Public Services Properties Share Discussion Threads

[envirovision] 07/4/2012 09:28

I dont understand why people think EC is in such a strong position myself. If they cant afford to pay the rent, PSPI could force them into a prepack and allow someone else to be found who can, worst case PSPI picks EC up for nothing and becomes an owner operator, I don't see a forced merger where PSPI loses all its equity because its hand is being forced by EC. It seems to me PSPI is the one in the chair of command here.

[kimboy2] 07/4/2012 09:12

Hi kenny
I may well be being optimistic but my point is about risk/reward rather than certainty. IMV the share price is far more likely to double than to be worthless from here.

Firstly they have non recourse loans and the non UK assets are unaffected by anything that is happening with EC. I reckon they are probably worth abut 25p a share.

Secondly the loan they have to renew is for £85m and the assets are currently valued at £191m. For a 65% LTV the value of the assets has to be above £130m which is a 32% devaluation from the prresent level.

I am fairly confident the assets won't be devalued by that much.

The current problem originates with EC. If they were guaranteed to be paying according to the lease then we wouldn't now be discussing it.

I think the problem is that the banks have lost confidence in the lease model with care homes. If they return to an ownership model then a layer of risk is taken out from both operator and land owner.

The actual outcome will depend upon the figures for EC and Esquire. Whether a cash raising is necessary will depend upon those numbers and they are unknown.

[wskill] 07/4/2012 09:01

Kenny cannot say I agree with your thoughts EC is a dead duck of course but that does not effect PSPIs care homes other than a new manager is brought in all the company management are pros we even have the chairman of New Dawn Investment trust on the board Southern cross in comparison had no assets at all there is still a lot of value here ok not 154p but more than 22p in my eyes rereading the report on 04/04/12 below from Edison this is not as bad as first thought , homes are focusing more on higher value care as well a lot can happen before Sept.

We have held full year forecasts, notwithstanding the update on the strategic review and dividends. That review continues, with no timetable set for its completion, a situation arguably unchanged from the last update at the end of 2011. This announcement could be interpreted as a sign of willingness on the part of PSPI, its UK tenant (European Care) and its bankers to support such a transaction.

European Care's portfolio and shifted its emphasis towards less discretionary - from local authority budget perspectives - areas of acute care for children and patients with mental disorders.

[kenny] 06/4/2012 22:53

Kimboy2, I do not have time to look at the figures in detail but, on first flush, I think your view is optimistic. However, even if we adopt your optimistic view - using your figures would give a loan of £85m on property valued at £120m. I don't think a bank would be willing to grant a loan to value of 71%, especially in circumstances where income to service a loan at that level is dubious if not downright flaky.

We need only consider government policy on care homes; which seems to be "ignore the problem and it might go away"; together with all the negative inflation on care home bed rent caused by Southern Cross and other care homes groups going bust, with real inflation on food and heating; and any bank is going to run a mile. You need to re-work the figures with a 35% maximum loan to value to ascertain the amount of money PSPI need to raise and add 10% to cover the costs of raising that finance.

Then consider the resulting £??m in terms of whether Elliott will underwrite a rights issue to raise that amount; in order to redeem something of what they have already invested. The alternative for Elliott is to simply let PSPI go under on the basis that it is too much in comparison to the value they may "rescue" in the longer term. In other words, what has gone before in terms of what Elliott has invested is currently more or less lost; so any new money Elliott inject has to not only earn its own return but also has to have a realistic hope of earning back some part of what they have already lost. I believe that is how they will assess any "new" investment.

You will appreciate that my view is firmly that Elliot is PSPI's only hope of survival – I doubt any other party will step in to rescue PSPI – it did not happen with Southern Cross. The complication - which is identical to Southern Cross but in reverse – is the RPI increases in rent subject to 5%p.a. minimum increase. If EC is truly independent, it must be in its interests for PSPI to go bust in the hope of getting out of those costly leases and rebasing to a lower rent. Unless EC plays ball, a rescue will not be feasible even if Elliott is willing to pump in loads of money. I suspect EC have their own financial problems with their own over-valued care homes and the loans thereon, so they may not be in a position to be helpful.

There is also the question of trust, and Elliott may feel they have been treated as patsies; so are not willing to put up any more money. There is a strong possibility that the question of Elliott putting up more money is a discussion that has already occurred and the company only issued the 2 April update after Elliott stated they are not willing to inject any more money.

As I said at the beginning, I have not done the figures to guess what value is left (probably not even estimable at present) but I think PSPI has ceased to be a company in which private investors should dabble. Leave it to the professionals who have the inside knowledge and will use that to their advantage, including dumping shares on private investors who jump in when the insiders start bid rumours (as with Southern Cross) in order to dump their shares on those who do not have inside knowledge of the state of negotiations with banks/EC/Elliott.

Always sad and annoying to lose money on an investment but I think this horse is dead; no matter how much you flog it.

[loverat] 06/4/2012 21:49

hatetrader

There is alot of circumstantial evidence. I have lots of e-mails from him and stuff he sent harrassing others. If I went through it all I could probably provide enough evidence that I am probably right. The crowd on MHG know of him too and will verify what I have said.

[hatetrader2] 06/4/2012 21:45

You really think that is him, what evidence do you have !

