Grainger Share Discussion Threads

[jdschwartz] 11/12/2008 11:49

dividend yield anyone?

[kibes] 04/12/2008 18:18

kiwihope - I agree the issue is mainly about whether they will meet their covenants. From the final results the covenant details are as follows:

'Covenants
Our core facility has two covenants covering loan to value ("LTV") ratio and interest
cover. Under the first, a LTV of 80% could lead to
default of the agreement. At 70% LTV, purchasing restrictions apply. To a large extent the
business is currently operating under the
restrictions by cutting back on new acquisitions. LTV on the core facility at 30 September was
66% although this was reduced to 64% shortly
after the year end by the early conversion of 78% of our convertible bond. We are able to take
action to help keep the LTV ratio down, the
main one being asset sales. We estimate that if we are able to maintain sales proceeds in 2009
at the same level as achieved in 2008 then UK
asset values as used for covenant purposes will have to fall by c.24% in the year ended 30
September 2009 for us to reach 80% LTV.

Under the second covenant, our interest cost must be covered 1.25 times by net cashflow
before interest. As at 30 September the ratio
stood at 2.2 times (2007: 2.8 times). This covenant is calculated by reference to the previous
12 months results and, given the cash inflows
that we have already achieved to date, we are very confident that this covenant will be met at
the next testing period in March 2009.'


So according to the first covenant, they are in default if loan to value reaches 80%. They are currently at 64%. This looks rather uncomfortably close to me given the way property values are falling. I don't share their confidence about asset sales in 2009.

On the second covenant they look to have plenty of headroom (interest cover 2.2 versus a requirement of 1.25).

[kiwihope] 04/12/2008 13:58

Keeping an eye on this one as a possible buy. I agree they have large debt and I need to look at that further. But providing they can meet their covenants I can't see the banks pulling support. In fact, are they allowed to?

I need to see what the outer is - obviously a rise in property values would help but that may be some way off. There are lots of 'distressed' property companies about now - not ALL of them will go bust.

As for debts being larger than assets meaning a company is insolvent - that's rubbish. There are many listed companies with negative book value. Solvency means a comapany is able to meet its liabilities AS THEY FALL DUE. Provided Grainger meet their covenants they are plainly solvent.

[alexx] 04/12/2008 09:53

Took my own advice and got out yesterday, looking like a good thing at the moment. Still short MJW & PDX. Need another short now.

[coby4] 03/12/2008 21:10

and plans to defer interest payments for up to 2 years, take some of the excess supply out of the market - could be good

[coby4] 03/12/2008 17:05

end year figures released with trading update for activity in last couple of months, dont imagine there will be any news from them for a while. rate cut tomorrow, maybe halifax report for november will confirm nationwide's of slow in price drops?

[alexx] 03/12/2008 11:20

Still have my short open but don't feel very enthusiastic about it. The problem is that I can't see bad news appearing in the short or even medium term.

The falling asset value, or the possibly inflated? book asset value, may be a key weakness but when will any news about it actually cause a problem to the share price?

[coby4] 02/12/2008 17:55

that's the kind of purchase that shows some faith.

Broadhursts was a buy as well by the way

[alexx] 02/12/2008 13:10

and now 250000 buy by Henry Pitman

[alexx] 02/12/2008 10:16

17000 sell yesterday by Robin Broadhurst

[kibes] 01/12/2008 11:09

coby4 - yes I agree the rental income looks secure and the lenders would be crazy to take control of the properties, they will get nothing like the underlying value if they try to sell them. But banks are getting jittery and could easily panic like they have with Woolies. The underlying value of the assets was greater than their debts but despite that the banks have pulled the plug. But in the fire sale which follows they probably won't get their money back.

