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We value Olam on a liquidation basis because our opinion is that it is likely to fail. In the event of a liquidation, we estimate the present value of the debt to be 14 to 33 cents. In a liquidation, the equity would likely be wiped out, or given “nuisance value” at best.

Olam’s response to our November 27th report is remarkable in that, despite being 45 pages long, it fastidiously avoids addressing the vast majority of our points. The response is essentially a waste of toner, as much of it consists of canned presentation slides and consultant drivel. Where Olam’s response attempts to be substantive, it contains numerous instances of irrelevant information, factual inaccuracies, misleading statements, and mischaracterizations of our report. However, the response does demonstrate Olam’s continuing deluded denial of its fiscal problems. It seems the Titanic is still heading full steam toward the iceberg.

Olam’s surprise announcement of an unusually structured US$750 million debt issuance validates our thesis that Olam is in danger of failing. Only in the case of our November 2010 report on Rino International have we had a faster confirmation of an investment thesis.

Muddy Waters retains our original investment thesis and Strong Sell rating on Olam’s shares. Our analysis of Olam’s Q2 2013 results is detailed in our latest report.

We continue to believe that, in a world where capital is allocated to maximize economic efficiency, Olam’s shares have no value. The Company has simply borrowed too much money, and then invested in projects that will not generate sufficient returns to repay its debt obligations. In this note, we will only briefly comment on Olam’s FY 2013 results. (Numerous analysts have already done so.) Instead, we will focus on qualitative points that cause us to believe Olam is not really turning over a new leaf.