29.08.2018 some news, page-5

Here is my understanding of how the debt and equity situation will play out. Please let me know if you see any holes in it. My worry is that the debt will get swapped for equity somewhere and minor shareholders lose out (I hope not!)

- Joint venture is VHA: 50% owned by Vodafone Group Plc & 50% owned by HTA (CK Hutchison Holdings owns 88% of HTA). Graphic of ownership structure below:



- VHA is the actual borrower and CK Hutchison and Vodafone PLC are guaranteeing the debt

- Total VHA debt is circa $6-$8B AUD. $8.4 AUD according to the AFR article and 4B+ Euros (~$6.5B AUD ) according to the Vodafone accounts (Note 29, p168):
vodafone.com/content/annualreport/annual_report18/downloads/Vodafone-full-annual-report-2018.pdf

- According to this article, there is not much net equity in VHA:
bloomberg.com/view/articles/2018-08-22/vodafone-hutchison-jumps-for-a-bigger-lifeboat-with-tpg-telecom

- Unless CK breaches debt covenants, then the vehicle can continue to run. Came close to a breach in 2013: smh.com.au/business/vodafone-close-to-3b-loan-breach-20130501-2it8s.html. 12 banks owed $3b+ for a portion of VHA's debt

- Am speculating that a breach is bad (probably unfavourable terms) and not wanted by CK Hutchison or Vodafone PLC. If they owned the debt, then a breach might be good for them as they could then swap this to equity in TPG in front of the shareholders of HTA (assuming a merger)

- Therefore, I think that maybe it would be difficult to screw the small shareholders and Spark NZ (owns 10% of HTA). Ultimately CK Hutchison and Vodafone PLC will have to take on some or all of VHA's debt directly onto their balance sheet and receive shares in TPG in return. I hope!!!

- What do you think of my very speculative analysis?