Interserve Share Discussion Threads

[aendjo] 31/5/2018 07:23

Jeffian’s scenario is plausible, but it is not the only possible scenario. Consider that in the next 24 months company and lenders have agreed on a plan to reduce debt below GBP 450m. Assets disposal and cash generation will need to be very significant in order to service interests and reduce leverage - but clearly auditors and company think it can be achieved.

[jeffian] 30/5/2018 23:38

#9321,

They've staved off collapse by a short-term finance deal which runs only until 2021.

"These new facilities will mature on 30 September 2021. Existing debt and private placement notes will be amended so that they also mature on 30 September 2021."

At that point, they will still have unsustainable debts which will need refinancing and in the meantime they are committed to repaying the banks more than they make for the next few years so all profits and the proceeds of necessary disposals will be grabbed by the banks. I previously referred to 'zombie' companies, which caused some derision, but that is what is likely to happen. The company may well continue ok at the operational level, but with all cash generated being sucked up by the banks and a further refinancing in the offing, there is no reason for this to trade outside the current range for years to come IMHO while shareholders are the last thing on the mind of the Board.

[da vinci1] 30/5/2018 22:18

Wind... I doubt if the BOD would recommend acceptance of an offer at 120p as it would materially undervalue the company. Jeffian, why is a refinancing inevitable? They've only just refinanced and funding was secured for the next three years. GLA

[windrushg] 30/5/2018 21:50

Coltrane only have to wait till September then if they want to make offer.Could then get to 30% and offer 120p per share for highest price paid in last 12 months eh.

[aendjo] 30/5/2018 19:49

Correct Jeffian. Coltrane was loading up in June-July 2017 (when they had about 9%). The stock was trading in the 220-246 range then.

[jeffian] 30/5/2018 18:49

That's the highest price paid by the potential acquirer, not the highest price paid in the market btw.
For what it's worth, my guess is that they would want to secure over 25% to make sure they could block any Special Resolutions (requiring 75% shareholder acceptance) when the inevitable refinancing comes.

[aendjo] 30/5/2018 17:17

Very interesting, indeed. Part 28 of the Companies Act 2006 states: “When a person or group acquires interests in shares carrying 30% or more of the voting rights of a company, they must make a cash offer to all other shareholders at the highest price paid in the 12 months before the offer was announced”. That’s 246p currently. Given there’s a fairly concentrated ownership, I see the ingredients of a juicy short squeeze.

[gregpeck7] 30/5/2018 16:45

Square point short down again ( short tracker just updated) I suspect we will see a few more start reducing.

[cc2014] 30/5/2018 16:41

Everyone can see Coltrane are absorbing all the volume and yet the market doesn't see what they see as they keep willing selling shares for Coltrane to buy and looking at how many they are buying there are not that many other buyers.

Strange.

[gregpeck7] 30/5/2018 15:46

Cc massive vote of confidence.. I think shorts will start buying back in scale shortly...

[gregpeck7] 30/5/2018 15:42

Even more interesting that they made (rumoured) around 100m shorting Carillion.. so they clearly know the sector and are backing Irv.

[cc2014] 30/5/2018 15:32

Coltrane puzzling me.

Added another 1.74% to take holding to 27.3%.


At 30% they either have to
a) stop which would mean the share price will fall as they are propping it up


or if they want to go over 30% declare they won't make a bid (there are lots of restrictions about this and tbh I can't remember this actually happening except with smaller AIM stocks - I would have to research further)


or if they want to go over 30% make a bid. Why Coltrane would want to run IRV is utterly beyond me as it isn't their normal line of business as an asset manager. The only thing that would make sense is that they would have access to far lower rates of capital than IRV are paying but even then IRV are tied into their loan rates until 2021 so that doesn't really make sense either.


Any thoughts anyone? Possibly nothing odd at all. It's only a £40m stake at 75p which to Coltrane is neither here not there.

[gregpeck7] 30/5/2018 15:17

Coltrane added again.

[aendjo] 30/5/2018 11:00

Also note the statement: it is not our place to estimate how much it will cost Pennon to complete, compared to our own reasonable expectations. Those “reasonable expectations” must already be included in provisions, so further outgoings would be 69m minus mitigation/mediation minus insurance claims minus reasonable amount already included in provisions. As cc pointed out, unless they can agree on a settlement, this will drag out for years.

