Invista EUR Prf Discussion Threads

[dcomd99] 23/6/2014 08:23

Confirmation of the above re divi

[xxx] 05/6/2014 12:50

To avoid misunderstanding, the announcement made clear there would be no dividend paid on the pref for the time being.

[stemis] 04/6/2014 11:59

The consensus seems to be that they'll just continue to pay the dividend. At the current yield of over 13% I think I'd quite like that.

[cookieb] 03/6/2014 22:14

I'm recently in at 70p. I am pretty confident that there is enough equity in the property portfolio to redeem the prefs (including accrued dividends) notwithstanding the decreasing NAV. My only concern is whether they will be able to raise the funds by the maturity date of the prefs and, if they don't, what happens then?

[stemis] 09/5/2014 08:17

Ok, it's Forum Partners - 42.7%
Brookes McDonald own another 19.2% and Hendersons 5.2%

Brookes have been heavily selling the ords. I wonder if they are selling prefs as well?

[envirovision] 07/5/2014 11:52

Someone seems to have a sell order in as i've just picked some more up at 77p

[stemis] 07/5/2014 10:33

Who is the 41% pref holder

[kenny] 07/5/2014 00:21

I think 3) is likely. I think what happens then is that we keep getting the 9% coupon until they either sell enough property or a rights issue of more ords. or a new class of prefs to repay us.

On 1) the preference holders will not accept ordinaries - the 41% pref. holder will just block it unless it is a really excellent deal for the prefs. My "worse case" guess is that we might be offered an exchange of our prefs for a new class of prefs which offer a lower coupon, say, 7% or 6%. To make this offer the company will have to have got itself "sorted" such that new prefs may also be issued in a firm placing to new subscribers - which strengthens the balance sheet for all.

On 2) - this may still be possible albeit I am guesstimating that there will still be a near par payout for the prefs.

"And any worries that i've not thought of....." - the French property market takes a lot longer to recover.

[garbetklb] 06/5/2014 22:49

I've got a reasonable holding of IERP and am pondering the potential outcomes.

The ordinaries are for braver people than me - and people who have a better grasp of European property and, crucially, Invista's NAV robustness.

I'm reasonably confident that the asset sales will realise enough to repay the Prefs and, on that basis, I'm thinking of buying some more. I'm quite keen on ITs in liquidation - my star performer being NRI.

My concerns are :
1) at redemption (or before) we are offered something (prob ordinary shares) rather than cash. With my level of exposure, I don't want Ords.
2) somehow, the company is liquidated in a less orderly fashion - but the refinancing renders that less likely. And, in this case, I'm assuming we'd be looking at a shortfall, rather than wipeout?
3) sales do not proceed as expected and the company isn't in a position to redeem the prefs in Dec 16. What happens then?

Any thoughts on the above would be appreciated. And any worries that i've not thought of.....

Garbetklb

[kmann] 02/5/2014 13:03

Kenny, you've been talking wind-up so long you've become obsessed. Its clear to me the company intends to refocus on logisitics and retail/shopping centers. And that means continuing as a going concern.

It was also clear to me they fully intended to refinance when they sold the last property to keep the ltv within covenant.

Now they have flexibility AND time to move on various fronts. So I don't currently think this management, after pulling of this deal are going to wind it up for you without good (or bad) reason in a recovering market.

Prefs currently have 3 years minimum to wait for what, a divi payment guarenteed. Could be more if they do a wind-up, but only if they do a wind-up, and to do that things actually have to get worse, which means the bank will come off best. And that is where your "prefs are best" argument kind of defeats itself, because your praying for the worse ... after these guys have pulled off a fantastic flexible deal .

The time you'd have to wait for the divi and a wind-up if it ever came compared with other opertunities you might miss putting your money elsewhere.

Its all a game of what if etc.

So in summary : If you expect a wind-up (even AFTER refinance) buy the prefs, If not buy the ords AND/OR the prefs for the continued divi once reinstated.

Why would you kill the goose that lays the golden egg! No one in business does that.

[envirovision] 02/5/2014 12:48

Fly there is some uncertainty and we can only guess, we don't know what they got for the two recent disposals nor how the proceeds are to be allocated. We know the company has some cash from DEC13 report and the later disposal, we do need some clarity and may need to wait for more clarity. However it clearly would have had to factor the preferred capex into this deal otherwise it would have been pointless agreeing the deal right, so I think its going to all be very credible.

I've seen how Tom Chandos has overseen RECI and am impressed he knows what he is doing with leveraged real estate finance.

I agree with you, they clearly want a continuation vote and it seems like turning it into an income portfolio with a very low risk and an excellent credit rating is whats going to happen.

[flyfisher] 02/5/2014 12:33

enviro , The company stated a while ago that if it was refinanced then they would seek a continuation vote , so I don't see excess property sales as being on the agenda.

As the company has little cash and the new loan has a cash sweep condition , where will this years capex come from unless they sell earmarked properties at a premium , which seems unlikely , or raise some funds.

At this stage , the terms of the 96m potential sales does seem to be crucial , if at a premium then great , but if at a discount then the need for a capital injection rises.

[kenny] 02/5/2014 12:28

I think you will find that the major holder of the pref's - holding about 41% - holds no ordinaries. So the interests of ordinary and preference holders are not aligned.

The preference holders are entitled to first and full payment on any winding up before ordinary shareholders receive anything, so would oppose any dilution. For these reasons, I too only hold the preference shares.

There may be some remaining value for ordinary holders but only once preference holders have received full repayment plus accrued coupon.

