- Debt reduction at slower pace in June quarter
- Cumulative debt repayments remain ahead of schedule
- Conditions continue to be subdued in key markets
Investments Portfolio
In the June quarter, Keybridge continued to manage its investments portfolio with the aim of:
- Bringing forward realisations where they can be achieved at acceptable prices, so as to reduce the Company's level of debt; and
- Protecting the value of remaining investments as much as possible.
The Company currently is not making new investments.
In the past three months, the Company achieved investment repayments totalling $6 million. These were spread across the following transactions:
- $3 million from a property transaction in the US;
- $1.5 million of further repayments from three lending transactions; and
- $1.4 million from the sale of a shipping investment.
These repayments were achieved at values consistent with the Company's carrying values at 31 December 2009.
As a result of these repayments and movements in foreign exchange rates, the composition by asset class of Keybridge's investments portfolio as at 30 June 2010, prior to any adjustments in carrying values, was as follows:
| |
AUDm |
% of Total |
| Property |
17 |
7% |
| Aviation |
138 |
57% |
| Shipping |
37 |
15% |
| Infrastructure |
12 |
5% |
| Lending |
37 |
16% |
| Total |
241 |
100% |
Over the past nine months, the Company has been able to bring forward the realisation of some of its investments. The pace of repayments slowed in the June quarter as the remaining investments in the portfolio become more difficult to realise.
This applies particularly to the Company's shipping and aviation transactions, which constitute over 70% of remaining investments. Secondary markets for these assets still tend to be affected by a lack of senior debt and by distressed secondary market pricing. Realising Keybridge's investments in these sectors in the shorter term at acceptable prices remains impractical.
Our expectation is that the realisation of these shipping and aviation investments will occur over a period of approximately three years. In the meantime, the Company's focus will be on achieving improved operational cashflow from these transactions, along with taking steps to protect existing book values.
Debt Facility
Outstandings under Keybridge's corporate debt facility as at 30 June 2010 were $146 million. The facility matures in June 2011.
Under the terms of the debt facility, interim repayments of $70.5 million are required to be made between September 2009 and March 2011. Repayments of $64 million have been achieved by the end of June 2010. The Company is confident of achieving the remaining $6.5 million of required repayments over the next nine months.
Currency Exposure
Prior to any changes in carrying values, the approximate currency breakdown of the Company's assets and liabilities as at 30 June 2010 was as follows:
| |
Assets |
Liabilities |
Net |
| US Dollars |
166m |
101m |
65m |
| Euros |
8m |
- |
8m |
| Australian Dollars |
40m |
36m |
4m |
This net foreign currency asset position means that the Company incurs translation losses when the Australian Dollar appreciates in value against the US Dollar and Euro and benefits from translation gains when the Australian Dollar depreciates in value.
Annual Results
In preparation for its end-of-year accounts, Keybridge is reviewing the carrying value of its investments. Some markets in which Keybridge has invested, most notably shipping, remain variable and are yet to exhibit evidence of longer-term recovery. This may affect adversely the carrying value of some of the Company's investments.
Keybridge expects to release its annual results on 10 August 2010.
Keybridge Capital is a financial services company that has invested in, or lent to, transactions which predominantly are in the core asset classes of property, aviation, shipping and infrastructure.
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