Rank: Chief Joined: 5/31/2011 Posts: 5,121
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VituVingiSana wrote:"...according to Clark, who says he’s sticking with a no-hedging strategy rather than risking a losing bet.
“You think you’re going to win, but in the long term you always lose,” Clark said yesterday at the Gulf carrier’s head office near Dubai International Airport. “When we enter into derivatives, betting whatever it may be with counterparties who actually control the price of fuel in the first place, you have to ask yourself, ‘Is that smart?’” http://www.bloomberg.com...il-in-fuel-squeeze.html
Well, compare KQ vs Emirates! KQ has made net losses since they started hedging. These hedges are sold by financial institutions that in turn buy/sell the same hedges... It's the fox guarding the hen-house. Citi will get a good deal. KQ's NAV is much higher than 14/-. Even after the Rights, the NAV will be above 14/- [and a lot of it in cash]. Furthermore, Citibank will INSIST in being the main bank for KQ's Rights Issue thus earning fees, commissions & arbitrage income. Citi will also get a DISCOUNT on the Rights Issue. Yes, suckers, Citi will pay less than 14/-. Suckers, they have not fully underwritten the rights issue. They have only underwritten 30,000,000 shares worth KES 420,000,000 and they are getting KES 47,645,075 in underwriting fees. (from section 6.5 of IM). That’s basically a discount of 11.34% (12.40 per share). Indeed, they’ve paid less than 14 bob. Smart guyz.
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