assuming gpt walks away from the jv, the only relevant covenant...

assuming gpt walks away from the jv, the only relevant covenant will be 40%

so what are the chances of the company breaching it.

as far as I can see a 20% asset writedown will keep us within the covenant with gearing (borrowings to assets ratio) being 39%

A 30% writedown will lead to a breach of the covenant producing gearing 42%.

ok we are looking here at the highest quality commercial property portfolio in Australia here eg buildings like Australia square

is it likely that asset values will drop 30%?

In order to discuss this we need to agree on the figures
so we are all on the same page here

please check my figures first thanx


assumptions
*capital raising of 1 for 1 @ 60c
*total writeoff of the jv
*a 30% decline in asset values
*a 40% decline in asset values


the original NTA was $3.82 before the capital raising

equity = $8.4 bn
no of shares = 2.2 bn
$8.4bn/2.2bn = $3.82

the balance sheet looked like this
assets $14 bn
debts $5.6
equity $8.4

* we then had a 1 for 1 equity raising @ 60c which was or WILL BE used to reduce debt

2bn shares x .60 = $1.3 bn

assets $15.3
debts $4.3bn
equity $11 bn

equity $11 bn
no of shares = 4.4 bn

bookvalue = $2.50
gearing = 28%

then there is the JV with BNB

$2bn was leant to the jv

jv balance sheet looked like this

assets $7bn
debt $5 bn
equity $2bn

the JV has been written down to zero

you therefore have to knock off $2bn from the balance sheet

assets $15.3
debts $4.3bn
equity $11 bn


assets $13.3bn
debts $4.3 bn
equity$9bn

bookvalue = (9/4.4) = $2.04
gearing 32%


next include a 20% reduction in asset values

assets $11bn
debts $4.3 bn
equity$6.7 bn


gearing 39% (covenant = 40%)
bookvalue $1.52




* next a 30% reduction in asset values

assets $10.2bn
debts $4.3 bn
equity$5.9 bn


bookvalue = $1.34
gearing = 42% (bank covenant = 40%)

finally a 40% writedown on assets

assets $9.5bn
debts $4.3 bn
equity $5.2 bn

bookvalue = $0.98

gearing 55% (bank covenant = 40%)