Carter & Carter Share Discussion Threads

[bronking] 18/9/2007 15:31

i think walrus meant whoosh as in over someones head

[musashi san] 18/9/2007 15:07

Walrus,

It just went up 1p ! ?

[cappagh] 18/9/2007 09:55

sandbank
Sorry, don't understand your post.
Please explain.

[sandbank] 18/9/2007 08:39

CAPPAGH: No, it's not your imagination. It so happens that it's my specific responsibility to monitor all your share deals and ensure that the purchased share does not rise once you have bought it (so to speak).
...But no doubt there is someone somewhere in the system who does the same for my buys too.

[cappagh] 17/9/2007 15:39

Is it my imagination, whatever stock I've been in.
If an institutional buyer comes along the price is
held down!

[v01101999] 17/9/2007 12:15

Bear Sterns increased again. Good sign.

[musashi san] 17/9/2007 11:58

ag,

BSIT Ltd is the trading arm of BS, not the fund management side, so I expect any position they have on their books to be very short-term...

[anotherguru] 17/9/2007 11:54

for more than 5 mins too!

[musashi san] 17/9/2007 11:51

Bear Stearns have gone over 4%

[musashi san] 17/9/2007 09:25

Not looking too clever.

Looks like the debt worries may be taking their toll in the current envoronment.

The 50-day MA has fallen through a weak 20-day, which will also be falling from tomorrow if things stay the same.

[markie7] 17/9/2007 09:05

thats a very important point. cheers

[v01101999] 17/9/2007 08:50

I had discussed with CART chairman. They do not have short term debt which is maturing in coming weeks/months. So they do not have the pressure to refinance maturing loans or commercial papers.

The only thing they need to sort out is continuation of those lines and terms on which they will continue. Considering banks are not adopting strong arm tactics (like freezing the lines or holding up the funds), it seems that discussion are being conducted in leisurley and cooperative manner with neither side particularly worried.

[v01101999] 16/9/2007 15:49

on CEO front they have indicated that they are on short list level .. at my level I am ok as long as CEO announce before/together with the results. Anything longer than that would make me bit nervous.

Regarding talks with bank, it is a special situaion. It is not a case of day to day re-negotiation of credit facility and also it is not a case of you either have a loan or not. Typically companies (and in this case Carter and Carter) have credit lines from the bank which are utilised in the normal course of operations. These lines are drawn upon in case of normal operations. Against providing these lines, banks usually require certain operational convenants. Typical of them is that the EBITDA would be X times the Total Loan/Overdraft. During bad times, the covenants can be broken (which seems to be a case with Carter and Carter). After breaking convenants, the banks have following rights/options:

a) They can call in the money immediately (or on 14/30 day notice). This is usually the last resort and effectively that is the route to bankruptcy for the company. Banks usually would not take this option as they do not have much chance of recovering the full amount of their loan in this case.

b) Banks can force sell some of the collateral with them against that loan, e.g. if the loan is secured on the free hold property, bank might move into sell it to recover their money OR take posession of the collateral.

c) Banks can stop lending any further money and start demanding the money already outstanding to be returned.

d) Banks can enter into discussion with the management about next steps, considering the covenants are broken.

e) Banks can ignore the broken covenants and continue as business as usual.

As you can see, a/b are options when banks think there is no hope (typically after c/d/e are exhausted). Usually banks would start with d) (or in a very bull market e but in todays climate, people are bit worried).

As part of d) bank would discuss with management what next -> may be increase the interest rate/may be agree a penalty rate/may be force management into an equity issue/placement so that debt/equity ratio improves for the company or in some case, banks might want to force management into accepting debtforequity swap i.e. banks would convert the outstanding debt into equity shares of the company. If you recall, this is what happend with BFC (bio fuel) where barclays took control of the company.

In case of Carter and Carter, so far D4E does not seem to be case and the recent acquisition proves that banks are not holding further advanaces which indicates their support.

In debt world, typically people would not lend further if they have no hope of recovering. After all, if under the mountain of debt the company goes bankrupt, banks have no recourse of recovering their money. So the fact that they are still cooperating and lending indicates that the banks are still not "worried" about the company.

Unless ofcourse the same banks have taken out that massive short position :-)

[gta5] 16/9/2007 15:12

Thanks Guys, that makes it a lot clearer to me. I appreciate you taking the time!