Personally it's nothing to brag about, the above, he must have every STD under
the sun !

[hosede] 06/4/2012 14:32

Kimboy with ref to 1106
IC have in my experience always had a incredbly naive habit of slapping a "buy" recommendation on Cos. that are doing well and a "sell" on those that are doing badly - with absolutely no regard to the share price at the time.

[kimboy2] 06/4/2012 11:40

The immediate problem is re-financing the UK loan which I think is due in October. The present situation is that the UK assets are valued at £191m and the loan is £85m.

The valuation is based on a rent £12.7m and a capitalisation yield of 7%.

IMV the worst case scenario should be the DJAN experience with SCHE where they had to find new tennants. This resulted in a 37% devaluation which I presume ws partly a reduction in yield and partly an increase in capitalisation rate.

If this applied then £191m would become £120m and equity £35m and the overall NAV about 60p.

However I don't think that this is likely to happen. I thought the comment in Eddison was interesting;

This announcement could be interpreted as a sign of willingness on the part of PSPI, its UK tenant (European Care) and its bankers to support such a transaction, in which case shareholders should await documentation before drawing conclusions regarding the implications.

This looks to me as though a merger is virtually agreed, with the banks at least. This is entirely logical from the banks perspective as it removes a layer of risk.

There are 3 questions IMV;

1. Is there likely to be a fund raising by PSPI to satisfy banks LTVs with new valuations ?

Given the amount of equity at the moment, and the potential sales, I think there is significant hope it will be avoided.

2. What sort of profits will the combined company make ?

This is very difficult to determine as EC's accounts are somewhat opaque and not up to date, let alone Esquire's.

However in 2010 they lost £18m but this was after a total of £54m admin charges.

Of this £29m of rent aid to PSPI and Esquire. There was £2.8m dep. This leaves some £22m of admin. IMV perhaps £7m may be genuine admin and the rest some sort of financial manipulation between EC and Esquire.

In addition there is perhaps a £3m profit on the other assets and EC has improved profit by £6m in 2011 compared to 2010.

From all this will need to be deducted interest and we don't know what Esquire's debt is.

3. How much of the combined company will PSPI get ?

Assuming the combination is with Esquire as well as with EC then it will depend on how much equity Esquire has. I think that EC will be valued at nothing and the split would depend on property equity.

[hatetrader2] 06/4/2012 10:57

Loverat.

You reckon that guy is buystock ?

Dont seem to have put him off if true, still spamming the whole site with 5 different names a day.

How about a picture of topinfo, yet another stock yesterday forced to issue
no reason for movement after his gang had pump and dumped it.

Another one for the FSA.

[wskill] 06/4/2012 10:05

We know net assets will be less than 154p per share but how much less cannot see this being cut by 50% if that is the case the companies which have done the yearly valuations for the bank will have overvalued the care homes greatly,if the banks wont refinance they they will lose the UK care homes cannot see the banks wanting to have 39 care homes on their hands after the last debacle with Southern cross very bad press for the banks.

[nurdin] 06/4/2012 09:57

If they cant raise the cash its curtains surely?

[kimboy2] 06/4/2012 09:54

Is a sell at 60p or 40p still a sell at 20p ?

[kenny] 06/4/2012 09:42

The Chronic Investor strikes again - they are almost always too late to the party with their buy and sell tips. This week they confirm all the fears and more:

"PSPI stuns market with grim update

Sometimes the market is right. We thought we'd spotted a valuation anomaly in Public Service Properties Investments (PSPI), an Aim-traded care-home landlord with index linked rental income, whose shares traded at a cavernous discount to net asset value even a year ago. But, after testing market appetite for its assets, the company has now established that its portfolio is overvalued on its books – and property values are still falling.

Not only that, but PSPI is struggling to find a bank willing to refinance the debt held against some of its UK care homes, which expires in September. Finance must be found before any further dividends are paid. The fund manager has been sacked, but will serve a notice period of 24 months. The shares fell 31 per cent on this news, which came out of the blue in a very grim update.

PSPI's double-digit dividend yield is now meaningless, undermining the reason we recommended buying the shares. Sell."

[wskill] 06/4/2012 09:40

The bank debt is held against some of its homes ok if the bank calls in its loans secured against the homes they have some care homes on their books I do not think that this will cause PSPI to fail they have other assets worth more than todays share price.

[warrensearle] 06/4/2012 03:55

Unsurprisingly IC have changed their buy rec on PSPI to sell.. Part of the article below

" PSPI is struggling to find a bank willing to refinance the debt held against some of its UK care homes, which expires in September. Finance must be found before any further dividends are paid. The fund manager has been sacked, but will serve a notice period of 24 months."

Glad I got out albeit at a 45 percent loss

[hatetrader2] 05/4/2012 12:59

Loverat

He has done this for years, i reckon he must be abroad, i thought topinfo was
arrogant but buystock takes things to a new level, he really dont care, they are
banning him at the rate of 50 names a week for those spams, advfn probably wont
warn him because he adds 10% to their new user numbers in their results :-))

[loverat] 05/4/2012 12:48

hatetrader

That is classic buystock behaviour. He used to do it all the time. If you see my earlier posts the FSA will not find it too hard to find him. Just send them the UTUBE clip.

P.S Tell them to mind out for the sheep in his front garden.