Gcp Asset Backed Income Share Discussion Threads

[papy02] 17/5/2024 19:55

Thanks Rimau1 (from the back of the class!)

[rimau1] 17/5/2024 19:45

Explains why we have not had a buyback, they must have been in high level sale discussions. I would probably accept a smidge over 78p

[rimau1] 17/5/2024 19:44

Post #233 i think answers

[spectoacc] 17/5/2024 19:35

Ah but then the managers miss out on their juicy incentives..

Definitely ought to have been pursued, and presented as an option to shareholders.

[williamcooper104] 17/5/2024 19:26

Plus if the bidder has leaked it there's every chance they'd go higher than 78 78 is a bit stingy but 80 something for cash quickly could be interesting

[papy02] 17/5/2024 19:08

I'm struggling to make sense of the net Cash position at 31st Mar 2024 (stated in EGM Circular as £60.8m). My quick (so maybe faulty?) calculation is:

They had c £30m at year end 2023.

1Q expected maturities were £92m (plus non-capitalised interest?)
(and the 2023 AR, in April, said "Post year end, the Group received 22 repayments totalling £41.4 million". It is not clear how much of this was expected 2023 maturities and how much 1Q24)

After adjusting for 1Q opex (c. £1.3m?) and dividend (c. £6.7m?) it looks like a large chunk of the 1Q £92m had not been collected by 31st Mar?

Thoughts welcome.

[williamcooper104] 17/5/2024 18:56

Compare and contrast with API who are getting broadly (IIRC) up to 1% as a transaction fee on selling and c20bps plus a few costs as a management fee Kick out Gravis Plus we still don't know how many loans have conflicts we have only been told the bad loans which have conflicts not the currently performing ones Another reason to kick them out Given there's no shortage of opportunities if happily take money today at a discount which I can then quickly reinvest

[skinnypope] 17/5/2024 18:21

hxxps://citywire.com/investment-trust-insider/news/gcp-asset-backed-turned-away-wind-down-specialist-brett-miller/a2442680?re=120253&refea=2081802

Amongst a few titbits here, this one is interesting:

"However, our sources say in the past month a credit investor contacted the company with a potential 78p-per-share offer that would have matched the upper end of an offer made, but subsequently withdrawn, by a US bidder in December. That offer was disclosed by the company, but the latest approach has not been."

[loglorry1] 14/5/2024 12:35

Yep I'd be over the moon with a 0.5% loss rate on wind up. I guess we all know that that when a loan starts to go bad it tends to be extended or refinanced etc. and so the loss rate on the residual is likely to be higher than 0.5%. How much higher I have no clue and there is plenty of room for it to be higher and for us to do very well from here.

[papy02] 14/5/2024 11:48

Thanks. I have updated the table in my original post (275) to sort out the formatting, and have added the number of loans in each time bucket.

I agree that estimating returns and risks require a lot more thought. The Maturities info is just an input, not an end-point!

Personally I set a lot of store by the way the manager incentive plan is structured - given Gravis agreed to it and know the portfolio inside out (more than I ever will).

[chucko1] 14/5/2024 10:44

You can look at their lending history and rate of capital rollover versus losses. In other words, the average life of the portfolio against the experienced 0.5% per annum loss rate.

If they continue at this rate, the IRR is extremely high, and you need to look at certain scenarios such as a 4% per annum loss rate to see if this is right for you. My calculation shows that to merely break even, you need far higher loss rates still.

I say this because although loss rates rising from 0.5% to 4% - an eight-fold rise - might seem unlikely, it is worth exploring the correlation between the longer dated loans which could provide the fuel for a quantum jump in loss rate at some future time.

[loglorry1] 14/5/2024 08:38

It's all down to how many losses they take on winding up the loan book. In my limited experience the NAV discount rates get bigger and the NAV drops when loans go bad as you approach repayment date if the loans are rotten. Conversely, if loans are repaid or recovery is decent it will all work out spiffingly. You just can't trust valuations and discount rates to tell you very much IMHO. The proof of the pudding is in the repayments!

[spectoacc] 14/5/2024 07:00

Agreed, thanks @Papy02. Would hope in a year's time, interest rates look different and some of those 2028+ loans can get shifted on at higher prices.

Assume there's no danger of the vote not passing on Monday.......

