Gcp Asset Backed Income Share Discussion Threads

[speedsgh] 01/2/2024 10:49

Loan prepayment -

The Company has received cash proceeds of £18m from the early partial repayment (the "Prepayment") of a loan secured against a portfolio of property investments (the "Relevant Loan"). The contractual repayment date of the Relevant Loan is March 2024. As part of arrangements agreed with the relevant borrower in connection with the Prepayment, the Company has agreed to extend the maturity of the remaining amount of the Relevant Loan and other loans made to the wider borrower group (the "Group Loans") totalling c. £53.7m, which are also due in March 2024, to no later than 29 June 2024. The Company has also agreed to an increase in the interest rates of the Group Loans in the period until the 29 June 2024 to align such terms with the current credit market conditions.

Following the Prepayment the Company is expected to have a cash balance of c. £50m. The Company has no outstanding balance under its revolving credit facility ("RCF"). The Company has recently announced that the Board is in discussion with its advisers in connection with the initiation of a £7 million share buyback programme in the coming weeks that would enable the Company to make capital available for return to shareholders in the period to 30 April 2024. Any share buyback programme may be tempered by regulatory and commercial considerations in connection with any potential approaches for the Company at the relevant time.

[neilyb675] 29/1/2024 18:15

at 31 December 2023, the unaudited net asset value ("NAV") per ordinary share of the Company (including current period revenue) is 93.21 pence per share.
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I wouldn't vote for a sale at 78p with the NAV at 93p, so any sale would have to be much closer to NAV.

If that isn't going to happen - then I would vote for an orderly wind down.

[skinnypope] 29/1/2024 17:01

[@loglorry1 – this is what my model assumes i.e. as the shorter loans roll off, the proceeds are returned to shareholders]

I was really trying to think what the major shareholders will say to the three questions being asked in the strategic review.

1. Continuing with current mandate after a capital return – I can’t see the point in this. Company will be smaller, and the market will continue to price at a discount. There will be better returns elsewhere while this is the case.

2. Orderly wind down – 14-17% IRR on my calcs over 5 years looks decent, and up there with private credit funds IRR (that don’t offer daily exit liquidity!)

3. A fair sale price for the company – as per my calcs 81-82p, not far off the 78p price approach mentioned in the 13th Dec RNS. I’m in at 90p kind of level, so an exit at 81p wouldn’t be great, but it’s the new reality in this IT sector right now.

[loglorry1] 29/1/2024 16:34

I'm assuming (perhaps wishful thinking) that they'll aggressively buy back stock when loans are repaid over the next 12-18 months and that should juice the IRR a bit. GABI a bit different from DGI9 in nature but DGI9 starting to look a better bet than GABI but more risky.

[williamcooper104] 29/1/2024 16:17

I added some credit losses (about 5 percent) and assumed a little quicker realisation - there's one loan that runs to 2030 something And I was getting to 15 to 20 IRRs - depending on timing - I did it over an average of 2 and 3 years It won't be done of course in 2 years but if there's a lot realised in next 18 months then it's not impossible for the average to be 2 something

[skinnypope] 29/1/2024 15:05

I’ve just run a cashflow model on a 4–5-year wind down scenario, with the company fully wound up by end of 2028. I have used the following assumptions.

1. The current NAV has provided sufficiently for credit losses on the problem loans (as per quarterly update)

2. Loans out to the end of 2027 run off at NAV.

3. Distributions (dividends) continue to be paid in line with the interest receivable i.e. dividends drop gradually during 2024-2028 as loans run off.

4. The £30.9m cash pile is used for £7m buybacks the next 3 years, the balance of £9.9m is returned on 31 Dec 2028.

5. Assets maturing from 2029 onwards are sold off before the end of 2028 at a discount of 25% to NAV, proceeds payable at the end of 2028.

This gives an IRR of ~17%

Even moving the asset sales to a 50% discount to NAV gives an IRR of ~14.6%

If I was an institutional shareholder, I’d be OK with a wind down on those terms. The manager seems to be on top of the credit story, debt is zero and the portfolio is a short WAM.

Alternatively, a fair price for a sale would (for me) be around 81-82p to return the same IRR

[chucko1] 29/1/2024 11:53

This announcement has no surprises relative to what we have been anticipating the past few months.

[speedsgh] 29/1/2024 11:22

"The Board is in discussion with its advisers in connection with the initiation of a £7 million share buyback programme in the coming weeks that would enable the Company to make capital available for return to shareholders in the period to 30 April 2024.

The Board continues to consider a sale of the Company as an option for its future. The timing and/or implementation of any share buyback programme may be tempered by regulatory and commercial considerations in connection with any potential approaches for the Company at the relevant time."

[neilyb675] 29/1/2024 11:13

The anticipated dates and sequence of events relating to the Strategic Review are set out below:

Initial shareholder consultation period

29 January to 23 February 2024

Publication of outcome of the Strategic Review

mid-March 2024

Posting of AGM notice / shareholder circular

mid-April 2024

AGM of the Company

15 May 2024



Alex Ohlsson, Chairman of GABI, commented:

"The Board looks forward to engaging with shareholders as it seeks feedback to inform its decision-making process for the future of the Company. The Board will be seeking to ascertain a future direction for the Company which can be supported by a majority of shareholders. The Board remains committed to maximising value for shareholders."

