will it survive the weekend, page-13

Of course, D1ckRussell was pulling the ol' leg (I suspect) about clapped out old RAMS surviving the weekend.

The fundamental problem with RHG, however, is that Big John Kingshorn listed the thing at $2.50, took around $850m of the punters' money and.......pocketed the lot!!!!

The 30 June 2007 accounts disclosed net assets of $1m. I kid you not! A mere $1,000,000!!!!!

Bear in mind that - as others have pointed out - this is a company with 55,000 odd loans on its books and $14bn of debt; most very short-term.

I never thought that RHG would have a problem surviving the weekend, but I've always insisted that it will only take one, minor hiccup and they will be into insolvency before you can blink.

Why? Because they only have $1m of net assets!!

For all of you holders - use your friggin' noggins! Here's the equation:-

Debt: $14,500,000,000
Assets: $1,000,000

Count the zeros and tell me how much room for error there is in this charade. Not much, hey?

So tell me: after Westpac has taken away their brand name, their new business, their franchisees, etc...and all that is left is a run off book, where they have to find $10bn of financing during the next six months to even stay alive, WHERE IS THE VALUE?

You're friggin' crazy, IMO! It's like tip-toeing through a pit full of taipans - there is a very small chance that you'll emerge a hero at the other end, but the consequences of a single misstep are fatal.

I personally believe that it is inevitable that RHG will go into administration at some point in the future.

Why? Well, it's possible that their loan book (in run-off mode) might eventually be worth something...The problem is, that they're starting with nothing. $1m of assets simply doesn't pay the bills. They have no buffer whatsoever to survive even the slightest bump in the road.

To all of those investors convinced that RHG will contine on, you need to think about the process of collecting all of this mortgage income which RHG is entitled to. It's a bit like a real estate agency collecting rent, only on a larger scale. That takes a lot of staff and costs a lot of money.

At the same time, your margins are being squeezed, because...well...you have $1m of assets, no ongoing business and therefore a credit rating which is in the toilet.

What rate do you all think RHG will get on its $6bn XCP refinancing? Do you think it might be junk? What do you think the income on book vs. cost of financing might be (particularly in the current climate) if they have a loan book with, on average, reasonable risks, but have to pay junk bond yields to obtain financing?

Bear in mind, here, that they only have $1m of assets, so they can't reject offers and sit back, picking and chosing between options.

Now, onto all of those punters (and not a few young analysts, who should know better) who think that some knight in shining armour is going to come along, look at the loan book and decide it's a good thing to buy.

I've got news for you: IT'LL NEVER HAPPEN!!

Why do I say that? Well...it's been a couple of weeks, now, since Westpac announced their bid and no one else is doing anything, are they? Do you think they're waiting for Godot? Bloody hell!

NO ONE'S GOING TO BID!!!! Get it through your heads. And that's the only reason (IMO) why anyone would invest.

I have only one thing to say to you:

Eeeeeeeehheeeehaaaa!!!!!! NFI AT ALL!!!!!

[Disclosure: Don't own, never have, don't deal with the company, never have, just trying to counteract certain views which might cause some less sophisticated people to blow their dough.]