Gcp Asset Backed Income Share Discussion Threads

[williamcooper104] 31/5/2024 23:11

Declaring and then cancelling a distribution is v painful If it's been deferred once there's clearly a risk it will be rolled again

[papy02] 31/5/2024 16:42

The 24th June as (latest) payment date jars a bit.

If the £57m problem loan repayment, already deferred (most recently) from March to end June, is expected to be paid on or around that date, why not wait till mid or end July so as to include that in the first shareholder-distribution? Seems to indicate it is not expected to be paid on time (again), or at least that there is sufficient uncertainty to warrant going ahead without it?

[speedsgh] 30/5/2024 19:48

Maybe not a large amount (£9935) but interesting to see a director picking up shares in the open market after yesterday's announcement. Provides further comfort.

[jam62] 30/5/2024 13:22

Looks like the Ex date for reconstituted company will be the 11th June. A new ISIN number will be allocated to a reduced issued share capital (circa 331 million shares).

I believe yesterday’s statement on the forthcoming distribution has considerably enhanced the company’s credibility. The corollary of this will hopefully be a much-reduced discount to asset value going forward.

One imponderable, is an implied yield, but some guidance in this respect will be forthcoming.

Whatever conclusions are reached, the bottom line is that this security has undergone major de-risking in the last 24 hours.

[hpcg] 29/5/2024 21:47

I reiterate my post 307 - no one bids 78p for assets they think are worth 78p, or even have an NPV of 86p.

Also - please can the Form 8.3s cease now. Many thanks.

[2wild] 29/5/2024 18:37

Was getting annoyed, seemed to be dragging their feet, for no apparent reason. Didn't expect 24% minimum return, including dividend, im June at nav. Excellent result.

[papy02] 29/5/2024 17:09

... not to mention an outside chance of

"The Board has also received a number of proposals relating to a sale of all or substantially all of the assets of the Company (the "Asset Proposals"). Notwithstanding the conclusion of the Strategic Review, certain Asset Proposals remain under consideration by the Board. There can be no certainty ... "

presumably (/hopefully) at a lot better than 78p !

[rimau1] 29/5/2024 16:28

This is why we had suitors at 78p

[williamcooper104] 29/5/2024 16:12

Nice - 22% back by end of next month

[hpcg] 29/5/2024 14:54

The issue of conflicted loans has / had been overstated. Credit quality is much more important, and thus the watchlist reduction is more important. Pleasant news either way and all round.

[cc2014] 29/5/2024 14:24

Well done guys

[chucko1] 29/5/2024 14:22

Not to mention buying 22.5% of the stock at 89.7p. Should have moved even higher on all that.

[chucko1] 29/5/2024 14:15

The repayment of the Aussie loan is indicative of the ludicrous, almost, avoidance of risk the current share price indicates.

That was one of the nasty ones out of the way, and at 103% of most recent valuation.

Not only indicative of what a "problem" loan is in GABI's eyes, but important to the share value just in terms of the arithmetic.

[williamcooper104] 22/5/2024 17:03

All sensible When you are looking at the loans to be sold maybe good to look at what IRR a purchaser is getting Eg if marked value = £100 at a 7% discount then reduce the mark to get to a 10% rate All points to better to get out today at a 10-15% premium to share price

[skinnypope] 22/5/2024 16:51

@Papy02 - I have a simple cash flow model going out all the way to 2052.

In each year I have loan repayments and where a problem/watchlist loan matures I knock off a provision [currently set to 25%]. Add on interest payments and also the buyback this year.

For years 2024 - 2027 that's it. Then for 2028 I have taken all loans left (less my 25% provision on the problems) and assume a sale at a discount to NAV, which I have set to 25%.

I say all the above comes to the shareholder, but I have ignored fees/opex [too aggressive], but assume cash comes in on 31Dec each year [too conservative].

My cashflows are:

Date Total CF
22-May-24 (297,937,541) [current market cap @ 70p]
31-Dec-24 180,874,744
31-Dec-25 22,865,906
31-Dec-26 33,395,651
31-Dec-27 67,780,412
31-Dec-28 94,265,297

XIRR in Excel gives IRR of 15%

It's very very rough, I know there are a few errors in there, please be gentle :-)

[papy02] 22/5/2024 16:22

Interesting post - thanks skinnypope.

Would be interested how you get to 15% IRR if you are willing to share.

My own attempts are too amateurish to share. But under (82.5p share price + a 12% IRR from Dec 31 2023), Gravis gets no Performance fee? It seems unlikely they would have signed up to cutting their regular management fee if they felt getting any Performance fee was unachievable? And they should know the portfolio better than us (or am I being too generous, given the staff departures?)

[skinnypope] 22/5/2024 16:08

I carved out some time today to have a deeper delve into the annual report, especially the parts on the post year end activity, as well as trying to reconcile some of the numbers against the old stale portfolio report from last year.


1. Cash – the 31Mar number at ~£60m kinda reconciles against the opening balance of ~£31m plus repayments & interests less dividends and opex. I’m a couple of million out, but am not going to drive myself mad looking for it.

