THE embattled drilling services company Boart Longyear still has a long way to go before easing investor concerns about its ability to reduce its huge pile of debt.
One of the biggest losers of last financial year (its share price fell almost 89 per cent), Boart made a small step towards righting a sinking ship yesterday when it sold some of its African manufacturing operations to a South African investment company for an undisclosed sum.
However, Boart did disclose that it would book a one-off charge of about $US3 million ($3.7 million) related to the sale in the first half, primarily due to foreign exchange losses.
Aside from Boart facing deteriorating demand for drilling, Goldman Sachs JBWere analysts doubt asset sales will generate enough cash to significantly ease its refinancing concerns. Boart has to settle $US585 million of debt which matures in April.
However, the analysts point out that the sales might at least help to improve Boart's image in the eyes of its bankers, thereby helping to bring about better refinancing terms.
Shares in Boart closed down 0.5c at 25.5c yesterday.
ANZ's careful return
An apparent bidding "war" for the Royal Bank of Scotland's Asian assets appears to confirm the view that ANZ is more focused on a "slow-burn" re-entry into the Indian market than a giant leap via an acquisition.
Observers with longer-term memories will remember that ANZ once had a good business on the subcontinent called Grindlays, which soured under the Australian bank's ownership and was sold.
Grindlays was bought by Standard Chartered which, somewhat ironically, is known to be one of the other competitors for the unwanted RBS operations that just so happen to include its Indian division.
That in itself puts Standard Chartered in the box seat given that ANZ is still in the process of acquiring a banking licence to set up again in India.
Such niceties also help explain the bids lodged by ANZ for the RBS assets in Hong Kong, Taiwan, Singapore, Vietnam and Indonesia, according to Bloomberg. Those are territories where the Australian major bank either has a presence already or is well-known enough to help smooth over any likely regulatory hurdles.
In for the long haul
Qantas's boss, Alan Joyce, was forthright in April when describing of the collapse in international travel, but even that does not seem enough to prepare investors for the reality of capacity continuing to rise on key routes despite demand falling off a cliff.
As Macquarie Equities put it yesterday, a 13 per cent decline in yields from Qantas's international operations in April is mild in comparison to an almost 25 per cent fall in May.
"This decline was already banked into management expectations when profit guidance was revised downwards in April," the broker said.
"Of more concern … is that domestic yields continue to remain weak in spite of a systemic reduction in capacity from both Qantas and Virgin Blue in recent months."
Macquarie believes excess capacity on key routes such as between Australia and the US and New Zealand will delay the eventual recovery in yields (otherwise known as fares).
The biggest fight for the Flying Kangaroo is on the US-Australia route where it derives about 25 per cent of its international revenues. That battle intensifies on Friday when the world's largest carrier, Delta Air Lines, begins daily services between Sydney and Los Angeles.
Macquarie expects load factors - a measure of seats occupied by paying passengers - across all four carriers on the trans-Pacific to fall unless consumer sentiment shows a marked improvement.
In April, Qantas's load factor on the trans-Pacific route was 82 per cent, United Airline's 78 per cent and V Australia's 57 per cent.
"From Qantas's perspective, the US route can be viewed as a 'war of attrition' as all carriers wear operating losses until one decides to exit the route," Macquarie said.
Shares in Qantas fell 2c to $1.99 yesterday.
And did we mention…
It's one step forward and one back for Babcock & Brown Infrastructure which yesterday announced it had completed the latest expansion phase at its Dalrymple Bay coal terminal.
While the market took that as good news given the pressing need to sell the facility to reduce its debt burden, BBI also slipped out an update on the sale of a 29 per cent stake in its Euroports business, which revealed yet another delay in the process. Having already put back the completion date to the end of June, the buyers (including B&B's unlisted European infrastructure fund) have now been given another four weeks to sort out the paperwork - a sign that all is not well with the proposed deal.
