If GCP paid 85p (in stock) for the rump of GABI and using between 10% and 15% haircuts on the rest of the loans (0% on the 2024 ones), still gives a 8.8% XIRR to GCP on the remaining book that they would acquire. There's plenty of meat on the bone to interest GCP shareholders while still being able to give GABI holders a decent uplift from here and for Gravis to make out like bandits. |
I have more GCP than GABI; always have had. I would be happy for a discounted transfer to there for shares. Those that really wanted cash in hand have a had a chunk, and a reasonably liquid market to sell down more. |
The 78p bid was before the big cash return at NAV of around 1/3rd of the market cap. Bar around £42m there isn't much in the way of loan repayments until 2027.
That's not to say there isn't significant value here. I still think best returns will come from Gravis merging the rump into GCP. The last merge was rejected by GABI but that seems less likely now. I think it can be made attractive to GCP holders and for Gravis to still get their nice juicy bonus. |
Inside dealing and as usual nothing will be done. Suppose to be a criminal offence. |
Surely everyone (?) would be happy with a take out at a 7% discount to NAV i.e. 85/83p |
loglorry1
I was intrigued by the share price action today versus yesterday.
Yesterday, stock was bought at a level of 68p with consummate ease. Today, volume jumped to circa 4 times yesterday’s and ended the day at 72p bid.
After enquiring with 2 ex colleagues who work in the financial services industry, the above explanation was cited.
I would remind followers that the last 3 price-sensitive announcements, have been preceded by significant upward share price movements. |
Now I have a good chunk of cash back, I wouldn't object to GCP/GABI merger at NAV for the balance, if coupled with a 93% cash exit for those that prefer that route.If it could be done, that'd take care of any share overhang as those who wouldn't be happy with GCP shares would go for cash. |
If true I wouldn't be upset |
Where did you see that rumoured? |
My understanding is that an offer has been made for the remaining portfolio that represents 93% of the current asset value i.e. a 7% discount. If this is acceptable to several of the larger institutional holders, the offer may be put to shareholders. |
I'm not sure GCP shareholders would want the GABI rump (would depend on price) but Gravis would want the bonus so might find a way to push it on them to enable them to hit their target and get their wind up bonus.
There's only another £46m of loans due for repayment in 2024 I think and then it goes very quiet for 2025/26.
Price very strong today - not sure why. |
Paid 68p yesterday and sold at 71p. Nice 4.1% profit in a day. |
I can't see any rump being sold to GCP after the way the last proposed merger was dumped by shareholders. GCP's main interest was in the short dated loans coming up for maturity - they will be used to return cash to GABI shareholders instead.Would GCP want to pay close to full value for longer dated loans? Surely they'd be better off buying their own shares? |
No problems with any of the above analysis. Discount applicable to any "rump" holdings is not easy to judge, but considering their long term default/impairment rate, the high discount rate set to arrive at the current NAV is a gift to medium term/patient investors.
I have generally held a fair few of GABI, and reinvested my ROC at the time. But will add more as and when. |
Just brought 4000 at 68p, yielding 9.3% paid quarterly and 25.6% discount to NAV. |
Likewise - thanks for setting that out Shame we can't easily share/post spreadsheets on ADVFN |
Yep - that's a good point |
I expect the rump could be sold to GCP who wanted to merge with GABI anyway. All comes down to price but given it's the same manager the price could be set so that they get their performance fees and everyone is happy(ish). |
Thanks Papy, that all makes sense to me. |
 Hi rimau1
Yes the IRR is an annual rate of return.
I would say the likely range is 16-18% p.a. shareholder IRR through to YE 2028 IF Gravis earn any Performance fee, which I think is probable. With an outside chance of up to 21% p.a.
My starting point is that Gravis know the portfolio better than I ever will, so it is of interest to see what our shareholder returns would be if they achieve the Performance Fee they signed up to.
You could argue Gravis are not that competent to have ended up in a wind-down scenario, and they have lost key staff, so may not achieve any Performance Fees. I recognise that’s possible. My money is on them earning Performance Fees, but nothing is certain, and others may take a different view.
Obv. if Gravis don’t earn any Performance Fee, then shareholder IRR would be lower than 16%, but I don’t have any special insight on a probable worst case – it would need e.g. modelling of worst case losses on Problem and Watch-list loans, or assessing the impact if there is a high interest rate environment in 2028 to try and sell the large (51% of Face Value) rump into, none of which I have looked at.
Equally if Gravis can pull loans forward materially, or an early sale of the complete remaining portfolio can be achieved, we might get an IRR higher than my range above, over a shorter period. I’d be happy with that, but again my analysis based on Gravis Performance Fees probably doesn’t add anything to that discussion. |
Rimau, probably more best guess vs best case. But an attractive return none the less. |
Papy - great analysis. The IRR is an annual return right? So noting your assumptions and caveats an investor can expect a range of anywhere between 12-21percent annual return out to 2028, correct? Best case- worst case. |
Thanks Papy02. Just trying to decide whether to reinvest my ROC or not. |
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