-3x Short China Discussion Threads

[selkirk69] 02/6/2011 15:41

LEJ2
Thanks for leveling that up, where there is hope there can be a way.
BTW it wasn't Oceanwood I was refering to it was Wintrust, they are also a LL, some research on them will make interesting reading I can tell you.

[lej2] 02/6/2011 15:19

selkirk, your post 7949 was excellent in pointing that there are still some reasons to continue holding here, but written very much from the point of view of an optimist, which is fine. However, for balance I will point out the case for the cynical pessimists.

The company is trading whilst insolvent (unable to meet debts as they fall due to LL's). This does put the directors are personal risk. We can assume that they are only willing to do this if there is a game plan that will work to the benefit of those creditors not being paid at present.

My guess is that this is trundling along awaiting the eventual administration whilst the major LL's get their act together in terms of lining up management teams ready to apply to CQC for registration as soon as the company goes into administration.

You mentioned the bank covenants. The banks involved have far greater liabilities with the LL's and are probably involved with LL's in restructuring debt to suit an operating company rather than an investment company,

You mentioned Oceanwood's 9% shareholding. This was all built up, if my memory serves me well, at prices starting in the 20-30p range and is probably averaging around 15p per share, which is less than £3 million, peanuts compared with the freehold values and bank debt on the freeholds they own. Why would they and others 'throw' money away? So they can influence the BoD and combine with other to prevent a voluntary liquidation (which I think requires 75% of the shares to be in favour).

This will all suit the government as residents in over 90% of the homes will not be affected and only the very worst forced into closure and transfer of residents. Even this will be done in an orderly fashion during the administration period.

I am not saying that this is happening but it is certainly a possibility - all IMHO and DYOR etc.

[tempramental] 02/6/2011 15:01

out and out gamble on whether this survives in its current form, might as well put your money on the 3.30 at kemptown.My feeling is current shareholders will be shafted.dyor

[selkirk69] 02/6/2011 14:48

targatarga
that's about right, although this isn't woolies their income was made up from selling penny sweets, SC has a guaranteed income just being squeezed by the LL's and screwed by the LA's, same difference I suppose.

[targatarga] 02/6/2011 14:40

selkirk69 - woolies was a fine example... All bits bits quickly sold off for a song and shareholders left penniless... Creditors with a few pence in the pound... imho

[selkirk69] 02/6/2011 14:37

targatarga
administrators would only be a very short term solution surely, are you saying they could do a better job than SC and all the problems will go away. Administrators are accountants basically and the problems of the residents would firmly remain.

[targatarga] 02/6/2011 14:33

administrators would run the company if failure happens.. Just the way it goes...

[selkirk69] 02/6/2011 14:33

kiwi
You must also be including the banks, LL's and the Gov when you say that, otherwise the plug would have already been pulled. No one here from what I read believes they can't go bust, they are on the brink and do appear to be heading that way, what is being discussed is what will happen next and what the future hold either with or without SC running things.

[kiwi2010] 02/6/2011 14:26

I'm surprised that people think it can't do bust because its important.. Look at railtrack, form a shareholders perspective it went bust. In reality not a single train was disrupted but all holders lost money, didn't they. (happy to be corrected here.)

[selkirk69] 02/6/2011 14:03

Without doubt this comming few weeks will determine the future of SC but there is a deal to be done here.

If the LL's took between 0-750 properties back who the hell would run them, who will/can take on 30,000 residents, never mind the prospect of how many of these old people will die as a result of being moved. It won't be Four Seasons or Bupa or any of them actually, no chance, not capable for one and they have their own problems with huge piles of debt. In fact all the bigger players are not very far behind the SC issues when you read the stats.

The properties are specific to requirements, the LL's would have to spend £m's to get the properties up to scratch, £m's on rehashing deals, go months without rental income and then re let them for less than they get now, it doesn't make sense for that to happen.

One LL is also the third largest holder having bought a 9% stake a few months back and two out of the other top four holders added at least 2m in the last four weeks, why have they done that.

