QUOTE(SKY 1809 @ Jan 18 2009, 10:25 AM)
Well, holding CASH at Co level and holding cash at subsi level could mean 2 diff things.
First, there are 2 separate legal entities, each might have their own minority shareholders to take care of.
In accounting , there is no such thing as simply transferring fund from one company to another. Even taking a loan from subsi is deemed to be improper in the current trend. It has to be proper by way of dividends, or capital payback etc. And also, subsi also needs working capital to run as well. Minority are entitled to dividends too, so cash leakage out of the group is likely.
Capital paybacks need consent from the court and the creditors, even though 100% owned , the process is long . There is one tobacco co in Bursa doing that.
One good example is Resort World that has over RM 4 billion cash, whereas Genting has lot of debts. Asiatic has good cash reserve too. And to take a good company into private needs more upfront loans from the bankers. And minority interest is at disadvantage.
So , one needs to look at where the cash is, at Co Level or at the group level.
By looking at Cash at group accounts alone could lead to a wrong conclusion. Oversimplified.
And co needs to build sinking funds in the form of cash to repay Bonds due. And to pay back bonds by way of converting to shares , again might dilute minority interest. Again, bonds are not repaid from the positive cash flow generated, against the overall objective if any. So not all cash for are future investments. Some would be for working capital.
Correct me if I am wrong.
YUp it is true when about not taking care of minority shareholders when the major sharehoders made a decision to use company cash to purchase something for their group because they are the group major shareholders as well. As in the case of Maybulk recently.
Thankfully, YTLPOWER owns Wessex by 100%. So whatever belongs to Wessex also belongs to YTLPOWER I believe.
I think more or less your explanation of the bonds is agreeable, but in my opinion bonds are raised for investments if the time permits compared to current financial situation. Rights issue is more for paying the bonds I believe at least in the case of YTLPOWER. In YTLPOWER's case, the rights issue more or less booked them about 2.2bil in capital for the next 10 years until the warrant expires. This I believe is to off set the 2.2 bil in bonds they also raised at the same time. It's like borrowing money from a bank and also making an agreement with other parties to give you money in the next 10 years to pay the loan.
Operationally their cash flow from profits are able to sustain them but not actually grow them. Their answer to this is large bond issues that brings in immediate cash to their coffers and a predictable expiry which they can plan for. Unless Seraya Power unexpectedly make losses, then there might be a problem sustaining their debt obligations in the future.
Jan 13 2009, 05:58 PM
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