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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (49079)	8/12/2012 6:17:35 PM
From: Spekulatius	1 Recommendation Read Replies (1) \| Respond to of 78644

Re XIN GOOG and MSFT indeed can borrow cheaply and that is why they borrow, despite having tons of cash already. XIN pays ~6.5% which I would not call terrible cheap: The rates of interest payable on our long-term bank loans are adjustable based on the range of 95% to 120% of the PBOC benchmark rate, which were raised by the PBOC four times from October 19, 2010 until April 5, 2012, and may be raised in the future. The PBOC benchmark rate for a one year loan stands at 6.56% as of April 5, 2012. But after reading the 20F, I do know why they are borrowing ;they have significant funding requirements that are due within a year for their RE projects... I also found this one odd: The note is secured by the mortgage of our shares in our wholly owned subsidiary, Xinyuan Real Estate, Ltd., or Xinyuan Ltd., which indirectly holds all of our assets and operations in China. If we default under the note in the future, the holder may enforce its claims against these shares to satisfy our obligations to it. In such an event, the holder of the note could gain ownership of the shares of Xinyuan Ltd., and, as a result, own and control all of our subsidiaries in China. They basically mortgaged the stake in their main operating subsidary to obtain a loan. I don't know, seems kind of iffy to me. If I have an operating sub, I would have that sub loaning money on the assets of that sub, rather than having the shares if that sub pledged -is this sort if like a margin loan? The sub is not publicity trades (only XIN shares are), so I am not sure why this strange construct was chosen.