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@MarsC and @Warrigals,

I have just come across your interesting dialogue on BOL from a few days back.

Your weightings of potential upside vs potential downside is an approach that resonates with me, because that is what I always try to do.


But while I think the most important thing when it comes to personal investing is serious assessment/evaluation of the potential for permanent destruction of one's capital, I was somewhat bemused by the notion that is being contemplated by you of BOL going belly-up.

For while this company certainly has some serious earnings headwinds facing it, it is still a highly solvent business, even right here in the heart of the mother of all commodity cycle downturns.

Even before the liquidation of the fixed asset base, we have the following:

- Current assets exceed current liabilities
- Current assets are at a record high level compared to total liabilities
- Net Receipts are more than double interest payments
- Since the banking syndicate expanded as part of the 2013 re-financing, the company has generated positive Free Cash Flow from operations in every subsequent financial period.


Added to this is the liquidation of the idled P&E, and the result is Net Debt that is falling at a strikingly consistent rate of $25mpa over the past three years ending in Dec 2015, from NIBD of almost $130m @ Dec, 2012, to a little over $50m @ Dec 2015.

In a little over 12 months, even without any recovery in the business's underlying profitability, NIBD will be under $20m, the lowest it will be, by far, in the company's 15-year listed history (incidentally, the lowest level of NIBD was $32.6m, recorded in Dec 2004. I expect BOL will be below that level in around just 9 months' time, which is when the current 3-year debt facility is die to expire. And I think that re-financing the residual $30m balance will be a cinch, compared to the $100m that the company's banking syndicate was faced with just two years ago.)

So I am a bit surprised that the worst case scenario being contemplated is insolvency; I would have thought that the biggest risk was - once the balance sheet is fully repaired (by fully repaired I mean that NIBD falls below EBITDA... which I calculate will occur in 2017, even absent any upturn in demand for COL's services) - that the market remains too brutalised and scarred by the trauma of the past few years to re-rate the stock upwards, and it simply continues to trade at 3.0x EV/EBITDA.


As I have been at great pains to emphasise: in terms of aesthetic appeal, this stock is no Mona Lisa.

But what am I missing in my thinking that the company is not an insolvency case in the making?