Invista EUR Prf Discussion Threads

[loobrush] 31/12/2013 18:53

Update-Shares currently 1/2 par value with 18% dividend.

These purchasers obviously think along the same lines as me or maybe they got to know something during the xmas festivities.

If the company get the loan agreement secured in the new year this could double overnight.

I hope they do as I've put a lot in here.

[envirovision] 24/12/2013 15:40

Around £43,000 worth of shares bought today.

[loobrush] 23/12/2013 13:04

News today

Hansteen Holdings (HSTN) has purchased a loan secured against a portfolio of mainly multi-let light industrial property in the Netherlands from UniCredit Bank AG for €41.675m, representing a 51% discount to the loan.

If Cerebus has purchased the loan from RBS at anything near this discount I would think a deal will be possible that will suit both parties.

[loobrush] 23/12/2013 12:44

However based on your theory RBS could have done the same thing and made more money than Cerebus could so if that was the case RBS would have taken that action.

Also IERP could find an alternative lender and pay of Cerebus.

Clearly the property management company who are employed to look after the business would not want to fail in their endeavours as it would cast them in a poor light. Therefore they will do the utmost to get a deal.

That is my view.

[rooky4] 23/12/2013 12:08

"I would have thought new loan owners would have bought debt at a discount"
Agreed, surely that is the only reason Cerebus would purchase the debt.
However, follow the logic through: the bank, not being a charity, would only sell the debt at less than its face value if it considered that it could not recover the full value of the loan. The ords and prefs are more junior, so the clever(?) people at the bank think the junior debt is actually worth zero.
Cerebus would like a quick profit, so can foreclose, delete the ords & prefs and sell on the debt again; as long as it's then at a smaller discount then they're in profit and bonuses all round.
As you can see, I'm struggling to find optimism here. But let's hope all the money men have made a big mistake and tbe board can find a white knight.

[loobrush] 23/12/2013 09:53

Todays good news of loan extension time and discussions with new loan owners
looks very good.
I would have thought new loan owners would have bought debt at a discount, this gives the company time to dispose of more assets and reduce the risks and to do a good deal.

Keep the good news flowing.

[blackpoolsteve] 13/12/2013 22:23

I,m inclined to agree with you loobrush,I think the prefs are oversold. Most of todays 48k trades were buys(5000 sold). Seems a bit of a panic on because of the ordinaries being sold down,the prefs track down with them.

Logic says they are much better bet than say AMB,averaging about 2500 @ 59p so thought I would hold off till next week. Not got your cash or bottle,only £1000 to invest,so see how things unfold.

I have 2 portfolios -as the old Bearbull portfolios - a speculative (which holds this one),and a passive/income which hold sold down TRV and MGHU

Any thoughts on these strategies,or others may be of interest to other investors

Kind regards,Steve

[loobrush] 13/12/2013 21:39

Taken the plunge today and bought 20 thousand odd of the prefs at 47p

My reading of the situation is that refinancing will be achieved and the company will be able to continue its liquidation programme. The company appointed managers are a pretty sound outfit and should be able to do the deal.

If I am right the prefs at a £1.00 value nominal value and dividends currently at 18% pa will be steal.

We will probably hear in January with results or before if there is good news to report.

[glavey] 13/12/2013 01:11

It was said the proposed conditional refinancing involved debt forgiveness. Would that debt forgiveness be likely to be a condition of the financing party, or bravado by the management?

[badtime] 12/12/2013 15:50

I think I will sit on my hands for the timebeing

[ydderf] 12/12/2013 12:29

if there is serious value in the prefs why hasn't the company been buying them back for cancellation - what would you do if you were running the company for its shareholders?

blackpoolsteve :

"Maybe the institutions are covering themselves because of the year end deadlines,but they signed up for the prefs at £1,and probably the ordinaries at 25p+ ,so they will be sitting on big losses already - whats the point in selling out now as they will lose everything?"

'They' (institutions) don't lose anything, its the client that gets stuffed!

[scburbs] 12/12/2013 11:54

Envirovision,

The preferred shareholders have an equity interest in the parent company. The administration would be lower down the structure in the property owning entities.

If the administrator puts a property up for sale and there is a bid which is enough to satisfy all the creditors, but leaves nothing for the equity holders then what do you think the administrator will do?

[envirovision] 12/12/2013 11:44

Actualy scburbs an administrator would need to treat pref holders with regards, its not quite true to state an administrator who has no thought towards them.

Yes an administrator has to work to and order of priority for creditors but must act in the interest of all of the creditors.

In other words theres not going to be a fire sale to satisfy cerberus exclusively otherwise certain people would be open to all manner of possible legal claims including the administrator.

[scburbs] 12/12/2013 10:07

If they don't refinance and Cerberus exercise security then administrators will be appointed. The primary role of the administrators will be to sell the assets to pay off the creditors.

At the point administrators are appointed IERE would lose control of the assets and I assume the pref dividend would cease as no cash would be flowing to the parent. One key question here is how much remaining cash would they have if Cerberus did exercise security as this would accrue to the prefs first (at least after running costs etc.).

Any pref holder would be awaiting the results from the administration based on an administrator who has no thought towards them.

A 20% margin of safety in this situation should not provide much comfort when you consider costs of administation etc. and the fact that 20% is a cliff edge (i.e. at 25% prefs are worth 50p in £ and at 30% they are worthless).

In this situation the prefs become like a ZDP with reference to the results of an administration seeking to pay of the creditors with no reference to the needs of pref shareholders! Is that really an attractive investment proposition?