Another question tho...

It seems to me that the time its taking both to anounce a new CEO and to give a clear indication on the progress of bank talks is dragging on for a rather long period... especially considering their desperate need for new bids to be won, and as people have pointed out before, it's not gonna look good that the company has no CEO?
Why has a new CEO not been found since may? I realize that finding a new CEO is not an easy task, and under the circumstances the interim management has held up ok, but its been almost 4 months.. is this normal?

Also, the bit that does worry me:(Please forgive my ignorance regarding company finance it was never my favourite subject in school!)

Why are talks with banks ongoing? I thought that either you get a loan or you dont? either you have a medium/long term backing from the banks or not?
Judging by the sound of this they are renegotiating their credit facilities on a daily basis??!
and last question: (relatesd to the latest C&C purchase) would the bank be allowed to lend more money to a company in financial difficulties in order to get them into deeper waters in order to benefit themselves since they can dictate the terms?

Cheers,

GTA

[v01101999] 16/9/2007 14:20

GTA5 - 14 Sep'07 - 16:46 - 5746 of 5749

Stock on loans are used for variety of purpose but most prominent of them is to take up a short position in stock. You take the stock on loan, sell in the market and when you need to return it back as per the terms of the loan, you buy the shares back from the market and repay the stock loan. If during this time the price has dropped, you make money as well.

It seems holders of these positions are expecting a discounted right issue or share placement (to the tune of 17%), once the issue is announced, they can buy the required shares in the placement or using the rights at low price and use those bought shares to repay the stocks on loan.

However, if the company does not succumb to making a right issue or business conditions improve or a bid materialises, the holders of these positions would be hard hit as they need to buy the shares at higher prices.

We should not forget that this stock on loan could also have been used by some large shareholder(s) to protect their long position (i.e. if for some reasons they do not want to liquidate their portfolio but want to be market neutral on CART in the interim period until the results etc). For these shareholder(s), if there is a right issue or placement, they can fund the purchase by the gains made on the short position and thereby maintain their holding in the company without dilution and without additional funds and if there is no such issue and shares rocket, they can close their short positions at a loss which would be compensated by the gain in the original long portfolio.

[patricktrfc] 14/9/2007 16:59

GTA5

Shares on loan are short positions where traders / hedge funds have borrowed shares off the true share owner and then sell them in the market, in the belief that after their sale, the price will fall and then can then buy back the shares cheaper to settle the loan and make a profit.

I.e. Long - Buy Low sell high
Short = Sell High buy low

Hope this helps

P

[briannewby] 14/9/2007 16:58

The shares will have been borrowed from a third party and sold into the market - the expectation is that the share price will go down so the stock can be re-purchased at a lower price and returned to the lender (therefore making a profit). Its quite unusual to see such a large % out on loan - imagine how the share price would react if 17% (about 7 million) shares needed to be bought back quickly? This implies to me the parties who have borrowed the stock are expecting to be able to acquire a large chunk at a lower price (hence squaring the position and making a profit) - and we know funding negotiations are ongoing at the moment.

(I hope that makes some kind of sense...)

I would expect the timing of the CEO to co-incide with results in Oct (+ financing details) - but don't hold me to it

(off to pub now - good weekend all)

[briannewby] 14/9/2007 16:48

Would love to know! With financing getting more expensive now, I am guessing that the "negotiations" will result in a discounted rights issue to enable these positions to be covered. The expectation must be for a significant discount for it to be worth the effort, as most of the loaned stock will have been borrowed in the 110 - 120 range. On the plus side, the share price has stood up remarkably well....

[gta5] 14/9/2007 16:46

Briannewby, V, What does this large amount of shares on loan mean? (In simple terms for the amateur investor to understand!)
Is it a stealth takeover by a bank/company? or just a very large gamble by an investment party?

Also... Would you agree that the timing of the anouncement of the new CEO is more important than the person ? (assuming its a well known name with a good record)

Thoughts?

Cheers,

GTA

[v01101999] 14/9/2007 16:41

who has this position?

[briannewby] 14/9/2007 16:28

check out new shares on loan figure....17.8% and a massive 24.7% of those on crest

[anotherguru] 14/9/2007 13:38

you're not wrong!