Forum Archive Index - April 2002

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

Hi Viewpoint,



> 
> 
>Borrowings are borrowings - be it short or long term, 
>it all needs to paid back sometime. In fairness should 
>take into account the cash shown of $164 million.
>
>


I notice the 'Cash' and 'Receivables and Prepayments' are more or 
less balanced by 'Accounts Payable and Accruals'.  I'm more of the 
opinion that the $164m cash is ephemeral and should be left out. 


>
> 
>I gather they have recently converted some of their short term debt
>into long term debt (taking advantage of lower interest rates)
>
>


That is sensible.  Whereabouts did you 'gather' that?


>
> 
>Even so high debt to capital ratios are a worry. Usually lenders put
>some limits on the level of debt relative to equity. And if $1
>billion did get written off I am sure lenders wouldn't wouldn't want
>to see $6 billion of debt supported by $1 billion of equity.
> 
>



Did you see the note in the last Telecom Annual report about how a 
change in accounting standards had forced Telcom to reclassify 
convertible note equity as debt?  It wasn't a trivial amount: 
$NZ943million!   Since that time there has been more convertible note 
debt added, including $300m which Microsoft are allowed to convert to 
shares in 2008.   Imagine if all that were allowed to be counted as 
equity!  That would change the debt position of Telecom 
significantly.  I can't remember this causing a big stink in the 
market when the equity to debt reclassification was done.  I 
suppose it was just passed off as an 'accounting change' with no 
cash impact on the company.  Or do I just have selective memory?



>
>
>The writedown wont have any cash impact this time around - as you
>and donkeyboy have previously pointed out the cash has already gone
>(been wasted?).
>
>



I remember Sir Selwyn Cushing telling Air NZ shareholders in 
1999-2000 that the company's $800m odd loss was nothing to be 
concerned about.  It was just a reclassification of tax liabilities 
made to bring them in line with Australia.  Then the year after that 
Air NZ almost collapsed, critically short of equity!



>
> 
>Did you see last week that TEN in Australia wrote down a recent
>acquisition by $180 million - and canned dividends for a year or so.
> 
>



 
If TEL canned dividends that would add about $340m to shareholders 
equity in a year.   Is that enough to make a significant difference?

SNOOPY



 
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