Digital 9 Infrastructure Share Discussion Threads

[donald pond] 26/3/2024 13:33

I've drafted something about this on LinkedIn. I think the best solution here is for the whole board to step down, Brett and Richard come back, and then I'd be happy to be appointed to make it 3. Please read and add a comment suggesting as much if you agree,
hxxps://www.linkedin.com/posts/paul-de-gruchy-4565a42a_investmenttrusts-jersey-activity-7178382158418313217-kkb6?utm_source=share&utm_medium=member_desktop

[donald pond] 26/3/2024 12:55

I think Brett and Richard came along with new ideas and the existing board are too close to the manager

[rambutan2] 26/3/2024 04:19

Agree that a worringly unclear rns re the surprise (to me in any case) director resignations. But it did make me think of this para in last week's interims from SLFR and the need for "free rein".

In posing the question: “How is the realisation proceeding?” it is worth recalling the background. With effect from 31 December 2020, the current Directors constituted a majority of the Board and from that point Brett Miller then had free rein to really work with the portfolio manager initially and then subsequently with the consultants and employee on running off the portfolio and returning cash to shareholders

(pg9)

[cc2014] 25/3/2024 17:55

They only just made it. Probably spent all day counting

[bagpuss67] 25/3/2024 17:30

Will need to engage Freshfields to advise on that CC before making a decision no doubt

[cc2014] 25/3/2024 16:39

One wonders if the remaining directors appreciate they have to inform the market out of the outcome of the vote at the general meeting.

[spectoacc] 25/3/2024 16:00

They both immediately resigned on Friday, so definitely a bust-up.

Implication is that the Board didn't like what Brett & Richard (saves me spelling the latter's surname) were suggesting, and hence it never got as far as an actual proposal, allowing DGI9 that wording.

I'd like to hear it from their side tho, both are experienced/not amateurs.

[ghhghh] 25/3/2024 15:52

Am I being paranoid but is

becoming a self-managed alternative investment fund, a proposal for which Brett Miller and Richard Boléat had indicated would be provided to the Company.

oddly phrased?

Why not say

‘…have indicated will be provided….R17;?

Implies a bust up? Perhaps over the valuation report which has presumably now landed on their desks?

[skinnypope] 25/3/2024 13:55

They are also named in the paragraph re Liberum acting as wind-down adviser, with one of the future state options being:

"(iii) becoming a self-managed alternative investment fund, a proposal for which Brett Miller and Richard Boléat had indicated would be provided to the Company."

Not sure what to make of this, speculatively maybe they stepped down as NEDs to pitch an option where they run the rump of the future company?

[redhorse2020] 25/3/2024 13:14

Any news from the EGM? Wonder why Brett Miller and Richard Boléat stepped down, they only joined a few months ago...

[invisage] 25/3/2024 07:36

Friday markets closed so by Thursday we should have latest NAV

[spectoacc] 25/3/2024 07:06

" The Board intends to publish the unaudited results of the independent valuation later this week."

[invisage] 24/3/2024 22:18

General Meeting

The Resolution is subject to Shareholder approval. The Circular contains a notice convening the General Meeting of the Company to be held at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL at 11:00 on 25 March 2024 setting out the full text of the Resolution. A form of proxy to be used in connection with the General Meeting is enclosed with the Circular.

At the General Meeting, the Resolution will be proposed as an ordinary resolution (which, to be passed, requires more than half of the total number of votes cast on the Resolution by Shareholders being entitled to vote (by proxy or in person) to be cast in favour) so as to duly sanction the changes to the Existing Investment Policy.

The Board considers that the passing of the Resolution is in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution to be proposed at the General Meeting, as the directors intend to do in respect of their own beneficial holdings of Shares which, in aggregate, amount to 582,031 Shares representing approximately 0.067 per cent. of the Company's issued share capital (no Shares are held in treasury).

The Board therefore strongly recommend that Shareholders VOTE IN FAVOUR of the Resolution being proposed at the General Meeting.

[keith95] 23/3/2024 14:41

"The £459m is now worth £350m as the money has disappeared in the accretion payment (plus other adjustments of course) Btw we have been round this before on this thread about 3 months ago."

.. and no-one bothered to ask DGI9? You can thank me later see above repeated:

"When D9 acquired its 51.76% economic interest in Arqiva, it acquired 51.76% of these shareholder loan notes."

£3.5 bn of Arqiva borrowings are accrued interest on shareholder loan notes and £2.1 bn the shareholder loan notes themselves that DGI9 has a 50% interest in.

Shareholder loans in the order of pecking come after bank loans and before equity as I understand it, whilst we have to bear in mind the £3.6 bn retained in the subsidiaries as reserves .... that I didn't get an answer to in terms of how these assets are retained.

The shareholder loan stuff is a practice used by private companies so it seems presumably to reduce tax payments, where as equity holders DGI9 can agree with other owners what to take in the £ to write the debt off if it so chooses, I imagine on any future sale or IPO.

But as it stands, Arqiva has operating profits that exceed £200 million a year, with reserves that can pay off a sizeable portion of the shareholder loans to the owners, along with the banks ....

.... so:

"The £459m is now worth £350m as the money has disappeared in the accretion payment (plus other adjustments of course) ..."

reads as garbage to me.

