Towards Financial Freedom
MUDDY WATERS WRONG ON RISK OF INSOLVENCY: OLAM
Olam International asserted yesterday that it faces no risk of insolvency, saying that Muddy Waters had got it wrong. "The assumptions and conclusions drawn on our solvency position are incorrect," said Olam.
Muddy Waters had done up its own calculations ' including making the assumption that all current loans without any given maturity dates mature in the fourth quarter of 2013 and first quarter of 2014. On the strength of such assumptions it had concluded that "Olam may have to raise or refinance $4.6 billion in debt in the next 12 months to stay solvent".
"Combined with a highly leveraged balance sheet, record low operating margins and continued capital expenditures and acquisitions, Olam runs a high risk of financial ruin," it said. The research firm compared Olam to Enron, and said that it valued Olam on a liquidation basis "because our opinion is that it is likely to fail".
Olam reiterated yesterday that it had su'cient liquidity to meet its debt obligations as well as its current business and future investment plans.
As at Sept 30, it had $8.55 billion in long'term debt and equity, covering fixed assets of $4.5 billion, it said.
"We believe we have more than enough capacity to meet our repayment obligations of $1.5 billion in the next 12 months, as well as our likely capex of $1'1.25 billion in the same period." It also has unutilised short'term bank lines of $4.5 billion to finance ongoing working capital needs, it added.
Olam's banks have remained supportive of the firm thus far, said executive director for finance and business development A Shekhar. "We've an extremely strong show of support from all our bankers, whether they're a tier 1 bank or a tier 2 bank, and we're grateful for that."
Source: AmFraser
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