risk vs reward . is its musical chairs

Guys - the numbers from the projected EBITDA don't stack up from a banking perspective:

projected EBITDA (which is a "proxy" for cashflow) = $6m.
Debt - BNZA - c $186m
Mez debt from Hedley Group - c $14m (from memory)

To be kind lets say 8.5% interest per annum on the debt (more likely to be a lot higher). Interest alone per annum is in the region of $17m.

With the payment made to Iris of close to $1m and $4m in cash at bank (again from memory) - you do the maths......

Interest shortfall from cashflow alone = at least $11m per annum and that is NOT taking into account any debt amortisation (ie repayments of principal)

With cash at bank of c $4m, there is a $7m shortfall in cashflow per annum for interest let alone debt repayments.

So how do they fix the hole

1) rights issue - been there done that - almost no-one bought in.....with the major shareholder having sold it doesn't inspire confidence.

2) the Bank - will they increase their exposure - with no evidence of debt serviceability - what would you do ?

3) Sell assets - best option - but the economy is slowing badly and prices paid for LEASEHOLD hotels are falling.

So what next - will the banks roll the debt over - that is the BIG question - fundamentally I don't think they have a choice - it is better to let the existing team run the company and try to turn it round - but will the bank have the patience to do so.........with the whole real estate sector going through serious mess at the moment - asset values are being devalued every day - eg World square not selling for the price required (and many other examples - just read the AFR on a daily basis)...is it better to get out with something and minimise the loss or make it worse - just think of it in terms of your your own stop losses on trading capital - what do you do .....

As long as you understand the risks of investment in NLG - then you are going in with your eyes open - it is very very high risk - there is no white knight or cavalry that is going to magically come to the rescue - how would they finance it ? Equity ? Debt ? What's in it for them ? Where's the projected return and serviceability..

The existing financiers are prisoners - and overall its a game of musical chairs - the problem is the banks control the music and the last chair is owned by the receivers

As long as you recognise you could be left holding the chair then invest, for me I am waiting to see if the banks support the company - and given an "independent body" is assessing the numbers the end result will come very soon.

And one final comment - if NLG pay rent quarterly in advance - their rents will be due this month - 26th June - that's a lot of cash to find.

This is not intended as a downramp - I really hope NLG survives - but my aim is to enable certain parties to view things perhaps with an air or realism - forearmed is forewarned - and the music doesn't belong to the fat lady - it belongs to the banks.

Please DYOR - this is not intended as financial advice - make your own call