Refinancing Risk - Tread Cautiously - Aussie Stock Forums

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  1. #1

    Default Refinancing Risk - Tread Cautiously

    Refinancing risk will be the buzz word this year as Australia's corporate sectors attempts to refinance up to a trillion-dollars in foreign debt.

    Reasons are straight-forward:
    1. banks now think about risk first (as it should be when you think about it) before writing a loan;
    2. foreign banks, who are owed about a lazy trillion by Australia's corporates, are in the poo and being nationalised as we speak. Governments will be asking 'why have you got a billion-dollar exposure to Australia, a non-core voter market'? So as the syndicates roll-over, the Santanders, BOS, JP Morgans, ABN Amros etc will be saying 'squeeze ya later'.
    3. the nasty, yucky credit crunch is still amongst us, even though it is slowly showing signs of thawing. The 'tyranny of distance' means it will first stimulate the yanks, then the japanese, then europe, then asia, and then us. However New Zealand is lower in the pecking order - phew!

    Anyway, ranting aside, here is a list of companies that might be wishing that they had not bought into the 'short-term debt, long-term investment timeframe' paradigm to save investors a few bob -

    From The Age article:
    OZ Minerals
    Boart Longyear
    Primary Health Care
    Macquarie Group and virtually all its legion of 'satellites'
    Sigma Pharmaceuticals
    et al - basically any company with debt maturing in the next two years. They all had the same structure - get a Big4 to quarterback a global syndicate!


    Be interesting to revisit this list in 12-months. Feel free to add to the list.

    As always, IMO and my 2c and do not take anything I say as advice, yada yada

    PS: a quick guide for pundits is to look at the accounting notes in a companies Annual Report - there should be a schedule in there that lists when debt is due ie >1yrs, 1-2 yrs, 2-5 yrs, 5+ yrs.
    Last edited by Bushman; 22nd-January-2009 at 08:05 AM. Reason: paradigm ain't paradign

  2. #2
    noirua's Avatar
    Join Date
    Feb 2006
    Kent, England
    Blog Entries

    Default Re: Refinancing Risk - Tread Cautiously

    An interesting thread. Following companies efforts to refinance themselves will be as interesting to watch as it will be painful for those who fail.

    Rio Tinto with a massive debt and no chance to grow this further, will be an interesting giant to watch. If it goes wrong then they will have to follow the strategy of UK banks. First will be a deeply discounted rights issue and placing. If that failed, then it's curtains for Rio as a complete company and it would probably be broken up.

    How the hell do small mining companies with exploration tenements only and dwindling cash get by. The refinancing risk means they go under unless a shareholder becomes a benefactor or the directors accept pay in options only.

    Shareholders, as the thread suggests, are walking near broken glass and bombs. Tread cautiously.

  3. #3
    gfresh's Avatar
    Join Date
    Jun 2007
    Brisbane, QLD

    Default Re: Refinancing Risk - Tread Cautiously

    Wesfarmers update, equity raising: http://business.theage.com.au/busine...0122-7mz4.html

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