Sdic Power Discussion Threads

[scburbs] 23/6/2010 07:35

One of the most astonishingly over valued property companies I have come across (although perhaps that will change at 8am).

REO has 1.1bn of property and net liabilities of 721.6m (yes, net liabilities of 721.6m!). Remarkably this company (with a similar amount of property to SDIC) is (or was) worth 50m.

[scburbs] 22/6/2010 20:31

Nickcduk, I think you may be in danger of giving them more credit that they deserve. A failing of which I have found myself guilty when expecting them to perform in line with the competition.

At 30 June 2009 the group cash was €62.155m and the parent level cash €37.792m.

At 31 December 2009 the group cash was €36.24m of which €8m was only available to fund refurbishment work so the group cash was really €28.24m. There is no disclosure of how that cash splits between parent and subsidiary cash.

Any cash in subsidiaries in breach will now be stuck so the question is how much of the €28.24m was in the parent company and how much have they since spent (operational cashflow for 6 months could be about a €6m outflow). There may be further outflows for refurbishment costs and to finance the service charge costs. These could easily account for a lot of the parent level cash. I hope they have been more prudent than this, but the working capital loan and the lack of disclosure does not bode well.

I agree that given the number of unanswered questions and uncertainities which would be price sensitive it is difficult for a layman to see how JM is free to deal (assuming he knows the answers to some of these questions). Although given the way it looks you would expect he has taken legal advice.

[nickcduk] 22/6/2010 18:40

Giving more thought to the director loan. I can't believe they have blown through the 36m or so cash they had at year end. I think the bank have asked for parent company cash to be ring fenced whilst ongoing refinancing discussions continue. Mellon being allowed to buy is a scandal when he is party to so much information that ordinary shareholders have no access to. I reckon he was in the market picking up stock today. He obviously sees some value remaining.

[ptolemy] 22/6/2010 18:29

From Digital Look:

"Speymill Deutsche Immobilien Property Company non-executive director Jim Mellon has been buying shares in the AIM-quoted property investment company just after it has agreed to take over the management of its own property portfolio.

Mellon bought 5m shares at €0.05772 a share and 2m shares at €0.06 a share. That is a total investment of €408,500. Mellon owns 13.82% of Speymill Deutsche as well as having a 44.8% interest in Speymill, whose subsidiary is giving up managing the Speymill Deutsche property portfolio in Germany.

Mellon is also lending €2m to Speymill Deutsche until 15 November 2010. If there is a fundraising it will either be repaid or converted into shares at the fundraising price"

[ydderf] 22/6/2010 17:31

Following Directors buys? Mr Mellon's judgement? see this rns:

"21 December 2009

Speymill Deutsche Immobilien Company plc

("SDIC" or "the Company")

Director's dealing

The Company has been informed that on 18 December Jim Mellon, a non-executive director of the Company, purchased 200,000 ordinary shares in the capital of the Company at a price of EUR 0.275 per share.

Following the above transaction, Mr Mellon has an interest in 39,538,285 ordinary shares in SDIC, both directly as well as indirectly through his interests in Galloway Limited and Speymill plc, representing in aggregate 11.73% of the issued share capital in the Company. Mr Mellon is a director of and an indirect 44.8% shareholder of Speymill plc, of which Speymill Property Group Limited, the Company's manager, is a wholly owned subsidiary."

[jeffian] 22/6/2010 10:32

I'm afraid this was all entirely predictable for those prepared to listen.

jeffian - 23 Dec'09 - 23:26 - 381 of 1288 edit
....... If Jim Fixes It, it won't be for you, it'll be for him. You were told!

"jeffian - 16 Oct'09 - 10:29 - 200 of 380 edit

......Finally, do not fall into the trap of believing that rich entrepreneurs have your interests at heart ("Jim Mellon has been buying a lot of shares, and was recently made a Director. I don't know his background, other than that he's made a helluva lot of money from property, so sounds like a good guy to have on board, surely ?") - they may do, but they usually look after their own first (e.g. have a look at the Reuben Brothers' involvement at ULG/PBR)."

[nickcduk] 22/6/2010 10:15

Mellon in the market very aggressively again. 2.5m buy order on the book at 6c.

[envirovision] 22/6/2010 08:11

see post 1279

[nickcduk] 22/6/2010 07:51

Mellon was our mystery buyer. Its bordering on insider trading. He is aware of the questions scburbs says we need answers to. Not sure what his game is yet. See if he carries on buying today.

[lagosboy] 21/6/2010 21:55

jeff H

You are absoltely correct, schurbs just does not get it and unfortunately goes off at a tangent with a laundry list which only serves to contradict his original argument that an orderly run off would return value to shareholders.

[scburbs] 21/6/2010 21:42

Jeff H, That article is referring to the liability that SDIC is already booking in its accounts (this is largely the difference between the basic and EPRA NAV). The interest rate swaps have got worse since 31 December 2009 [€71.5m], however, for some reason the company has chosen not to disclose the current amount.

So what are they not disclosing:

1. Current interest rate swap liability.
2. The amount of unencumbered properties and why these haven't been disclosed previously.
3. The properties to be transferred to SYG (location, LTV, yield, vacancy etc.).
4. The amount of parent level cash and where has it gone.
5. The current vacancy rate following the referred to improvement in the trading statement.
6. The forecast level of [positive] cashflow following the internalisation.
7. What have they done to sort out the service charge debacle and why have they made such a mess of it (is this where the parent level cash has gone?).
8. Where has the value to be delivered from the refurbishment programme gone (perhaps they have wasted the parent level cash here?).
9. Whether the vacant properties are valued prudently (I guess the loss on sale of €2.2m was a vacant or partially vacant property leading to a suspicion that they are not - despite the previous disclosures).
10. How much lower was the bank valuation than their valuation.

