Brixton Share Discussion Threads

[fireplace22] 06/7/2009 06:58

Should imagine that most of the institutional 'shareholders' asked were holders of SGRO also.

[zangdook] 06/7/2009 06:54

"Brixton's board, shareholders and advisors deemed Segro's offer the best overall solution"

oh yes? I don't recall giving my opinion.

[fireplace22] 06/7/2009 06:28

From the Telegraph:

BRIXTON BONDHOLDERS UNDER PRESSURE AS SEGRO CLOSES IN.
Property group Segro has moved a step closer to acquiring Brixton after the former secured a preliminary agreement to purchase its rival for 107 million pounds in an all-share offer. The news follows the announcement that an alternative proposal put forward by a Brixton bondholder in order to stave off Segro's advances has been rejected. The bondholder had suggested Brixton take on new management and launch a rights issue to manage the company's 862 million pounds of debt, but Brixton's board, shareholders and advisors deemed Segro's offer the best overall solution.

[hamsterape] 30/6/2009 11:08

Burbs

The covenant-testing date will coincide with the official
release of those figures at the end of August, so they won't
announce beforehand, especially if they know already that
they are in breach.

[scburbs] 30/6/2009 10:44

Some comment on the leasing deals.

"Brixton boosts annual income by £1m
Nathan Cross 30/06/2009 09:15

Brixton added almost £1m of annualised rental income in June after making nine new lettings totalling 103,963 sq ft.

In a stock exchange announcement today, the company said it had let nearly 450,000 sq ft of space since the beginning of the year, culminating in almost £4.4m of annualised rental income.

...

Steve Lee, Brixton's operations director said: "The Norbert Dentressangle letting both creates new rental income and eliminates the empty rates liability which would have been due by the end of the year.

"The Sainsbury's deal is a good example of how we engage with our customers to find the right lease structure for their business needs and, by doing so, generate new income."

[e-mail]"

Source EGi

[scburbs] 30/6/2009 10:16

HamsterApe,

Are you referring to when the June results are issued?

Companies with June results should all already have draft valuations from their valuers. With the valuations known, the amounts of cash and the amounts of debt known and the value of the derivative available they will have access to nearly all of the constituents of their balance sheet. The only one missing will be other net current assets/liabilities. This is primarily made up of rental debtors (which they will know) and rents in advance (which they will know).

Therefore they should know whether or not they have breached their bond covenants way way before August (unless it is very very close) and, therefore, should announce to the market in my view. Whether they will or not is a different question. Presumably if they have failed then they definitely won't announce and will hope to complete the SGRO deal.

[hamsterape] 30/6/2009 09:25

No - it will be definitely be August.

The final Segro deal should be announced before then, anyway.

[scburbs] 30/6/2009 08:59

They should have draft valuations as of 30 June. Therefore, they should announce shortly whether they are in breach of the bond covenants, although if it is very very close it may take slightly longer.

[scburbs] 30/6/2009 08:52

Not much interest in the leasing update here. Fiddling and burning spring to mind anyone?

[hamsterape] 26/6/2009 11:00

Due to Segro edging up to 24p, yes.

Further investigation has determined that the bond covenant testing
date will in fact be late August when the company officially reports,
and these test will be baed on the June valuation.

The Segro deal is clearly now quite advanced while due diligence is done
and forms a kind of minimum option for the board to put forward - in other
words Segro can't turn around and undercut their own offer and it seems
they are unlikely to pull out now.

However, the other possibilities are that Brixton could still raise money
via a placing and/or open offer and could sell off assets, so if a better
alternative scenario was possible it could lead to Segro having to
increase their offer.

The likeliest scenario, as far as I can see it, is that Segro make a firm
offer within the next two or three weeks.

[fireplace22] 26/6/2009 09:41

For the first time Brixtons shares are now below the 1:1.75 offer price.

[hamsterape] 25/6/2009 19:08

I can't understand that article that claimed the bond-holders wanted
the board's heads to roll for a poor deal with Segro.

Surely the bond-holders don't give a sh!t what value the shareholders
get as long as their bonds are well covered?

[sommet2] 25/6/2009 18:13

Hamster,
Good point.I imagine many things will coincide.For example SGO will require their own valuation of BXTN properties as part of their due diligence.Perhaps both companies will agree on a common valuer to avoid duplication.This will take time - at least 2 months I think.This will give SGO some breathing space to do other work such as reviewing BXTN legal/rent agmts etc.Not much the bond holders can do to scupper things until they know the figures.