However, it is worth noting that there are extra payments since 31Mar of ~£7m loan repayments already received, as well as £9.5m on “Property Co 20” which is noted as “Agreed repayment date 31May2024”.

So by the end of the next week cash should be ~£66m which I think augers well for a possible upsized capital return?


2. Loan revaluations - again the numbers seem to largely tally. Opening valuation of £362m less repayments of £34m and PV changes of £10.2m [more on this below]. This sums to about £3m difference to the factsheet valuation of £321m, but there will be pull to par and a few other bits that’ll explain that.


3. Credit deterioration – I’d recommend everyone to read pages 20 and 21 of the annual report. Some fairly grim reading in there with loans being marked down – the summary statement is on page 138: “the independent Valuation Agent decreased the fair value of six problem and watchlist loans by £8.5 million and one further conflicted loan by £1.7 million in their valuation report as at 31 March 2024”

So how worried should we be here? The “Problem Loans” 1, 3 and 4 are now relatively small, but PL2 being written down from £12m to £9m is ominous, although some interest was paid this year. “Watchlist Loans” 1 and 4 also don’t look promising, no interest received this year and a total outstanding of ~10% of the book.


So where from here? My figures haven’t changed a great deal, the IRR coming down slightly due to higher share price and decreased loan valuations, I now see 15% IRR.

Upside case: cash position seems healthy, capital return imminent [upsized?], persistent bid talk

Downside case: credit outlook was worsened

So I’m a HOLD here, but lower target to high 70s (down from low 80s)

[hpcg] 21/5/2024 17:21

I take note of the 78p bid. From the perspective of the buyer they must think it worth considerably more and have a decent margin of safety. Can't see why anyone would want to waste their time on a 10% gain, even if a lot of the cash expense comes right back.

[chucko1] 21/5/2024 12:43

I still have plenty of GABI. The main risk is a large single loss, as they have experienced in the past on one occasion. They counter this by saying that the 0.5% per annum experienced loss rate is basically entirely made up of that one loan. The risk manager would counter argue that this is not helpful in a wind down as there is no further diversification over time to soak up this (consequentially higher) loss (rate) were there to be another large single loss.

Nevertheless, all else appear to be in reasonable shape and the current discount and average portfolio life suggests a 15-20% IRR (reinvesting capital repayments in the short term) over the nest two years.

I would prefer a portfolio of a few GABIs, rather than swapping from one to another. I buy the arguments on things like ASLI and API, and I do not even mind a few VSL at the new lower sale price(!!), but I like the overall wind down concept as a risk rather than a similar risk on those not winding down where there remains a different systemic risk in that any further IR shock will knock further spots off them. The economic argument of higher underlying rates for the medium and long term argue against the same sorts of returns on the likes of SUPR (though I have many) and even the likes of EBOX. Chuck in some cheap things that are relatively IR-agnostic like RECI and SEQI, and I think you can construct an argument for a reasonably diversified 12-13% IT portfolio over 3-4 years. Do the maths and you find you will be 50% better off by the end of 2027 without much of a concern about rates.

[cc2014] 21/5/2024 07:34

Sold as my view of the credit risk changed after reading pages 140-141 of the accounts.

The manager conflicted loans (that's loans to the investment manager or directors of the investment manager or employees) are a disgrace.


Better options elsewhere. Chucked two thirds of the cash on GSF at under 60p which has worked out well


PS - as an aside I do not like that the portfolio information pages 140-141 are unaudited. I am confused by this. It seems to be provided as additional unaudited information but I would have expected it as part of a set of annual reports and financial statements to be audited. Is all of it unaudited or just parts of it?


Edit. I'm completely and utterly confused why this section is unaudited. Surely the whole point of the annual accounts is that the auditors take a random sample of the assets and check the evidence the company is providing to it's shareholders

[williamcooper104] 20/5/2024 21:36

Indeed - that's why despite my concerns I did buy some GABI

[papy02] 20/5/2024 21:11

Thanks. I agree those are the worry pinch-points. Especially the 57m getting deferred from Mar to June, alongside the memory of how they took their last humdinger loss spread over many years, writing it down but by bit. And with this 57m (and the 18m repaid in Feb) it doesn’t look like it was clear it was all effectively with a single borrower.

But on the other hand, the independent valuers should have already built these concerns into the last NAV. In many of these windups it seems to me that pessimistic assumptions are counted in multiple times, by the company, then by investors.

But you are right, surprises are also par for the course! Time will tell.

In any case, thank you for your feedback - always more useful to understand a contrary view than feeding our confirmation bias ! (Especially when it comes from respected posters like you guys).

[rimau1] 20/5/2024 21:00

My point was a portfolio could have both API and Gabi. Gabi could still be bought out, if not there will be a buyback. I am a happy holder, i'll buy more in the 60's

[williamcooper104] 20/5/2024 20:50

Indeed - think we all would quite like to have gotten out at 78 so long as it's 78 cash in a few months