well before that. So PXUPA retains $100 value.

(2) Unable to trade into sustained profitability, so goes into administration/liquidation at some stage. In which case, the assets get sold, senior debt holders and other stakeholders (employees, suppliers, taxman etc) get paid first. PPX holders get nothing. PXUPA holders may get something depending on the outcome of asset sales. With current net assets of $170m and additional $276m in hybrids capital, there is still considerable value in the company, which can quickly dissipate under a liquidation scenario but not if the company can be managed out of its troubles as a going concern. So, under this scenario, PPX value becomes zero, PXUPA may retain some value.

(3) Muddle through close to break-even over many years after current restructuring of business over 1-2 years. In which case PPX will hover around a slightly higher than current price, and PXUPA price may improve more but will also remain subdued. Eventually, either Scenario (1) or (2) above will emerge!

IMO Scenario (3) is most likely to occur, and with the level of current net assets there is a good chance the company would be taken over within the next 1-2 years (assuming PXUPA's can be dealt with at lower than the face value). And the route to that outcome IMHO is: either (a) re-structuring of PXUPA vs PPX in the near future by mutual agreement of holders of the two classes of securities, followed by acquisition, or (b) an acquirer bidding for PXUPA's only at lower than face value (say at $50 per unit) with prior support of key PXUPA holders and with the leverage over PPX holders (of holding virtually all of the hybrids still by the company at the face value) bid for the company at a slightly higher than the market price.

It seems to me that under any of the above scenario PXUPA holders have much less to lose (and more to gain) than the PPX holders and they are likely to get a much higher value for their securities than a conversion now into PPX at ridiculously low ratios!