Stripnomics

 Think only individuals play the balance transfer game? Think again.

Here is a spreadsheet detailing ProLogis’ outstanding debt for the last 2 quarters:

(Data from ProLogis’ 10Q’s for June 30, 2008 & March 30, 2008 - I calculated the differences)

As you can see, PLD mostly just shifted a bunch of debt from its Unsecured Lines of Credit with banks (big surprise!) to Noteholders. It’s not that big of a deal. In fact, the situation appears good since PLD paid off some debt. However, you really have to read 10Q’s carefully.

ProLogis only had $169M in “Net Cash from Operating Activities” and -$294M in ”Cash from Investing Activities” for the 3 months ending June 30, 2008 so these items could not cover the paydown alone. In the end, ProLogis had to dip into their cash reserves and, again, resorted to more financing to pay down senior debt. However, the source of the financing does not show up in the spreadsheet above. That’s because the source was technically not Debt - they sold more COMMON STOCK!

That’s right, last quarter they sold $117M in common stock to payoff senior debt holders ($97M in the 1st quarter). In the process, they are diluting common shareholder value and giving money to bankers at the expense of the equity holders who are at the bottom of the bankruptcy totem pole. Click HERE to read my September 15th post about bankruptcy priorities. In my opinion, since they are already overleveraged and merely shifting money from innocent buyers to the bankers that allowed this leverage, they are knowingly selling WORTHLESS paper. This is a despicable practice to common shareholders.

In addition, there are other inconsistencies regarding PLD’s total debt. Although it looks like debt from Unsecured Lines of Credit is only $2.162 Billion, in Note 10 on the bottom of page 18 they state:

“Our credit facilities provide aggregate borrowing capacity of $4.5 billion at June 30, 2008. This includes our Global Line, where a syndicate of banks allows us to draw funds in U.S. dollar, euro, Japanese yen, British pound sterling, Chinese renminbi, South Korean won and Canadian dollar. This also includes a multi-currency senior credit facility (“Credit Facility”)… The Credit Facility provides us the ability to re-borrow, within a specified period of time, any amounts repaid on the facility. As of June 30, 2008, under these facilities, we had outstanding borrowings of $2.6 billion and $178.4 million of letters of credit outstanding with participating lenders resulting in remaining borrowing capacity of approximately $1.7 billion.”

Am I missing something here??? This is a discrepancy since amounts under a Global “Line of Credit” should be properly attributed to the category “Unsecured Lines of Credit”. Obviously, it was not categorized that way because the balance for Unsecured Lines of Credit is only $2.162 Billion. Further, it does not make sense that the Credit Facility was categorized as part of “Senior Notes and Other Unsecured Debt” because the balance for that category is $4.8 Billion - which is far in excess of the 4.5 Billion aggregate borrowing capacity stated in the notes.

Perhaps it is included in neither category, in which case debt is SERIOUSLY underrepresented by the debt schedules and the debt shown on the balance sheet. If it is included in the “Senior Notes” category or both categories, it is plain sloppy accounting. This would be an excellent issue to bring up on the upcoming conference call - but we all know that ain’t happening because only softball questions are asked.

This entry was posted on Tuesday, September 30th, 2008 at 7:49 pm and is filed under Accounting, ProLogis (PLD), Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.