Michael,I have been holding this stock for some time and...

Michael,

I have been holding this stock for some time and unfortunately it has seriously underperformed the rest of the market to my detriment. It is a yoyo ride up and down but seems to go no where.

In july it appears it could not meet its DSCR and was forced to pay down $250 Million. In sept it failed to meet its DSCR again and was forced to pay down about $505 Million. (which is why it did the second cap raise in sept)

After much frustration I decided to do some calculations last night on what it would take for the company to be in the clear on its coverage ratios. The outcome of my calculations is that they would probably need to reduce their expenses from $80 Mill per year to about $60 Mill and achieve continuous ADR above $540,000 (GST inclusive figure which they are using) each month to avoid further debt reductions come end Dec. ADR needs to be about $580,000 to avoid equity lockup. This is on an ideal situation that they can cut costs by about 25% which may not be realistic either. If costs remain in line with second half 09 then ADR needs to be about $610,000 and $650,000 accordingly, which will not occur going into a quiet period (dec-jan).

My final opinion is that unless TCL decide to take this baby over then it is likely there will be one more cap raise to go but at what price? It seems that it should have cap raised more funds last month but I figure based on the poor retail acceptance that the instos would only do a 2-1 split when it really needed a 1-1. So the issue keeps dragging on. It even appears major shareholders like CP2 did not really partake any further in the 2nd cap raise. Maybe they realise they will be burnt again as they handed over 55c per share 12 months ago just to lose about 40% of the value.

In regards to todays trade, It appears that someone has agreed with another party to trade a huge amount at price of 35c which is the halfway point between insto bookbuild of 36.5 and retail bookbuild 33.5 (when the stock was not taken up by retail holders). This is the only explanation for a sudden increase to 35c and then followed immediately by such a large cross trade transaction that represented about 1.5% of the total shareholding. Could it be TCL making another move? who knows but if it isnt then this stock could be moving down further. Maybe 20c or 25c.