Forum Archive Index - April 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Viewpoint,
 
>
> 
>That appears to be the basis of the suggestions that Telecom will
>write down the value of (AAPT) before June.
> 
>The current debt to capital figure at Telecom is already over the
>top.
> 
>December balance sheet, in rough numbers, shows equity of $2 billion
>and debt of $6 billion which puts the debt to capital ratio at 75%.
>
>



Are you calculating that from the half year review profit release 
(for half year ended December 31st 2001), and in particular the 
Consolidated Statement of Financial Position?

If we use the (long term debt)/(long term debt+equity) calculation, 
and plug in the figures from that report, I get:

Equity= $2,149m
Debt= $4,634m +$2m+ $5m+ $1,582m = $6,223m

So, debt ratio of capital funds is:

6223/(2149+6223)= 0.7433= 74%

That ties in with your 75% figure.  If that is correct, then you have 
included $1,582m of 'debt due within one year'.   This is quite 
separate from the 'accounts payable and accruals' and so IMHO you are 
correct to include it.  The $1,582m is just long term debt that 
happens to fall due in the next year, as I see it.  But I'm not sure 
if according to strict accounting conventions you are correct.  
Anyone like to comment?

 

>
> 
>Writing down the AAPT investment say by $1 billion would reduce
>equity to $1 billion and with debt remaining the same the debt to
>capital soars to 86%.
> 
>Doesn't that suggest that Telecom has to raise heaps more capital
>very soon?
>
>


Maybe not.  They will  probably say that such an adjustment is an 
accounting adjustment only.  It doesn't affect the cashflow position 
of the company.


>
> 
> Not a very bright picture  - private capital raising diluting
> existing investors stake, rights issue seeking more money from
> already disenchanted shareholders, 
>
>


And IMHO this is the reason that Telecom has difficulty rising above 
$5.


>
>
>or even worse, snoopy, they might have to cut that dividend 
> that regularly comes into your letterbox.
>
>


-:-O  !!!


>
> 
> Am I missing something big time? 
>
>


No, I think you've nailed one of the more serious talking points of 
the next 6 months.  SNOOPY

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