It is interesting to see the share price continuing to rally and...

It is interesting to see the share price continuing to rally and it got me thinking that despite this getting closer to the current NAV, what else is there attracting the SSH people into further buying in this fund?

It has been pointed out to me that the fund has accumulated losses of around $90M due to some of the losses they took during the GFC. Therefore any surplus income being earned by the fund going forward will effectively be tax free.

Once the current managers complete their task of paying down the deferred interest before June 30 2014 (which as far as I can see will come naturally from cashflows and expected maturities during that period) then the shareholders again will effectively control the entity and can appoint their own managers (prob themselves) and directors as well.

If they have other similar credit derivative and income earning assets under mgmt elsewhere, they could back these investments into the fund (and the fund could either raise new debt or new capital or combo of both) and start utilising the losses and making tax fee profits until the $90M of losses are used up.

At the corp rate of 30% in Australia, $90M of losses are worth $27M to the unitholders if they can be used, and spread across 177M units, these losses could add 15 cents gross to the fund NAV over the long term. If you were to put a present value on the future tax benefit of these losses, starting point would be around 10 cents I reckon.

Perhaps this is why the buying is ongoing for MXQ and the price is rising.

Any other views out there folks?