For the above reasons, personally I find it strange that people are not concentrating their buying on the preference shares - IERP.

[stemis] 02/5/2014 12:24

This is a deal basically to get Cerberus off their backs. Even after the step down, LTV will be 60%+. There will inevitably be a second restructuring which sorts out the prefs. Probably a discounted offer to convert and maybe fund raising. At the moment the market cap of pref shares is £22m and the ords £11m compared to NAV of £93m. Could be good news depending on price?

[xxx] 02/5/2014 12:17

Although I am a holder,imv the clear winner here is the lender. In essence all cash going to them, which keeps the co. on life support and thus dependant upon them esp. as the co. needs cash to updatesome of the props to re gear the leases and relaes value. If selling the vacant/non core portfolio was easy, it would have been done in the last 6 months.The current valuation used for the loan would make interesting reading.
The prefs may well be offered ords in lieu ofcash div. and depending on the disposal programme and availability of capital,also to settle principal in Dec 2016.

[envirovision] 02/5/2014 11:24

ahh got it in the original fund raising 9.7 million were placed and the remainder came from the open offer, in the end 29,137,134 pref began trading on 8th Jan 10

[stemis] 02/5/2014 11:19

I agree with the principle of what you say scburbs but not the numbers. It'll cost €40m to redeem prefs and accrued div. Interest rate on loan is about 8% so early prepayment costs about €3.2m per annum. Although the step down LTV is 70% the covenant only drops to 80%.

[scburbs] 02/5/2014 10:57

Envirovision,

Are we looking at the same company? Where do you get £9.7m of prefs?



It is highly unlikely that the terms of the loan will permit asset sales with no debt repayment. That is not realistic, although in any event the effect would be the same as the loan would keep accruing an amount of interest which would match the exit penalty! In other words selling assets and sitting on the cash would be equally inefficient (as you have given up your income generating asset but still have to service interest on the loan).

[envirovision] 02/5/2014 10:45

am I being thick here, I have only £9.7M in outstanding prefs ?I dont agree with scburbs regarding his inefficient disposal assumptions, there is no reason the company cannot sell assets and sit on cash and decide when to pay down the loan and I don't agree with his wide further 100-150 of disposals to repay the prefs that does not make sense.

Reading the RNS yesterday clearly highlighted some ambition so I agree with fly, further capital raising may be on the cards but only once the portfolio has been really sorted out nicely and has a better low risk rating, (perhaps 85 in 100). Any capital raising before this is simply going to destroy value in the ords. Looking at the 50 mill worth in the pipeline plus the properties already sold since DEC13 I cant really see anything to justify Flys fear, indeed one would expect any capex to be used to increase value such of change of use, planning permissions etc to attach to disposals. So far we have seen the company be really quite prudent in its disposals and vacancy reduction. Also clearly our new creditor must think they have credibility. (Tom Chandos is of Real Estate Credit Investment fame), so is as credible as you can get I think.

I thought I would think aloud this morning as I study more detail.

The present portfolio has a net initial yield of 8.32% as of DEC13 which seems to be on an upward trajectory as some European recovery kicks in, so the loan interest is covered from income.

NAV at DEC13 was 19.4p this obviously includes deducting the pref liability and bank loans.

The portfolio is rated low to medium risk which will be set to fall to low risk as low or vacant properties are trimmed.

There are 9.7 million prefs par value £1.00 the official redemption date is 8th January 2017, they rank senior to all other shares, it seems preference share holders are eligible to vote in resolutions after 1 year of non payment (x1 7.1.3(V). No payment may be made on the ord whilst prefs unpaid and accruing (X1 - 4.3)

Redemption may be paid out of profits, reserves of issue of new shares.

So I think to answer the question of what would happen if nothing had been repaid at maturity, the answer would lay in an EGM where preference holders would have their say, however in this scenario they would have become eligible to vote long before this date, so the company would have clearly been putting agreeable proposals forward if they were expecting not to repay. I guess that could be anything sweet (or bitter) depending on the health of the company at the time.

[scburbs] 02/5/2014 10:35

SteMiS,

The LTV test will be on the new loan only. As you have shown they will be at around 60% (assuming they sell €85m at book) and, therefore, the margin will step down on achieving the €85m of sales provided valuations hold.

As the prefs have limited rights the path of least resistant will be to make the pref holders wait until they have sold enough property to repay them.

[p@] 02/5/2014 10:25

Issue new prefs exchange, or extend the repayment date,both.

[stemis] 02/5/2014 10:21

After raising E85m for the step down the company need to raise E40m or so to repay the prefs. That means they'll struggle to hit the 70% LTV that reduces the interest margin on the loans. Prop Loans LTV
Now 310 220 71%
Step down -85 -85
After 225 135 60%
Prefs -40 -
After 185 135 73%That assumes they can sell at valuation. Only a 5% shortfall on valuation will bump the LTV to 76%. The covenant at that point is 80%.

What does happen if they can't redeem the prefs in Dec 2016?

[stupidboypike] 02/5/2014 09:12

Posted this on the ors thread, but I meant to put it here:-

People seem not to have noticed this:-

"The terms are closely aligned to the disposal programme on which the Company is making encouraging progress, with properties currently under offer for a total amount of over EUR50 million."

If that is right, they only have to raise an additional 35m for the step down. Once that is achieved the company is making handsome profit even after paying the pref dividend.

I've been buying the ords, I think the market has them at the wrong price, short term I expect nearer to 50% discount to NAV which is 19p

Best regards SBP

[flyfisher] 02/5/2014 09:05

Kenny , does my last sentence not say that.