[hamsterape] 25/6/2009 17:50

Good find, Scburbs

Mind you, it just says it is the June '08-to-June '09 change in valuation
that is applied as a test. It doesn't actually say that the test is applied
on June 30th. Annual accounts take weeks to prepare and are released
months after the date to which they apply, so I'm guessing a valuation
may also take some time and that the date that the test is applied may
be some time later than June, unless you know different.

I'll try to find out the precise date and post tomorrow.

[warmsun] 25/6/2009 16:11

Sorry scburbs, but could you plse explain in English what this all means?

Nothing is ever simple!

Thanks for your earlier post minsky.

[scburbs] 25/6/2009 16:02

This release confirms that the bonds will be tested at 30 June contrary to their previous indications that there was no test until 31 December. Not very clever!

"Following a review of further advice received in relation to Brixton's unsecured bonds, the Board of Brixton wishes to clarify that the gearing covenants will be tested on the basis of the net assets published in the half-year results. The Board of Brixton remains focused on mitigating the risk of any covenant breach."



This is the clearest summary on the bond covenants.

"1. As our unsecured bonds (£630m in issue) are UK listed the terms and conditions are publicly available. The principal covenants are:

A debt to equity gearing limit of 175%.
Secured borrowings not to exceed 50% of adjusted net assets.
Under the terms of the £150m 5.25% Bonds 2015 (£145m now in issue) and the £210m 6% Bonds 2019, a holder of these bonds has the option to require the Company to redeem or, at the Company's option, purchase these bonds at their principal amount if there is a change of control of the Company and a Rating Downgrade or Negative Rating Event occurs.

A Rating Downgrade occurs where the rating is withdrawn or changed from an investment grade rating to a non-investment grade rating or (if the rating is below an investment grade rating) is lowered by one rating category. A Negative Rating Event occurs if the Company does not seek a rating of the Bonds or is unable to obtain a rating of at least investment grade.

The bonds do not have interest cover covenants.

For the Company to breach the 175% debt to equity gearing limit the value of the Group's portfolio (including its share of joint venture properties) would have to fall by 33% from the June 2008 valuation. This would reduce the June 2008 adjusted NAV by 60% to 180p per share."

[minsky] 25/6/2009 15:48

sorry warmsun - I just read some of last week's posts and scburbs covered the bondholder issue. There isnt much to cheer you up. It looks like we're running out of time...

scburbs - 22 Jun'09 - 14:35 - 1076 of 1109

If BXTN do not have a waiver from the bondholders and the covenant is breached on 30 June then BXTN will be in technical default. I believe this means the bondholders are entitled to request repayment on demand.

[hamsterape] 25/6/2009 15:41

UBS sold about 15m the next day.

Might be the same block that was bought yesterday.
Amounts don't quite match up, though.

[hamsterape] 25/6/2009 13:12

scburbs

Can you please provide a link to the details of these bonds with
the 30th June covenant-testing date - I can't find where the bond
info is on Brixton's website?

[sommet2] 25/6/2009 13:11

minsky,
Yes that is what I hope for.Going back to the covenant issue the RNS only mentioned "banks and banking facilities". There was no mention of Bond holders.Unless it was intended to cover all types of debt it appears that the bond holders may have an issue at the end of this month.

[minsky] 25/6/2009 12:45

even if there are no other players - if the Segro takeover goes through at 1.75 Segro per Brixton share - you just have to wait for Segro's price to increase to a mere 38p and you'll be back to where you were before the offer.

[warmsun] 25/6/2009 12:25

So, back to my original question......can we hope that someone else might be interested in the company - given today's RNS?

Any 'wishful thinking' comments would be appreciated - will cheer me up a bit :-)

[minsky] 25/6/2009 12:06

In the AGM Statement of 22nd June it stated:

The Company is in negotiation with its banks to refinance its banking facilities and has secured a waiver of any potential breaches of the asset cover ratio covenants under those facilities prior to 31 July 2009. Brixton will update the market on the position regarding its banking and bond covenants by the end of August when it publishes its results for the half year ended 30 June 2009.

So hopefully there won't be a risk of breach until the end of next month.