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Singapore
7
Yes/Yes
2
nil
100
80
Thailand
5
Yes/Yes
3
40
60
60
Vietnam
4
Yes/No
5
55
120
85
Finance opportunities
The Freemantle management had identified a number of financing opportunities.
Government finance. There were a number of financial assistance packages for hotel
developments.
Leaseback. The group currently owned all properties freehold. One financing option was to
sell these freeholds to a property company or another financial institution. The valuation of
such sites was based on the gross profit from the site multiplied by 12. The lease charged
by the financial institution would then be the capital value divided by 6.
Lease. The company could buy much of the equipment for the improved control of energy
on lease. The lease would cost $40,000 for 3 years, with a residual cost of $10,000. 50 per
cent of the lease would have to be capitalised.
Debentures. The company could issue further debentures. The normal requirement for
debentures in the Australian market was for the debenture to carry a premium rate
according to the risk of the investment. Secure investments carried a 2 per cent premium
over the market, whereas moderate risk carried a 4 per cent premium. The markets
expected the length of the debt to be around 15 to 20 years. Should the group consider
international investment, there were a number of overseas markets in which money could
be raised, though the risk premium requirements would be raised by approximately 50 per
cent.
Shares. The company could issue a further quantity of shares. It would have to consider its
dividend policy.
Convertibles. Another option was to consider some form of convertible. The problem with
this would be to determine the likely value of the stock at the end of the convertible period.
Warrants. This posed the same problems as the convertible option, involving the valuation
of the warrants.
Table 12I. Freemantle assessment of foreign investment risk
Index
Inflation range
Interest range
Australia
74
2-9
9-12
Bangladesh
3
35-140
14-45
China
52
8-15
10-18
Hong Kong
65
3-4
3-7
India
15
9-35
13-35
Indonesia
12
15-20
17-25
Japan
186
2-3
2-3
Malaysia
115
6-9
8-12
Macau
65
3-4
3-7
Nepal
3
40-130
45-75
New Zealand
73
6-9
7-12
Phillipines
1
35-235
40-85
Singapore
125
3-5
5-7
Thailand
42
23-35
15-27
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