[hpcg] 13/5/2024 21:28

I don't want them to undersell the loans just to get rid. So long as they can keep costs down the long tail is fine. Good table by the way papy02.

[papy02] 13/5/2024 13:00

This is the Quarterly breakdown I get for the Principal Balance (incl interest). (Using the Dec 2023 Gravis spreadsheet without edits - I don't know which loans have paid out, nor any new loans). I think it illustrates the "don't expect further distributions quickly" point in the Circular, though Gravis job is to bring forward or sell loans to improve on this. Also there should be a lot more than £55m in the kitty for the first distribution (£92m maturities in 24Q1).

Table EDITED to try and improve formatting (thanks to help from pvb on advfn Problems thread!), show 2027 by Quarter, insert Quarters where no maturities (for clarity), and add number of loans.




Quarter Principal balance £k Principal balance % # Loans23all 30,423 8% 5 24Q1 92,291 25% 5 24Q2 10,241 3% 2 24Q3 16,844 4% 6 24Q4 25,123 7% 4 25Q1 - - - 25Q2 - - - 25Q3 - - - 25Q4 5,401 1% 2 26Q1 4,446 1% 1 26Q2 - - - 26Q3 - - - 26Q4 12,231 3% 2 27Q1 - - - 27Q2 1,646 0.4% 1 27Q3 29,812 8% 2 27Q4 21,987 6% 1 28PLUS 124,214 33% 11 Total 374,657 100% 42

[tag57] 13/5/2024 11:03

First time I have seen an share price described as luscious. :-)

[chucko1] 13/5/2024 09:23

It well might (take 3-4 years), but that might be more a statement of the length of the tail. It has a number of loans well past that time period, and the average being well short of that period. So it is all about the latter refinancings (or not).

If the loans previously scheduled for March repayment (now typically June repayment) pay off on time, then 50% of the loans are off the books in fairly short order.

Absent of an abnormally high future default rate, this is still arithmetically luscious. Was more so when at sub-60p, of course, especially considering there have not really been any non-foreseeable events the past few months. It had been signalled to be in wind down many months ago, notwithstanding the official vote in a few days.

[papy02] 13/5/2024 09:16

Re comments on “Shareholders may have to wait a considerable period of time before receiving returns of capital or other distribution.”


I agree. You would think the first 6 to 12 months they would harvest the low hanging fruit - loans where the interest rate, terms, or client situation make it easy/attractive for the client to refinance elsewhere. Especially if interest rates do come down.

However I have to give some weight to the fact the Circular begs to disagree. Maybe reflects Gravis negotiating position of “the performance fee target is very stretching” - to put an optimistic spin.

Re time to wind down, I got a whiff from the Circular that the expectation is end 2027, so 4 yrs from Jan this year, but would be interested what others think. Obv there are many loans with longer maturities than this that would either have to be refinanced elsewhere or sold on.

[cb7] 13/5/2024 07:35

I thought I read somewhere that it might take 3-4 yrs to wind down.....

[hpcg] 12/5/2024 16:59

chucko1 - indeed, the loans that would have been rolled over will have to find new funders, or they will be rolled over. That does mean they keep paying interest though. PIK of course is not distributable, but then it hasn't been to now of course.

[chucko1] 12/5/2024 16:23

According to the current amortisation/maturity schedule, there is likely to be a further capital distribution in the not too distant future (on top of the £55mn stated). It is after that where further distributions could be far apart, and dependent on their ability to secure refinancing elsewhere for the relevant loans.

A falling rate environment could make that a little easier, all else equal.

[hpcg] 12/5/2024 16:10

One can look at the asset duration profile to estimate how returns will arrive. I don't see why quarterly dividends should stop immediately, though they necessarily will reduce in size and ultimately frequency.

[2wild] 12/5/2024 15:51

ammons MNo. If another return was due shortly afterwards, they would not intentionally make a misleading statement.

[ammons] 12/5/2024 13:29

"....Shareholders may have to wait a considerable period of time before receiving returns of capital or other distribution."

Wouldnt the company have to say something like that anyway?

[spectoacc] 12/5/2024 11:23

Must admit I'd missed the second part of that - knew we had a payout imminent after EGM, but be interesting to know what timescale the latter part actually implies.