Valad hit hard again

Macquarie Equities, in a note to clients, said its 12-month price target had been downgraded to 11c with the catalyst being "resolution of concerns over debt covenants".

"We view Valad as a high-risk proposition given proximity to debt covenants and pressure on the underlying business (that is, Valad remains a motivated asset seller in a weak market). Our revised target price applies a discount to our bear case valuation for this risk," the broker said.

But the company moved to allay investors' fears, telling fund managers the share price did not reflect the group's underlying value, it was not breaching any loan or bank covenants and interest cover was being met.

The rout of Valad was triggered on Thursday when the directors revealed it had an exposure of about $31.1 million directly and $48 million in an undrawn commitment to three bankrupt projects. In the last two days of trade last week, the group lost 72 per cent of its market value.

Valad's chief executive of Asia Pacific, Jeff Locke, confirmed receivers had been appointed to a project in Byron Bay and two in Noosa, which were owned by the developer Petrac, a customer of Valad Capital Services area. Valad Capital Services is the investment banking and structured finance arm of Valad Property Group.

Macquarie's analysts said most of Valad's exposure to Petrac was via preferred equity at the project level. "However, Valad also had a $10.7 million investment at the corporate level by way of a convertible note (fully written-off at the 2007-08 result). In addition to these projects, Valad has $44.4 million invested in three other Petrac projects and five retirement joint venture vehicles with Petrac," they said.