Gcp Asset Backed Income Share Discussion Threads

[hpcg] 18/12/2023 11:39

CC2014 - Open ended funds don't have a choice if they are suffering redemptions. I don't think I agree that unsophisticated investors invest in all world trackers, I think they have money managed for them, for example with St James' Place or a local financial advisor. Even a lot of self directed private investors just use funds. Even HL has £8.7bl in fund AUM, which will be their fund-of-fund portfolio ( ).

Anyhow, whatever the cause, I subscribe to your final statement too; if I thought the market was perfect I would only be in trackers.

[williamcooper104] 18/12/2023 11:29

Wealth managers own a lot of the investment trusts we ownThey've been selling to put their mugs - sorry clients - into fixed income

[donald pond] 18/12/2023 11:21

ADIG announced last week it is being wound up. So maybe they were selling the less liquid stuff before going public

[cc2014] 18/12/2023 11:17

Hpcg. Money for sure is leaving the market to pay for mortgages or maintaining lifestyles or being put into 5%+ 5 year bonds etc but I would have thought that most of the sellers will be unsophisticated and own world trackers, US magnificent 5, or some other large tracker or ETF, not from a stock like GABI which most people have never heard of.

However, whilst I was digging through ADIG this morning I've discovered ADIG have sold 3.1m shares in GABI sometime between Feb and November this year. They have none left now. Whilst I see the actions of Aberdeen and thus the trade flow, I struggle with the why? They've been selling GABI at a discount to NAV to presumably buy private markets. I don't get it. It's not even an issue with Gravis as they've been adding to their holding in GCP.

Perhaps that's all the insight I need though. Do ADIG and some other funds really know what they are doing?

[williamcooper104] 18/12/2023 10:39

Couldn't resist buying some this morning Not as if don't have enough busted investment trusts being wound up - sorry - strategically reviewed Reduced my credit loss assumptions and wind up period (17% and 3 years) to get to a 15 IRR Still worried about credit quality/loans to associated parties Would be great if the board could confirm that there was only one loan to the manager

[hpcg] 18/12/2023 09:27

CC2014 - domestic investors are continuing to withdraw from the market I think (no recent data to quote, but £26.2bn out of fund in the first 10 months of 2023). Some will be forced as needed for higher mortgage payments, some because the median investor acts 6 months to a year late. I now find myself wanting this to continue as I have a chunk of distributions turning up in January and would like to reinvest at these prices.

[cc2014] 18/12/2023 09:03

Nice news that GABI have cleared the RCF a couple of months earlier than expected and will now start buying back shares.

It will be interesting to see if the persistent sellers goes away or just carries on regardless.

[chucko1] 18/12/2023 08:42

Care home loans totalling £61mn with average life of just over 12 years. That will require some attention.

[hpcg] 18/12/2023 08:26

That has substantially reduced the duration of the portfolio too. I can't from memory recall if that was the furthest out loan, 2035 rings a bell.

[chucko1] 18/12/2023 08:22

Huge. These were pretty well the longest loans in the portfolio with a weighted average life of just over 6 years.

So, by end of Q1 24, nearly £200 of the portfolio likely to have been repaid. From an NAV of not even twice that, the current NAV is a way of making some decent expected gains, by pure maths alone. I had no difficulty buying this morning as the constant seller is impervious to all this, it seems.

[spectoacc] 18/12/2023 08:03

Excellent:

"The Company has received cash proceeds (the "Proceeds") of c.£35m from the early prepayment of loans secured against a portfolio of nurseries across the UK (the "Relevant Loans"). The Proceeds were made up of the repayment of £33.64m of principal, £0.65m of accrued interest and an early prepayment fee of £0.75m. The contractual repayment dates of the Relevant Loans were between 2027 and 2031. At 30 September 2023, the valuation of the Relevant Loans was £33.64m (representing 8.2% of the total fair value of the Company's investments)."

[rimau1] 18/12/2023 08:03

Confirmation that the RCF will be fully repaid by 31 Dec, great news and should mean a share buyback is on the cards given the discount to NAV. With vultures previously circling and rates having peaked surely the discount to book value should narrow from here.

[cc2014] 13/12/2023 14:51

There's also a difference between the Board recommending the offer subject to due diligence and not recommending the offer but letting them have a look.

I suspect the Board had made noises about a higher offer yet subject to due diligence would be required and the offeror felt that too much of a stretch.


From my perspective I wouldn't have accepted 72p for cash and neither would I have been too excited about 78p for shares.

[hpcg] 13/12/2023 14:25

frazboy - I think you, perhaps, and the market in general are over-thinking the offer for GABI. Firstly, put yourself in the position of the proposer. What level of return would they want? Given the mostly, but not entirely, short term nature of the holdings I would suggest an absolute minimum of 10%, but frankly something much closer to 20%. I'd suggest they thought they could realise a bare minimum of 83p per share. In reality it is probably a combination of short term cash and ongoing high interest. 45% of the portfolio (nav/nav) matures before the end of 2024. That includes 40% of the capitalised portfolio, which in turn is 20% of the overall portfolio.

