- Keybridge has brought forward a review of the carrying value of its investments portfolio.
- Assessment is for expected writedowns of approximately $120 million, reducing net tangible assets to around 75 cents per share.
- Write-downs would lead to breach of banking covenants: Discussions with the Banks have commenced.
Keybridge Capital Limited has brought forward a preliminary review of the year-end carrying value of its investments portfolio. It has done so in an environment where conditions for the Company’s investments continue to be difficult.
The asset markets in which the Company operates are characterised by:
- Ongoing restrictions in the availability of senior bank debt;
- Low levels of market liquidity, inhibiting the ability to sell assets in the short term;
- Greater financial pressure on lessee counterparties; and
- Reduced current market values.
Keybridge has undertaken the review of carrying values in consultation with its auditor, KPMG. Based on current information, our assessment is that impairment provisions of approximately $120 million will be required. This level of impairment equals 24% of total assets and would reduce the Company’s net tangible assets to around 75 cents per share.
The actual level of year-end provisions will be finalised at the time of the release of the Company’s financial accounts in August 2009.
The expected provisions are spread across all of the Company’s asset classes, but predominantly apply to shipping and property transactions.
The anticipated level of impairment would result in the Company breaching two of the covenants in its corporate debt facility, being the tests for minimum shareholders’ funds and maximum provisions. As a result, Keybridge will work with its Banks with the aim of altering its loan terms to enable it to continue realising investments in the ordinary course, facilitating the repayment of its debt and, ultimately, a return of capital to shareholders.
The Company’s forecast cashflow remains sufficient to meet the ongoing servicing of its debt facility, its operating costs and the scheduled debt repayments of US$25 million by June 2010 and US$45 million by December 2010.
It is anticipated that the discussions with the Banks will take at least four weeks to finalise. The Company will inform the market as soon as it is in a position to provide a meaningful update on progress.
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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