Originally Posted by
Don Diego
On her performance last night you would not let her run a choko vine over the sh#t house, and she is the Chair??
Astounding, isn't it? And she's the current chair at IAG also.
You've got to love these snippets from last night:
ELIZABETH BRYAN, FORMER CHAIR, VIRGIN AUSTRALIA: As soon as I started to understand my way around the numbers and where it all worked out, it was very clear to me that the company was over leveraged ...
PAUL SCURRAH: I think what became obvious to me is that the balance sheet wasn't as strong as it should be. It was something that was vulnerable I think to a black swan event.
So, between the Chair and the CEO there's a recognition that the business is over-leveraged, with a weak balance sheet. So far, so good.
What do they do? Let's add the best part of a billion in debt!
Scurrah is right, he inherited a business with a weak balance sheet - just shy of $6 billion in debts and liabilities and just over $600 million in net equity. So his cunning plan, obviously endorsed by his choice of CFO in Keith Neate, and signed off by the Chair and Board, is to issue over $A 900 million in bonds at 8 percent. It's a three-for
- trash the balance sheet completely by driving net equity underwater to the tune of a few hundred million,
- drive leveraging back through the roof (one thing that Borghetti had been managing was getting their leverage position down into the mid-4s), and
- just so the P&L doesn't feel left out we'll smash that with an extra $70-odd million per annum in finance costs.
It's mind boggling that anyone would pay these people to make financial decisions.