Public Services Properties Share Discussion Threads

[scburbs] 04/4/2012 12:45

The best outcome for PSPI would be to acquire the EC freeholds and lease them back to EC in exchange for new shares issued in PSPI at NAV. An issue at NAV would be fair as both assets are an equivalent proxy for the value of an asset leased to EC! This would reduce the LTV and possibly make it easier for PSPI to refinance.

They would probably need to combine this will a rent cut for EC (perhaps reversing all those RPI increases!) who are having a hard enough time without paying rent on more properties!

All this would do is buy time (i.e. kicking the can down the road) for EC to turn around its business so it still wouldn't represent a very investable proposition, just preferable to merging with EC. It is difficult to see any attractive options here.

[kimboy2] 04/4/2012 12:39

The companies with this model have survived. The operating companies have gone bust.

the loans are non recourse as well.

At some point it is worth a punt.

[scburbs] 04/4/2012 12:38

Kimboy2,

The key question there is what would the LTV be in that case?

Certainly in the area where refinancing is not possible other than on the basis of a prohibitively expensive extension from the current lender who has no other viable choice.

[adam] 04/4/2012 12:35

Is there a parent guarantee on the senior debt secured on the UK estate, or is it ring-fenced from the rest of the PSPI portfolio?

[fangorn2] 04/4/2012 12:35

Not impressed with management at all frankly. Worst case of "enhancing value" I've ever seen. We seem to be in free fall.....

Presumably management will be insulated with their golden parachutes,and pension top ups I'd wager - the cycle of rewarding failure continues....

[kimboy2] 04/4/2012 12:29

I don't think the valuation in a merger will be based on share price but asset value and equity in that asset value.

I would presume the intention is in effect to merge PSPI with Esquire and EC will be valued at zero.

I think the share price is presently valuing the UK assets at zilch.

If EC is sound then there is no benefit from a merger.

DJAN reduced the value of their care homes by 37% when SCHE went bust. If this happened the NAV would be reduced to 60p or so.

[envirovision] 04/4/2012 12:24

No chance of directors buying either, they will most certainly be in a closed period during the review, jeez I expected to to half at worst on the divi cut but no more.

This has certainly been handled badly to say the least.

[fangorn2] 04/4/2012 12:06

Must say if this is what management call "Enhancing shareholder value" then I'd dread to see what would result if they were trying to destroy it.

Down 18% today I see, on the back of a massive fall yesterday.Not happy my side but at least only a small holding here.

[taylor20] 04/4/2012 12:06

FWIW:

Edison update out.

[kenny] 04/4/2012 12:02

SteMis, see my post 847 of 19 November 2011 and the half a dozen or so that followed 847 for discussion of value.

[castleford tiger] 03/4/2012 16:41

Well i am in here for a fair chunk and see it like this.

The company running the homes is making a loss............. and thats going to get bigger as local authorities reduce payments.
60% plus of value is in uk homes...........thats 5 million each, That looks heavy to me.
I expect a right down on values (amazing that 6 months ago......we were told that the company was undervalued)..........

Not sure whats going to happen or the outcome but i expect no divi now. The BOD have made a right dogs of this...........

Sorry could not post on main thread i am not a member.

tiger

[stemis] 03/4/2012 16:36

Whether shares in a combined ECH/PSPI would be of interest in principle is one thing, but at the moment there is no way of valuing PSPI because we don't have enough information to value the combination and no way of knowing what share of it PSPI shareholders would get. It was a ridiculous RNS issued by PSPI. All they did is reduce the valuation of PSPI in the merger by driving the share price down. Maybe it was intentional but I wonder what Elliot think of it all as they effectively have veto over any deal.

[scburbs] 03/4/2012 13:06

The LTV in European Care & Lifestyles (UK) Ltd is c.25%, being around £20m of debt and £81m of fixed assets. However, this is after a £30m revaluation gain in 2010 which must be a bit questionable!

The gearing in the merged vehicle would be lower than PSPI stand alone, but the profitability would also be much lower (if there was any profit - given the significant operating losses European Care are making).

In 2010 the negative operating cash flow (after interest before tax) in European Care (£5.9m) is just about balanced by the positive cash flow in PSPI (£5.4m). The combined entity would not initially be a dividend payer IMV.

I can't see anything that would interest me in holding shares in the merged entity, unless fees/utilisation starts to rise again.

[mathisvale] 03/4/2012 12:50

I think that it is a matter of doing whatever is necessary to get re-financing in this very difficult market. Without it we are stuffed.

[hosede] 03/4/2012 11:38

Mathisvale
PSPI investors would not I think want a merger. We are a property owning Co. Who would want to be invoved in RUNNING carehomes? After SCHE it seems a disaster waiting to happen. The Govt. demand certain standards but will not/can not afford to pay enough money to allow them to be implemented.

[adam] 03/4/2012 11:13

Oh, I thought they were saying, at least initially, that they were looking at combining just the freeholds with those of EC. This makes sense since as long as you use the same valuation criteria it wouldn't be dilutive on a NAV basis to PSPI shareholders. Eventually I would think PSPI would just get bought by EC.

[goliard] 03/4/2012 11:07

I think that is exactly what they are saying and you don't need to read between the lines.

[mathisvale] 03/4/2012 10:28

With this RNS it is a matter of reading between the lines.

The looming re-financing is causing major problems because of asset value downgrades and the fact that PSPI does not have direct control of care income - that is in EC's control. Therefore the talk of a 'joint' re-financing approach.

Would it help if there was some kind of merger for the UK care homes where tenant (EC) and landlord (PSPI) became one entity. This would have to be a share takeover of one by the other as neither has available cash. Who would takeover whom and at what price

[djderry] 02/4/2012 17:45

Absolute carnage,will sit it out and stay invested.

[bisiboy] 02/4/2012 17:29

oh dear another disaster
on what otherwise has been a good day.

[grahamburn] 02/4/2012 16:34

Agreed. Selling at open was fortunate, but - dare I say it - absolutely a no-brainer necessity given the RNS. (And the sell showed up as a buy on advfn trades, as it was above the bid price at the time!)

[horndean eagle] 02/4/2012 16:28

I think this mornings strength possibly came about from a buy order being worked by Liberum Capital. The buyer didn't cancel the order and therefore Liberum carried on mopping up the stock. Some times you just have to thank your lucky stars you get a free get out of jail card as was on offer this morning.