Interserve Share Discussion Threads

[general george] 21/3/2018 22:10

Good spot Fenners. And that would be similar to what Carillion were charged, 10%
This deal is much worse than it has been dressed up.

[eodfire] 21/3/2018 22:08

Don't forget jaknife, he was endorsed earlier today. You definitely need to listen to him apparently.

[da vinci1] 21/3/2018 22:04

It is your prerogative to keep open then,and/or increase your Short position. You can't fail to do well being such an expert.

[fenners66] 21/3/2018 21:53

aendjo - read my comments about the interest

What is the interest rate on the loans - they can just put it in black and white

But is says "Pricing on both the new facilities, and the existing debt and bonding facilities have been renegotiated as part of the refinancing. It is anticipated that the total interest expense in 2018 will be approximately GBP56m"

So IF I take the £56m to be the 2018 interest on the NEW facility that may start on say the 1st May and IF that is on the full £834m

Then the maths would be 56/834 x 12/7 charge for 7 months grossed up to annual rate = 11.5%

As I said they could have killed that speculation stone dead by declaring the rate of interest.

[unclejr] 21/3/2018 21:50

For those long term holders, simply consider this scenario.

Consensus fY18 EBITDA is $140M and managements view is that they will be above this. Even if you ignore any top line growth or margin improvement just assume this for the next 5 years (extremely pessimistic in my view given Carillion Exit, Fit for Growth etc)
Now Imagine all excess cash over the next 5 years is used to pay down debt. What will this trade at when NetDebt/EBITDA < 2.0? In my view, this will easily trade at an EV/EBITDA multiple >6x and more likely > 8X. Work out your terminal valuation and determine your share price after allowing for the 20% dilution and smile at the result.

Now separtely assume there is some EBITDA growth due to increased margins, Fit for Growth etc. Re-run your valuation assumin EBITDA grows to £200M by Yr 5 (Relatively conservative in my opinion). Now look at the revised result and have a giggle to yourself.

Enjoy tomorrow but for you long term investors stay patient here. In my view a lot of value will be left if you dont now benefit from the leverage of normalising industry margins combined with strong management.

[aendjo] 21/3/2018 21:50

George, apologies, but you are wrong. Look at the numbers.

[cfc1] 21/3/2018 21:47

and now poor nigelpm...another loser who failed to buy and didnt know what to do....does make great entertainment........

[general george] 21/3/2018 21:47

Look at previous profits......take off the annual interest payments.
Wheres the profit? This saddled with debt it will never pay back.

I cant see it making a profit. Win win?

Win for the lenders, bleed it dry, then d4e later lol

[aendjo] 21/3/2018 21:46

GG and Fenners, credit was given when credit was due, I admit I was overly confident and thank you for sharing sobering views. However, your latest posts do not compute. The deal is far better than my most optimistic expectations. 56m of interest on a 800m refinancing works out as <7% interest rate. 20% after dilution works out as... 20% dilution. Which is great. I could have been wrong but it turns out you guys were, in my opinion. I’m staying long and holding my 0.2% of Interserve, will be happy to hold 0.16% after dilution. The company will prosper - strong management, strategy and sector recovery.

[nigelpm] 21/3/2018 21:42

The company is now on a secure footing.

You what?

Secure?

Try again.

[da vinci1] 21/3/2018 21:40

This deal is a win-win outcome for all parties and i'm happy for the financiers to have their (deserved) 'pound of flesh'. The deal to all intents and purposes IS DONE! Just a matter of dotting the i's and crossing the t's

[aendjo] 21/3/2018 21:39

Mmmh... fenners and george - credit was given when credit was due - I was overly confident and was humbled by your arguments - but your latest posts do not make much sense to me. 56m interest on 800+m works out as a <7% interest. After dilution, 20% equity to debt holders. I’m fine with that deal. Elated, even. I think the share price will reflect that.

[nigelpm] 21/3/2018 21:36

Actually the RNS is cleverly worded. 20% holding post dilution.

The dilution will actually be 25%

Good spot GG.

25% of existing - 20% post - why quote the post figure when existing position is far more relevant?

[nigelpm] 21/3/2018 21:34

You can't base the price after a deal was announced, they were worth £100m this morning


You base it on current value which goes up and down as the share price does.

There are currently 145m shares in issue

Based on 20/80 * 145 - we get an additional 36.25m shares issued.

If it goes to £1 tomorrow as some seem to think that costs the existing shareholders £36m

[fenners66] 21/3/2018 21:30

I have just been reading these posts thanks....


So they pulled an alternative financing arrangement out of the bag, and depending on when the warrants are exercisable have put off the new issue of equity.

"there is not going to be a dilutive debt for equity swap"

You are right there is however an offer of 20% of the company for £2.8m

And NONE of the debt is wiped off .



aendjo - where do you get your 6.7% interest from?


They were very careful NOT to declare the interest on the borrowings - sure they let someone come up with a guess as to the £56m but that will depend upon drawn balances

It mentions £56m for 2018 - is that just on the new facility starting 1st MAY 2018?
If so and even if it is on the whole £ 834m
that could be 11.5% !!

It is a step up from not declaring anything with the last emergency funding but clearly they have something to hide.

That speculation could be laid to rest by just telling us like every other company does.

Then NOT all that will be paid in cash .

So I guess they add another £22m to the debt.
And why do you not pay the interest ?

Because you do not have enough cash to make payments with !

Ok so it buys time and we can applaud the B.O.D. for that , they will be collecting their remuneration for a while longer for sure.

Then you have to look at the investment case - this company will not be paying any dividends for years to come and question just how much profit they can make.

Without disposal Proceeds this year it looks like they are saying the debt will rise to over £850m (rolling up the interest ).

Is that before all the expected exceptional redundancy costs?

This may survive to fight but so did Alpha Pyrenees whilst Barclays bled it dry , and Jarvis went bust , was it 2 years after their debt for equity ?

[general george] 21/3/2018 21:27

Actually the RNS is cleverly worded. 20% holding post dilution.

The dilution will actually be 25%

20 out of every 100 shares......so 80 inital shares.....
20/80 × 100 = 25%

Ouch thats big dilution to facilitate a high interest loan.
One which wipes IRV profits out, Saddles it with £800m debt.

It looks worse the more I look.

Enjoy

[losses] 21/3/2018 21:23

We shall see in the morning General...

[hawi2] 21/3/2018 21:21

terrible for you General George and all other bears out there :-)

[feileb] 21/3/2018 21:20

GG

I'm just celebrating you having to eat your own words!

The large share price rise tomorrow is a bonus

[csmwssk12hu] 21/3/2018 21:20

You can't base the price after a deal was announced, they were worth £100m this morning

[general george] 21/3/2018 21:15

Incredible people are celebrating a terrible deal. Lol
Which isnt for certain yet i might add.

I dont see much of a recovery, not when saddled with all this debt and the debt payments wipe the future profits out anyway.

Whats to celebrate? Haha

[h2owater] 21/3/2018 21:08

140p target