Forum Archive Index - August 2002

[nickk@quicksilver.net.nz]

Snoopy 

Sometimes I think you're dialogues are too lengthy and I have to admit to 
tuning off (deleting actaully....no offence intended). 

However, I thought you put this well.  It is ironic that our 'timber worker' 
is almost a mirror image of the average New Zealander; tied up with a 
mortgage/house that is practically dead money in this low inflation 
environment; when they actually think they are improving their financial 
position. 

Have a good weekend everyone.  NPC picks - Waikato, Canterbury, Otago, BOP 
(in an upset and a close one), & The Naki. 

Cheers 

Nk 

tennyson@caverock.net.nz writes: 

> Hi Gerald, 
> 
> 
>> 
>>
>>Thanks, Shareholders
>>Association, for your misleading and irrelevant talk of a 430%
>>increase in debt. Could Fletchers have handled a 50:50 ratio of debt
>>to net tangible assets? Sure they could, like many other companies. 
>> 
>> 
> 
> I think it is worth commenting on this particular part of your reply. 
> That is, the idea that a 50:50 debt to net tangible assets is OK. 
> 
> I'd like to pose the analagous question of the timber worker in 
> Tokoroa who has a mortgage over 50% over the family house.  By this 
> single snapshot measure, you might say such a worker is in good shape 
> financially.  But what if he has a child with special needs?  What 
> say he is an 'off balance sheet guarantor' on the loan to his 
> brother's house?  What happens if the family are going to have to 
> sell the house and move to Auckland?  Conversely what happens if he 
> is in line for a large inheritance?  What I'm saying here is that 
> the bald fact that you have 50% equity in a house in Tokoroa is not 
> sufficient information to know whether your situation is good or bad. 
> 
> Ultimately it comes down to this.  Does the Tokoroa timber worker 
> have sufficient free income to pay the bills?   That is what the bank 
> manager wants to know about our worker, and that is also what the 
> bank wants to know, reverting to the original question,  about 
> Fletcher Forests.    
> 
> What happens if you take the free cash flow from the proposed 
> expanded company and compare that to the balooned debt? How many 
> years will it take to repay the debt if the company so expands?  
> Compare that with how many years it will take to repay the existing 
> debt based on existing free cash flows.  If you do that little 
> exercise, I suspect you will find the proposed 50:50 debt ratio is 
> not as conservative as it might have been painted. 
> 
> SNOOPY 
> 
>  
> 
> ---------------------------------
> Message sent by Snoopy 
> e-mail  tennyson@caverock.net.nz
> on Pegasus Mail version 2.55
> ----------------------------------
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> 
> 
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