financial statements

I was just reading through the ING industrial fund previous finacial statements and i came accross something interesting in realtion to going concern. (thoughts are below)

(b) Going concern
At 31 December 2008, the amount drawn under the Fund's syndicated bank facilities was $1,653.4 million. The facility limits total $1,785.0 million and the facilities are repayable on 6 December 2010 ($1,460.0 million) and 17 April 2011 ($325.0 million).

The facility agreements impose covenants for the maintenance of certain financial ratios. These include a requirement that the ratio
of total look-through liabilities to total look-through assets (the "Total Leverage Ratio") will not exceed 55% at each reporting date of 30 June and 31 December. However, the facility agreements provide that, in certain circumstances, that limit is, in effect,
temporarily increased to 60%, but reverts to 55% as at the next reporting (being, in this case, 30 June 2009). The directors are of the view that the conditions for the availability of that additional headroom have been satisfied as at the reporting date of 31 December
2008.

At 31 December 2008, the Total Leverage Ratio stood at 59.8%. The Fund and the banking syndicates are presently negotiating revised facility agreements which are likely to provide for security to be given over certain of the Fund's assets, including its investment properties, and
for an increase to the limit for the Total Leverage Ratio.

The fair value of liabilities to syndicate members under interest rate and foreign currency derivative agreements at 31 December 2008 was $206.0 million. Payments under the derivative agreements extend to 16 January 2017, but may be accelerated in the circumstances described below.

The Fund expects to be able to pay its debts as and when they fall due in the ordinary course of business for the next twelve months. As mentioned, the original facility agreements require the Total Leverage Ratio to reduce to 55% by 30 June 2009 (being the nextreporting date). If the Fund is not able to reach a suitable agreement with the
syndicate members to change the Total Leverage Ratio, the directors are of the opinion that the conditions required for the Fund to meet the 55% Total Leverage Ratio will make it very difficult to achieve by 30 June 2009.

In addition, because the Total Leverage Ratio is so close to the limit, continued compliance with the original or revised facility agreements is dependent on future market conditions including fair values of investment properties, foreign currency exchange rates and interest rates. An adverse change in any of these market conditions could put pressure on this financial ratio covenant or one or more of the other financial covenants.


Here is the paragraph im mostly interested in (rearranged)(bottom paragraph) - pay specific attention to the last one. " An adverse change in any of these market conditions (fair values of investment properties, foreign currency exchange rates and interest rates), could put pressure on
this financial ratio covenant or one or more of the other financial covenants."



Well, so that means if investment propeties FV got written down then the total leverage ratio would be likely to rise. But would you say would happen to that ratio if foreign currency exchange rates and interest rates went lower? (i think since interest rates decreased it will give the ratio some health)

Becuase i was thinking at the end of december that ratio %was released, and since then certainly interest rates have decreased a lot; where currency rates initially got smashed but they are coming back (eg australia dollar to US). But yeh what would you say would be likely to have happened to that ratio?

Furthermore, i was thinking, if a fund like this colapsed what effect would it have on the rest of the world? Therefore its unlikely that banks would allow it to become insolvent.. whats your opinion? Personally i think since ANZ owns half of ING, and ING being a substatial insurance group - ( dont know the structure but i assume it has many links to financial insitutions throughout the world (could have a link with america insurance group))... but if this fund colapsed.. then all the efforts that the world are trying to overhall the crisis would be impacted immenselly.. opinions?

It would also be interesting to see, if it is having trouble meeting its payments, taking out an interest only facility in the short term - reducing the payments and temporaily stopping facility payments on the loans.

good luck to all.

all opinions welcomed