Tapping the Market Liquidity and Alternative Funding Structures

1. Tapping the Market Liquidity and Alternative Funding Structures Presented by Norman Wilson, ABIF

2. Combined Bank Loan Trend $3,000m Local liquidity pressures leading to increase in foreign currency financing for a number of major transactions $99m

3. Relationship between Domestic Liquidity and Reserves $1,359m -Recall of offshore investment • Improvement in Trade deficit • Increase in Foreign loan • IMF SDR Increase Inflow from bond issuance U$100m -GFC impact -Increase in oil price to U$150/barrel – liquidity drain • Fiji Govt floated U$150m bond • FNPF offshore investment flowing back in F$100m Devaluation Redemption of RBF Notes $75m 2 SRD increase totalling 3% $515 m FCY Loans $99m MNC Profits $100m $200m Bank Capital

4. Financing sources • Equity • Self • Private equity (institutional investors) • Angel investors • Stock exchange (IPO)

5. Financing sources • Debt • Senior debt, i.e. banks. • Commercial paper/ Bonds • Mezzanine finance

6. Capital structure options • Raise own Capital, from savings and borrowing from family members. • Own equity + debt financing. • Own equity + Private equity + debt (bank) • Own equity + Mezzanine Finance + bank finance

7. 1 Raise own Capital - 100% 100% equity, carrying 100% risk as well. Low Return on Equity because its all self funding. Pay back period is about 5yrs 2 Own equity + debt financing (40%+60%) Return on Equity is higher as equity is reduced Pay back period is 4.3yrs Assumptions:Initial Capital – FJ$8mBank debt – 9%Mezzanine Finance – 12%Private equity – 20% Sales cost – 60% (Gross Profit margin of 40%)Overhead – 25% (Net Profit margin of 15%)

8. 3 4 Own equity + Private equity + debt (bank) 20% + 20% + 60% Return on Sales again lower than option 1, because of interest portion. ROE is higher as Investment is only 20% of total capital. Pay back period is about 5 yrs. Own equity + Mezzanine Finance + bank finance (20% + 20% + 60%) Return is sales is the lowest because of higher interest from Mezzanine Finance. Pay back period is about 4.6 yrs Assumptions:Initial Capital – FJ$8mBank debt – 9%Mezzanine finance – 12%Private equity – 20% Sales cost – 60% (Gross Profit margin of 40%)Overhead – 25% (Net Profit margin of 15%)

9. Summary of return on Shareholders Equity

10. ENDThank you for listening.