[neilyb675] 29/1/2024 11:12

As part of the Strategic Review, the Board is seeking shareholder feedback to inform its decision-making process. Barclays Bank PLC, acting through its investment bank ("Barclays"), financial adviser and corporate broker to GABI, will contact the Company's key shareholders to arrange meetings with the Board shortly.

The Board would welcome shareholders' views on the future strategic direction of the Company, including in respect of the following:

· a potential continuation of the Company in accordance with its current investment policy delivered by the Investment Manager, paired with a partial return of capital;

· a suitable time horizon for the return of capital in a potential orderly wind down of the Company; and

· acceptable pricing on a potential sale of the Company.

[cwa1] 25/1/2024 15:25

Hi gemlotte55

I don't use dividend max but when I went there they were FORECASTING(staus displays forecast) the following dates:-

Declaration 26/1
XD Date 8/2/24
Pay Date 12/3/24

Until the company actually announces them these are just(reasonably) educated guesses

[hpcg] 25/1/2024 14:59

Ah, I see what you mean. They tend to release a dedicated Dividend Declaration RNS appropriately tagged. I would expect that again, especially with the number of Form 8.3 RNS junking up the stream.

[gemlotte55] 25/1/2024 14:36

Hocg, i thought they would have declared today, should be ex dividend on 1st February according to dividend max.

[hpcg] 25/1/2024 14:30

?? How on earth did you come to the conclusion that dividends might be paused? An early loan repayment was used to pay off the revolver. It is as simple as that.

[gemlotte55] 25/1/2024 14:28

I was thinking the same Garbetkib, unless it had been disclosed last year some time

[garbetklb] 25/1/2024 14:03

Are dividends currently paused? I can't see anything that explicitly says so, but note the comment about cash being used to repay loans / buyback shares. But that appears to have been so for some time - before the December dividend was declared.

[hpcg] 25/1/2024 13:53

I'm easy either way. Which way would you like your money is my favourite question to be asked as an investor. A capital gain in the bag, so to speak, with a decent dividend on cost gives one optionality. My question as an ongoing business compared with a continuation is whether similar investments can be made in a higher interest rate environment.

[chucko1] 25/1/2024 10:55

CC, I ditto all of that.

Perhaps we need to look further afield - in the US, for example, where ITs tend to be larger scale and where cashflow appears to be the marginal issue.

Private debt is another area, but again, tends to be non-UK domiciled. Or with restrained liquidity.

[cc2014] 25/1/2024 10:22

I agree that everything points to a wind down but for the life of me I cannot particularly see why the market is so keen on this. I get that it's a way to crystallise the value at close to NAV but other than that GABI seems to be doing broadly what it is meant to be doing.

I find myself conflicted. I'm more than happy to get an exit at something close to NAV (or even at 10% below NAV). My entry price is 55p and I'm in size so that would be great but on the other hand it's the end of another IT for no other reason that the fund/wealth managers seem desperate for cash.


I guess in the end I'll shrug my shoulders, taken the capital gain and move on to whatever the market has to offer me as and when that happens.

[chucko1] 25/1/2024 09:34

There were no surprises here. The value of this asset is not so much in the quarter to quarter statements, but in the continued lack of new information combined with the pure arithmetic of its price/assets/maturity profile(s).

Every statement made the past few months is pointing to an orderly wind down and return of capital. I can only think the the 11.4% of its assets which are regarded as impaired in some way serves to put off the marginal investor - but I see the expected recovery of this cohort as being 80% or more. That implies some loss of up to 3% of NAV. Trivial, not only as compared with the current discount, but also on the portfolio's average interest accruals.

Its cousin, GCP, is also rather interesting.

[speedsgh] 25/1/2024 08:26

More importantly confirmation that the RCF has now actually been repaid in full...

"At 31 December 2023, the Company had fully repaid its revolving credit facility (£30.1 million drawn at 30 September 2023) and had cash at that date of £30.9 million."

[spectoacc] 25/1/2024 08:21

Yes looks pretty good - no real change to the few problem loans.


"...The Board ....intend to use any available cash: (i) to repay the Company's outstanding balance under its revolving credit facilities and reduce the Company's net debt; or (ii) buyback the Company's shares whilst such shares trade at a material discount to ...NAV per ordinary share. Ahead of the May 2024 AGM, the Investment Manager, Gravis Capital Management Limited, will continue to work with existing borrowers to determine how best to maximise value for the Company."

[rimau1] 25/1/2024 08:03

Looking good here with a reassuring update - stable NAV and imminent announcement due on a share buyback and the strategic review.

[donald pond] 19/12/2023 10:21

Look at the chart. Things don't rise in a straight line, so a little pause before the next leg up is to be anticipated. I would have thought that funds like CGT and some activists would be looking at picking up the rump holdings of any wealth managers.

[cc2014] 19/12/2023 10:13

Good points. It's clear there are plenty of unloved stocks out there where players like Rathbones or Investec etc. are selling and prioritising volume over price.

I could understand this when 10 year gilts were up at 4.5-4.75% but I'm surprised it is still continuing now that we are at 3.7%.

Perhaps the selling pressure will abate once we get to the end of January aligning with the large flow to the Treasury at that time. Probably not though as QT will just keep on going as will government borrowing.