Olam International

[CityFarmer]

I think people realise Olam has a solvency issue but forgot a crucial difference: though ROIC is the same but the liquidity profile of an asset heavy business model and one WC heavy is very different.

What it means is that if the figures are "real", Olam could scale back on their business and generate cash flows or her liabilities. It will definitely affect the business but can easily restore confidence first before moving on, unlike selling assets which may have a longer term strategic impact.

Obviously that doesn't solve the issue that olam is over leveraged and creditor confidence is hence important, but cash flow management is not as dire as some thinks. This rights issue is likely to address the former

Readily Marketable Inventories (RMI) or Liquid Hedged Inventories (LHI) is one key argument from Olam on its solvency issue.

Together with cash reserve, secured receivable and LHI, it is obvious that solvency is not an issue anymore.

Next question is the confidence level on the LHI. As outsider, it is difficult to access the worth of the LHI vs the "value" stated especially credibility of management is at stake.