[coby4] 29/11/2008 17:46

but they secured substantial extra funding in the last year when others have found it difficult to do so - got to be a good sign? if they can carry on servicing the debt in the short term why would there lenders want to take control of over 10,000 properties? mostly either rent protected tenancies or tied into their property reversion schemes which would limit the field of buyers. bit more director buying would be nice

[kibes] 28/11/2008 12:56

coby4 - how can you value properties with long term sitting tenants which right now nobody wants to buy? Just based on the rental income I suppose. The attraction of their business model is these properties when they eventually become vacant will be worth much more. But will Grainger still be around to benefit from that or will debt kill them first? It all depends on their banks playing ball which is extremely questionable in the current climate.

[pyman] 28/11/2008 11:29

well - 2 directors buying - 37,500 shares .

[coby4] 28/11/2008 09:50

they claim the portfolio is worth more than the debt - presumably there has to be some independent confirmation of their valuation? they also say that there is a much larger reversionary value although this could only be realised if the properties were vacant. as most of it has sitting tenants this isnt easily achieved. definite upside if (big if) market sentiment changes and access to mortages improves

[kibes] 27/11/2008 17:57

Its very difficult to say whether this is worth anything or nothing really. Huge debts of £1.6 billion, does their property portfolio exceed that or not? Its anyone's guess but mine is not and things could easily get much worse next year. On the plus side there is plenty of rental income coming in and no immediate concern that loans will not be serviced, particularly if the rates might be reduced. I agree the banks will probably just go along with the situation unless something panics them. In a serious FTSE rally this could easily go back up to 200p as shorters are squeezed to the limit. Too uncertain for me either way at the moment.

[coby4] 27/11/2008 16:12

agreed no bid, £400 million is due June 2010 not 2009, guaranteed rental income, increased funding - banks must be happy, government looking to intervene in mortgage lending and prevent hasty house reposessions, new build almost dead, if they can weather the storm..........

[kibes] 27/11/2008 12:57

I agree with you they are probably bust, but they are certainly putting a positive spin on things. I shall wait until today's rally burns itself out before opening a short, the problem with short positions is bust companies can reach ridiculous highs as shorters nerves are tested to the limit. We are probably due for a major FTSE rally soon and this will drag GRI up with it. There will be no bid interest though, who would want the debt in exchange for largely unsaleable properties?

[wiseacre] 27/11/2008 12:08

I warned of a rosy hue on the accounts and the presentation IMHO is disgraceful. The salient facts are the company made a loss per share of 77.4p, borrowings have increased from £1.34 billion to £1.62 billion with repayment of £400 million due next June. A Gross NAV of 535p is meaningless as it does not take these borrowings into account nor the taxation on disposals. Burried in the accounts you will see anet NAV figure of 178p per share which, given the continued economic downturn and the fact it reflects the balance sheet date of 30 September, is hardly realistic

[wiseacre] 26/11/2008 13:42

Bearing in mind the company still has £1.5 billion in debt and against the precipitous fall in property values this company is probably bust. No doubt the forthcoming statement will put as rosy a gloss on trading as the board dares.(Just look at its previous statements). Holders really should make for the exit if they have any sense of reality. I admit I am talking my book. I have been short since the shares were at a level of 250p and remain short. They are likely to fall to 20p before any possibility of bid interest INMHO.

[coby4] 25/11/2008 13:15

big increase today

decent results Thursday?

[jdschwartz] 24/11/2008 10:48

How come the profit shown above says 77.5m but on tdwaterhouse to march 08 says 0.2m??

[kibes] 11/11/2008 19:02

sandbank - if the bonds are worth less than 50% of face value how can the equity be worth anything much? I wouldn't bank on shorting pressure coming off.

[sandbank] 05/11/2008 15:06

ERSTWHILE2: Thanks for that info. I was quoting a point made to me by someone close to the company but I'm not really across how this works (as you can probably tell). Do you think the shorting pressure is now coming off GRI now ...or not?

Reading today's RNS - it all seems relatively positive.

" sales from our core and retirement solutions portfolios for the year ended 30 September 2008 were 17.5% up on the previous year and that we were, and we remain,
confident of meeting our interest cover covenant not only at that date but also at 31 March
2009, the next testing date."