[jeff h] 21/6/2010 20:29

2). The £10bn cost of unravelling swaps

Interest rate swaps seemed a sensible way of hedging risk on property loans. In reality, Savills estimates the unprecedented period of low interest rates has created a potential £10bn liability - and it's making distressed asset sales unviable. Restructure the loan, and you'll have to cancel this swap – at a cost. It's a massive problem, as 57 per cent of the UK's £250bn property loans have interest-hedging swaps in place. Savills estimates that unwinding a 5-year swap currently costs nearly 12 per cent of the original loan amount, rising to over 20 per cent for a 30-year swap. Yes, you did read that last figure correctly.

"We know of situations where 20 or 30-year swaps are in place," says Mr Newsom. "In the halcyon period, property investment yields were very low. It was cheaper to raise long-term money than short-term, and a 30-year swap could make the cost of debt a whole percentage point cheaper."

Listed property firm Hansteen paid €20m to cancel swaps on its recent €250m distressed purchase of a German industrial portfolio, but many potential deals have fallen through due to unwinding costs.

[lagosboy] 21/6/2010 19:11

scburbs

Don't rely on a Barclay's general 2 page guide, such guides and reality are often quite different, unless you believe the carrying value of all assets and liabilitiies on a balance sheet are 100% accurate.

Mark to market is a crude best approximation developed for accounting purposes.

Try Swap Financing by Satyajit Das

Unwinding swaps, particularly with unco-operative banks, who seek to maximise their gains from the process, is an expensive and painful process.

It is a little worrying that you believe a bank will do anything today without chargeing a fee, even if under your belief the bank is perfectly hedged as to time, amount, duration and asset class there would be no compensation for the work & time involved unwinding the swap so it would have to book a loss for the expenses incurred.....

[sleepy] 21/6/2010 18:50

Looks like Mr Mellon is getting over 5% (including the facility fee) for his 5 month - over 1% per month - CONVERTIBLE and SECURED loan.

[scburbs] 21/6/2010 18:18

Lagosboy,

No I didn't. I yet again refer you back to post 1196 when I explained how to undertake an orderly disposal process taking into account the swap liabilities.

If swap breakage costs are higher than the mark to market of the swap liabilities then I agree that I did not factor in these additional costs. However, I have not seen any evidence to support this other than your contention.

When I provided some evidence to support my view and asked you for evidence to support your view you said "I think we are getting away from the original issue" [which was odd as the swap breakage costs was the original issue!].

If you have any evidence to support your view I remain interested as if there are significant additional swap breakage costs beyond the mark to market adjustments then it would be fundamental to the value here and would make an orderly disposal process difficult. If you have changed your mind on this point please let me know rather than just saying "I think we are getting away from the original issue"!

[lagosboy] 21/6/2010 17:27

scrubs
No need to reflect at all, it is a fact that the cost of unwinding swaps to facilitate property sales is prohibitive. It is a fact that you ignored that cost in your 'orderly' winding up proposal !


Equity Fund raising is a certainty in my view. The €2m, as well as working cap will meet the costs of the fund raising.

Repayment: Repayable on maturity or, in the event of an equity fund raising prior to maturity, '''convertible, at Mr Mellon's option''', into ordinary shares in the Company at a price per share equivalent to the price paid by investors in such a fund raising.

[envirovision] 21/6/2010 17:25

Prob Mellon, Mellon is prob going to take the whole lot private.

[nickcduk] 21/6/2010 16:28

Buying is pretty relentless and a fair few weak hands are being taken out. Wonder if there is some corporate interest at hand. Shouldn't be long before we find out. Whoever has been buying should soon be declaring a holding.

[nickcduk] 21/6/2010 15:10

There is a a heavy buyer out there today. Since the announcement an order of 5m went up at 5.5. Got filled in around 0.5m and then the buyer pulled it. Since then around 4m in lots of 1m have gone through at 5.5 and now 5.7. Price could start to move if loose stock has now been absorbed. Be interesting to see who has been buying.

[littleweed] 21/6/2010 12:49

Unsecured?. Have you read the statement?.

[scburbs] 21/6/2010 12:27

I think that answers the question on how much the parental cash is!!! Not impressive, but JM has been quite generous just asking for 7% on an unsecured loan (from memory I think he asked 12% from SYG). On reflection it is 9.5% so not quite as generous. [Actually it is more like 13% as the loan is only for a 5 months period, so on similar or worse terms than the SYG loan]

"Speymill Deutsche Immobilien Company plc (AIM: SDIC), the pan-German residential property investment company listed on AIM, announces that, today, Jim Mellon, a director and substantial shareholder of SDIC, agreed, subject to final documentation being signed, to lend the Company €2 million. The additional funds will be used to assist the Company with its working capital and certain financing requirements in the intervening period until such time as negotiations on a comprehensive debt restructuring with the Company's lending banks have concluded."

[lagosboy] 20/6/2010 10:09

scburbs

I think we are getting away from the original issue.

My point was that the cost of unwinding SWAPS would be prohibitive to the disposal of property assets. This was later confirmed in the RNS.