Originally Posted by
Enumerate
Percy, I wouldn't like to underestimate the risk with the "wall of debt". After all, it is quite possible to kill a profitable business with poor cashflow planning (many businesses fail or get into trouble when growing without proper cashflow management). However, SCF is a business with a clear understanding of the threat and obvious management attention to the issue.
In a nutshell, I see SCF as being more about a restructure than an equity refloat:
1) Both the equity assets and the "bad bank" assets will be disposed of
2) The core business will be downsized to a $1b loan book.
The existing SCF balance sheet has too much of the equity assets. Trading these, at a fair price, for cash would provide the cash needed to float the "good bank". Working through the "bad bank" assets is a job SCF can do - and hopefully yield above average recoveries. Selling the "bad bank" looks increasingly unlikely (with the recent appointments indicating SCF are hiring to work through these assets, internally). However, selling remains an option - but only as a stop gap measure to assist with the "wall of debt".
It is difficult to interpret the announcement about the recoveries. Are these bad assets that have turned good? What are the recoveries above the impairment rate estimated in December? However, it does seem that they are recovering more than estimated. This does tend to justify the maintenance of the tax loss as an asset - as recovery could be faster than many commentators expected.
Anyway ... I have put down on paper (ether?) what I think, and why. Do your own research! Make your own mind up!