[windrushg] 30/5/2018 10:38

Could be out of court settlement if parties compromise maybe. So if both agree £30m say,and £20m already lodged, only liable for £10m or so.Would make sense if it 50/50 chance of winning for either party. Specially as 7 years of legal/professional costs would run to many millions eh.

[cc2014] 30/5/2018 10:06

The actual issues are I understand;

1. Did Pennon give appropriate notice to IRV to employ another contractor to do the work. The mutterings I have read in the press suggest Pennon may not have given IRV sufficient opportunity to rectify their failings. Pennon will of course argue it was blindingly obvious to everyone that IRV were not going to rectify their failings as evidenced by their failure to deliver to timetable. They will also bring in evidence that IRV failed to complete on other similar EfW although whether this would be allowable as evidence I'm not sure. The position of each party should be clear from the correspondence between them.
2. IRV will therefore argue if not given sufficient opportunity to put it right the claim should be struck out.
3. Even if Pennon's claim in principle is agreed, IRV will argue the quantum of the claim asserting that by employing another contractor it's like offering them an open cheque book. They will seek to reduce the claim
4. It is noteworthy Pennon have included their claim in receivables so they must have been able to persuade their auditors that the claim has a reasonable chance of success.

My guess would be the two parties will spend years haggling, spending money on lawyers and expert opinion and progressing through the courts. I strongly believe that while IRV may be able to mitigate the quantum they will lose the argument overall.

The main point is really that it doesn't matter whether the £69m is provided for or not, the cash situation is more important. It's probably in IRV's interest to drag it out 7 years by which time their cash position may be under control and they can afford to pay it. If Pennon's case is very strong and they can find a way to force this to a conclusion in 2 years then it's another £69m or whatever out the bank account and IRV's cash position begins to look very challenging indeed imho.


NB - that phrase "successfully lodged claims of £20m" is very important. I'll raise an eyebrow at "successfully lodged" as that doesn't mean successfully agreed.
So, the £69m cash out the door in 2-7 years time might be £49m or not or some other lower mitigated number on the premise the insurance claim is agreed which will be open to question too.

GLA

[aendjo] 30/5/2018 09:35

In the recently published Pennon 2017 results, the company states “Viridor is contractually entitled to recover incremental costs from the original principal contractor, Interserve, under certain circumstances. Discussions with Interserve are ongoing with regard to the contractual settlement. At 31 March 2018 a receivable of £68.7 million has been recognised.” - as in recognised by Pennon, by the sound of it.

There are a number of uncertainties relating to the outcome of legal proceedings, timing and size of insurance claims and I am not sure how much of these additional costs were already accounted for in Interserve results.

The above figure is a worst case scenario (100% of costs passed on to Interserve, 0% covered by insurance and 0% of those costs accounted for in earlier EfW provisions).

[gregpeck7] 30/5/2018 08:52

What does this mean for Irv mate?

[aendjo] 30/5/2018 08:46

From Construction News today:

Speaking to analysts following the presentation of the firmʼs 2017 results, Pennon chief financial officer Susan Davy said: “There is a legal process and obviously we have a very strong contract in place with the original contractor [Interserve]. “We have recognised a £69m receivable in the accounts from Interserve.”

Construction News understands the value has not been agreed by Interserve.

In its 2017 accounts, Interserve revealed it had successfully lodged more than £20m in professional indemnity insurance claims relating to “failures by the key subcontractors”; on the Glasgow job.

“These failures gave rise to additional costs and delays and were the greatest cause of both the losses recorded on this project and the termination of the contract by the client”.

An Interserve spokesperson said: “It is not our place to comment on how much it will cost or how long it will take Viridor to complete the facility compared with our own reasonable expectations.”

[aendjo] 28/5/2018 09:15

I would focus on the prospects of the company, rather than being distracted by the share price. I’ll admit that the radio silence on the sale of Interserve’s stake in Haymarket is bothering me a tad, but I think this is going to be a massive turnaround story. Bring on the AGM.

[whoknowswhoknowswhoknows] 26/5/2018 20:52

Doubt anything will come of that. Someone mentioned they sold all at a massive loss on another forum.

[dandanactionman] 25/5/2018 18:40

I assume there will be an RNS early next week if 2.6 million shares were sold in one chunk today?

[gregpeck7] 24/5/2018 20:28

Shorts reduced again...

[gregpeck7] 24/5/2018 17:12

Another 825,000 buy...