Of course if they can sell enough properties to refinance then IERP should be a great investment, albeit the terms will probably need amending (e.g. at a minimum a new lender if providing a term loan will probably insist the pref repayment date be pushed out to after the new loan expiry).

Unfortunately you can see from the announcements that IERE can not currently refinance. Limited comfort should be taken from the overall LTV when you bear in mind that a decent slug of the properties (e.g. 18% vacancy) are probably not refinanceable. When you bear this in mind (together with some short term breaks which may be difficult to refi) the LTV they need to get on the good properties which they can borrow against is much higher. You can see this in the sudden scramble to get rid of the vacant property at any price in order to close the refinancing gap.

The preference share pricing is starting to align with the binary nature of IERP, but is the risk 50/50? Red or black, place your bets, but not for investments.

[blackpoolsteve] 12/12/2013 09:39

Reading the annual report,the prefs have a 7 year life,I think up to 2018;and the EGM in 2011 stated that shareholders would be repaid,after debt,approx 3 years later.

Institutions own most of the prefs(72%),which maybe act as cover for the ordinary shares. Weiss and others have sold down the ordinary shares,but Investec have increased their holding over the last 12 months.

Maybe the institutions are covering themselves because of the year end deadlines,but they signed up for the prefs at £1,and probably the ordinaries at 25p+ ,so they will be sitting on big losses already - whats the point in selling out now as they will lose everything?
Bottom line is I cant see any large institutional sale of prefs(22million) -apart from 2 x 238k last week;so presumably recent sales are PI's?
Report confirms NAV of prefs is over £1,so in the fullness of time,if debts are cleared this will be their entitlement before the ords?

Comments anyone?

[envirovision] 12/12/2013 08:52

Hi bt I'm ok thank you feeling comfortable. I think Kenny May be on to something. I guess the bottom here is how long would you care to lock your money up for at the hope of a return of some sort at par perhaps. Say 4 years worst case. I wonder if the risk is now priced in. Ive taken a few but would like to be more knowledgeable to take more.

[kenny] 12/12/2013 01:28

If your question is posed in a general sense, then I guess my answer is to ask: who really is in control of their own destiny.

On the other hand, in terms of the company being in a strong position, my basis for investing in IERP would not be soundly based if it had been to rely solely upon management achieving a particular outcome.

In the scenario of liquidation, I estimate the company currently has a NAV of €57.56m which rises to €64.66m upon expiry of the interest rate hedge. Both figures are after deducting the preference shares at par. In rough terms, that equates to 20% of the current gross portfolio value, so that is the margin of safety for preference shareholders. I work on a margin of safety as my ability to predict the route to the eventual outcome is not very good.

After the costs of liquidation and any further property write downs upon sale, I cannot predict if there will be anything left for ordinary shareholders but I am hopeful of a 100% recovery for the preference class. Other people are not so confident that there will be much of a pay out on the pref's so they have been selling. I guess it is a question of judgement and mine is certainly not infallible. With new lettings and property prices stabilising albeit France is still sick, there is also hope that property prices will improve over the timescale of a liquidation, therefore, increasing the margin of safety.

[glavey] 11/12/2013 23:35

Kenny, Not being cynical or critical of your reckoning, but just wondering what makes you feel the company is in a position to control it's own destiny? Doesn't it seem that they might have left things a bit late?

[badtime] 11/12/2013 14:53

Enviro!!!!! Welcome..,the gambling side of me says maybe.,the sensible side says really? How r u?

[envirovision] 11/12/2013 11:42

You still expecting these to pull through the other side then BT?

[badtime] 11/12/2013 11:32

These are struggling to find a base..think I will remain on the sidelines a little longer

[kenny] 11/12/2013 10:53

From the 2009 capital raise document (page 39);

"an exit fee payable on the date (the "Repayment Date") that is the earlier of (i) the expiry of the term of the facility and (ii) refinancing or repayment of the facility in full, in an amount equal to 2.00 per cent. of the weighted average drawn balance of the loans from the date that the Proposed Amendments take effect to the Repayment Date"

[stupidboypike] 11/12/2013 08:39

Thanks Kenny, so just taking your figures

debt 230m
cash (including accrued over next 4 months) 18m
net debt 212m

I will add back the pref interest into income as they could use that if survival was at stake so they have 19m of income which is 8.9% of the 212m debt.
Again, I can not see a situation where they are not going to survive. I think as usual, the market is overpricing uncertainty.

Kenny: Do you have any details of the exit fee due to Lloyds that you mention?

Best regards

SBP

[badtime] 10/12/2013 16:36

2 large sells.. wonder who took those

[kenny] 10/12/2013 14:31

Thanks STB.

On the basis of no capital raise, I think the figures are such that the company can pay an overall interest rate of about 6.956%. This I compute as below:

Gross property income €27.5m
Less:
Property Expenses €3m
Investment management and company expenses €5.5m

Sub-total: €19m
Less:
Interest on pref's €3m

Net income before interest €16m
Current debt €230m
Equals = interest rate of 6.9565%



The above excludes the following beneficial factors:

1. The cash the company holds, which I estimate at €15m currently, before taking account of the exit fee due to Lloyds (assuming it is still due).

2. The €3.2m interest saving that will accrue in the 4 months to 30.04.13; which arises from no hedge being in place.

3. The new letting of a previously void property in Amsterdam which could add about €0.5m per annum.

4. The void rate is about 18%, perhaps slightly lower. If just some of this empty property could be sold or relet - even at a big discount - this would help.

Having worked out the above figures, it occurs to me that a capital raise of even less than the £18m I last estimated may be all that is needed.