The gov say sort it out yourselves, they must be confident they can because they'll ultimatley have to pick up the pieces and an even bigger tab than now. It's annoying that the Gov continues to dole out £m's to countries, the same countries who then spend £m's on weapons etc. and more £m's bailing bankers and EU states.

The banks have agreed to put back the covenant test, that's a bit unlike them isn't it, their first concern is always and only how safe is our money.

I think the BoD's have and are doing a fantastic job, they have come out fighting saying we will restructure with or without your help and have put the interests of the residents first.

LL's just need to be realistic if they are and a deal is done then I can see SC being taken over and getting the funding.

Although the fat lady appears to be clearing her throat.

[daniel] 02/6/2011 13:55

The company will not go bust, because it wouldn't be allowed to, due to its ramifications. The Government will have to offer it a bailout, local authorities will have to increase and match fees with inflation, and Land Lords will take rental cuts. The share price will be 20p soon, the board will foolish not to ensure that, and the government will take consolations in the fact that top Sche investors have still lost 99.8% of their investment; since that what our country is fast becoming, a quagmires for investors.
For me 6p is ridiculous, and brave souls can step in the waters. My handlers insist on returning to sche at 10p when the wind changes its direction.

[kiwi2010] 02/6/2011 13:29

Could they be short covering? What happens if you are short and the company goes to zero?

I think with a SB a copy going to zero, aka into admin is considered as the price going to 0 for the bet. Not sure of the case with brokers and shorters??

[targatarga] 02/6/2011 13:06

Brave souls buying... amazingly brave me thinks

[clarendon] 02/6/2011 13:04

On the way back up?

[lej2] 02/6/2011 10:23

Wooly, Blackstone sold out by means of an IPO, mainly to institutional investors. Blackstone have done nothing wrong, unless the IPO prospectus did not reveal all of the facts. My memory is that it did contain everything re future rent increases etc.

[wooly62] 02/6/2011 09:52

Why is this mess Blackstone's fault? They bought a company and decided to sale and lease back of the properties it traded from - a wholly normal transaction. They then decide to sell out, again perfectly normal. new owners come along and after effecting their DD they decide a price that they want to pay. Presumably the price would have been higher had the properties still been owned by the company, but the point is they chose how much to pay and clearly got the sums wrong. If someone offers me 4 times what my car or home is worth, why shouldn't I take their money and run? Blame the BOD, their advisers and their backers, don't blame the VC. We all know VC's raison d'etre is to make money from their investments, so if we trade with them surely its a case of caveat emptor?

[kirk2] 02/6/2011 09:50

last chance to get out before total colapse

[induna123] 02/6/2011 09:22

Somehow I don't blame the American, I blame the idiots that came in and bought the company off him for 4 times the price he paid for it. Didn't they realise what he did and the ramifications of it would be? This is sick situation.

[gdasinv2] 02/6/2011 07:53

so what would be the share price today, 30p

[stud-muffin] 02/6/2011 07:28

Clearly insolvent it reads more a case of when than if they go bust.

Who will trigger the end the BOD or a winding up order?

[edmondj] 02/6/2011 06:17

How the American fat cats made a killing from SCHE and set up misery for everyone else:

[boffster] 02/6/2011 00:15

So, the smaller LL's who are also operators are willing to take back their homes. SC will likely allow this to some extent, obviously depending which are profitable and which are not. But what about the larger LL's? Yes, they could force SC into administration, but where would it get them? They would be unlikely to shift these homes on to another operator, or if they did, they would have to accept a rental cut anyway. The properties are, as I understand it, unsuitable for other purposes. So one way or another, the yield on them is going to reduce. Why not agree a permanent rent reduction with SC in exchange for, I don't know, 50% of the company equity. The LL's are going to have to take their medicine one way or another so why not make it a less bitter pill.

The above is the reason I still think there's a chance shareholders will come away with something. Although I stress it is a chance.

[abergele] 01/6/2011 23:20

smells like a woolworths scenario.
of once you lose your assets..(property) you have no calateral to bargain with.

[mavverick] 01/6/2011 22:51

Office of Fair Trading and Competition Commission need to be stronger in the future and not let any one company get too big.