What has changed now is very clearly the bid premium. A hostile or time consuming takeover would just take basis points off the potential profit. I bet they wish in hindsight they had gone in with a knockout bid off the bat as the lows hit. Now, no point wasting their time IMO.

For me the offer metaphorically backstops any buy with a 6 handle. I'd say at 60p there is a 40% return on offer and that discounts some considerable losses.

[frazboy] 13/12/2023 12:43

Price continuing to retrace.Lots to chew on as others have said but my key takeaways are, the board would contemplate an offer in the mid 70s, the reason for the withdrawal of the offer (happened on Monday) is a concern (why not at least do some due diligence?) and probably triggered the (timing of this) announcement. I'm inferring that there are no other material items to report on (bad loans) currently because this would have been the time to acknowledge such items.

[cc2014] 13/12/2023 10:38

Logic has no part in the market.

The latest NAV is £397m. I cannot understand why the major shareholders seem to want to wind GABI up on the basis that it's not large enough or not liquid enough. On that basis you might as well wind up 75% of the Investment Trusts in the UK and the whole of AIM as well. (oh and hand over the whole of the financial markets to the US and close UK plc while you are at it)

Indeed at 60p, GABI was ranked 448th in the FTSE. Hardly too small.

So, the plan to resolve things seems obvious to me.

1. Pay off the RCF which will be done in the next 3 months. I expect the NAV will still be around £400m as both £30m of assets and £30m of liabilities will be gone.

2. Start buying back shares and keep doing so until the discount to NAV reaches 20%

3. When it gets to 20% see how big the NAV is and make a decision then about GABI's future.

[chucko1] 13/12/2023 10:27

CC, indeed! Yes, RCF will be history very soon and that may in itself have a discount narrowing effect. Shouldn't do, but when did logic last play a significant part here?

[2wild] 13/12/2023 10:07

Maybe a tender offer, 25% of shares at 2% below NAV.

[cc2014] 13/12/2023 10:03

At the end of the day GABI will have fully paid down the RCF in Q1 2024.

And then what? Share buybacks I would have thought.

[2wild] 13/12/2023 09:47

Still on 30% discount to nav at 65 pence. With Firm Proposals due in 5 weeks, should have further to go, especially with UK 5 year gills falling below 3.85%

[cc2014] 13/12/2023 09:39

lol. Good point Chucko. How embarrassing. Too much going on this morning with GABI, GCP, TENT at it as well.

GCP another one that's undervalued although perhaps by not as much as GABI

[chucko1] 13/12/2023 09:27

Are you referring to GCP? This is not GABI's portfolio.

[cc2014] 13/12/2023 09:11

The portfolio has significantly transitioned away from property over the last couple of years. Only about 35% is now "property". 65% is focussed on the renewable sector.

It's now

Geothermal 1%
Solar 25%
PPP/PFI 24%
Supported Living 11%
Hydro 2%
Gas Peaking 1%
Biomass 9%
Electric Vehicles 1%
Wind 17%
Anaerobic Digestion 9%

[chucko1] 13/12/2023 08:39

On LTV, it is worth considering a few things here:

it is essentially an asset backed project lender, but there is certainly a large fraction of its portfolio which is deemed "property". They look at their risk through the lens of project and infrastructure finance, and so it is the analysis of cashflows which is their focal point/language.

However, if you go to page 60 of the 2022 annual report, they do cite an average LTV of c. 70%, so in line with (a little higher, in fact) RECI whose sole business is property lending.

It is the combination of management quality (as I always cite with RECI) and other risk analysis (and there will be substantial amounts of this) which dilutes any concerns I would have re. the LTV matter.

I do not mind what I see re. management and in any event, 56p to buy (as was a few weeks back) was far more than generous in rewarding me for those ever-present uncertainties.

Sold out of a few this morning as we have seen this movie on "strategic reviews" often on ITs with an initial oomph and then a mild thud. That said, the entirety of the announcement this morning is something rather more than just this, especially considering the previous statements they have made regarding the May 2024 AGM where the continuation vote was to be held and they are even now acting as though it is not going to continue. This is clear from all the language in the various reports published the past few months and the zero new money spent on lending together with the intention to remove the RCF with all due speed.

[speedsgh] 13/12/2023 08:30

They kept rather quiet about this...

"On 6 October 2023, the Board received a non-binding proposal from a US-listed investment company (the "Possible Offeror") to acquire the entire issued share capital of the Company. The proposal comprised a cash offer at a level of 68 pence per share in the Company, paired with an alternative pursuant to which shareholders could elect to receive US listed shares in the Possible Offeror for each share held in the Company, with an exchange ratio to be set at a point prior to any firm offer announcement to equate to a value of 76 pence per share. The proposal was unanimously rejected by the Board, following which on 27 November 2023 a second conditional and non-binding proposal comprising a cash offer at a level of 72 pence per share in the Company, paired with a share alternative offer at a level of 78 pence per share was received. The Board agreed to provide the Possible Offeror access to confirmatory due diligence. Prior to accessing such information, on 11 December 2023 the Possible Offeror notified the Company that it would be withdrawing its proposal."