[williamcooper104] 23/3/2024 14:25

Yep It's digital infra but it doesn't have the growth characteristics of their other assetsIt's not terrible and they will be able to see it for likely more than the VLN but probably less than they paid for it

[keith95] 23/3/2024 14:00

"Nothing unclear, they are blocked by the terms of the VLN that they signed to fund the purchase"

DGI9 were not "blocked" by virtue of the VLN - from the interim report:

"Interest on the VLN is due annually in arrears on 30 June, and D9 has the choice either to settle each payment in cash or to accrue it. For the period ending
30 June 2023, the Company elected to accrue the interest, increasing the VLN’s outstanding balance from £163m to £170m. Accrued interest must be repaid in full before distributions can be made to the Group. After the fourth anniversary of the VLN, the Group can only receive distributions if the entirety of the VLN principal
and any rolled up interest has been repaid in full. "

Note the sentence:

"D9 has the choice either to settle each payment in cash or to accrue it."

DGI9 chose to not pay off the VLN interest but even if DGI9 had paid off the VLN interest, its unclear how it would distribute shareholder loans to DGI9 shareholders.

Hence my comment:

"I presume DGI9 thought a simple issue as a stakeholder but as it turned out they could not achieve for reasons that remain unclear outside of issuing shareholder loans being Arqiva's normal practice."

That was clear, unlike the someone claiming clarity in their poor understanding of detail, and tres amuse.

[cc2014] 23/3/2024 13:16

The investment in Arqiva was £300m + VLN of £159m = £459m

The VLN is between DGI9 and CPP or it was at the time. CPP may or may not have sold all or part of it on.



The £459m is now worth £350m as the money has disappeared in the accretion payment (plus other adjustments of course)


Btw we have been round this before on this thread about 3 months ago.

[alan pt] 23/3/2024 12:31

My point, which you chose to ignore and deflect by trying to assume some kind of moral high ground, was that you were approaching the broadcast revenues question from the wrong angle

But feel free to laugh and filter rather than challenging your own assumptions

[keith95] 23/3/2024 12:23

Update:

I received a response from DGI9 to my questions. The attached is the response to one question:

"Arqiva’s balance sheet includes large shareholder loan notes, which are a part of an internal tax and cash extraction structure. They are owed to Arqiva’s current shareholders, not external lenders. When D9 acquired its 51.76% economic interest in Arqiva, it acquired 51.76% of these shareholder loan notes. "

.. and what the VLN "bought".

So, current investment in Arquiva £300 million valuation £350 million and a stake in the shareholder loan notes as I assumed.

Bear in mind the sizeable assets locked up in the Arqiva subsiduaries.

[keith95] 23/3/2024 11:29

"Nothing unclear, they are blocked by the terms of the VLN that they signed to fund the purchase"

The DGI9 Arqiva purchase employed £300 million to buy 48% equity in Arqiva with a £163 million VLN that increased Economic interest to 50%.

The interims still state that the initial investment in Arqiva was £300 million - see page 38 of the 2023 interim report.

So, what the £163 million VLN "bought" is unclear to me. If the £163 million was a part of the Arqiva puchase, and with a current valuation of £350 million ...

... that's a tad over a £100 million loss, but if so, the purchase price would be stated at £463 million and that isn't the number stated.

So there is a missing unexplained element, obviously.

"Try asking anyone under 30 and they'll just laugh"


13% of UK people can't afford broadband - and I'm sure are not laughing about it - maybe lift the head out of sand and appreciate the struggles of some people in the UK.

I tend to laugh at people making stupid comments, to include generalising from personal experiences and hand wavy “ask anyone” comments - then I filter.

[cc2014] 23/3/2024 06:45

(not that it really matters as the shareholder loan notes are both an asset and a liability to DGI9)

[cc2014] 23/3/2024 06:44

The £2bn sale to Cellnet did not pay off the shareholder loan notes. This from this years accounts. It must have far off some of the other loans.


Shareholder loan notes which are unsecured, are listed on the Channel Islands Stock Exchange, are repayable
between March 2029 and March 2030, and cannot be called upon early. The shareholder loan notes carry a fixed rate
of interest ranging between 13% and 14% applicable to the capital and unpaid interest which can be deferred at the
option of the Group subject to certain conditions, qualification of which are subject to bi-annual review, applicable to
the capital and unpaid interest. The Group has exercised this option to defer interest payments since 2009.
The Group’s senior bonds and notes are structured within a Whole Business Securitisation package (WBS). These
instruments have covenants attached, principally an interest and debt service cover ratio and a debt leverage
ratio. The Group continues to comply with all covenant requirements.
There have been no breaches of the terms of the loan agreements during the current or previous year.
The value of the interest deferred on the shareholder loan notes at 30 June 2023 was £3,532.4m (2022: £2,846.9m).

[alan pt] 22/3/2024 20:58

Nothing unclear, they are blocked by the terms of the VLN that they signed to fund the purchase

I don't think Arqiva is a terrible asset, but it was undoubtedly the wrong thing to buy, it's not a comfortable fit with the rest of the assets and it is the source of the financial woes. However, all that's sunk cost and can't be changed

The future of bandwidth use and associated revenues is the key question for Arqiva. Broadcasting vs streaming is an argument already decided. Try asking anyone under 30 and they'll just laugh! I'm, ahem, a little older than that and I haven't had a TV aerial since 2006 and haven't had a satellite dish since 2018, I stream everything

But the real reason for turning off broadcast TV is because the spectrum is valuable and has multiple other uses. Therefore the broadcast infrastructure absolutely still has value. Does it have the same value? or more? or less? TBD