Queen's Walk Investment Share Discussion Threads

[envirovision] 20/9/2010 09:53

Name changed ok to Real Estate Credit Investments

Now trading as RECI,

I have moved over to the new RECI board and updaed it.

See everyone there

GLA

[envirovision] 18/9/2010 11:32

rat you need to ensure your broker does W-8BEN otherwise you could pay 30% otherwise its 10% but don't quote me as I've not received my divi yet. Yes I hold which recently added to. Of course the repos offset leverage but any lower repo rate of high short term borrowing against them will knacker income. also theres an AGNC board if you want to post there better.

The beauty of qwil and outright safety is that there is no leverage and the senior debt, ie our prefs are fixed interest covered by 2 times portfolio value. As I was explaining to our clueless troll on other board your looking over 50% impairment on your already highly discounted book before any of the senior is at risk, so much so that your major bank prefs would have gone pop before the senior debt here.

edit..........
also our interest payments are 6X covered by income.

[rat attack] 17/9/2010 21:32

envirovision - do you hold AGNC? I have looked at sipping these, but as I understand it if you sign the US disclaimer you get a reduced level of withholding tax. Do you know what rate this is because it will reduce the current 18.8% yield. How do you derive your 800% leverage? I would have thought that the securities held and the repos would have more or less offset each other? As I see it the risk is the terms of the repo and particularly how they relate to any diminution in the value of the securities. Let me know your views. Thanks and have a good weekend.

[envirovision] 17/9/2010 20:15

rat from what i understand pretty much all of it, and the average hold I doubt even they know that yet, guess it all going to depend on what's on offer and what gems they can find when they go shopping. One things for sure, the window of misspriced mortgage securities is slowly closing. RBS are planning on doing a 4.5 billion offering at the end of the year and were reported to be doing a road shows to get it away, this is their first since 2007! and Lloyds managed one earlier in the year.

Pejaten, this is the beauty of an unleveraged variable fund, will find a moment to listen to the web cast over the weekend.

If anyone wants lots of risk i.e. interest rate risk, have a look at AGNC 800% leveraged and hence >20% yield!

[pejaten] 17/9/2010 18:41

In the webcall they said they are looking to purchase assets with a redemption yield of >12% based on current interest rates. This is after factoring in likely losses. They also said rates are normally variable so if rates increase interest received will also increase.

[rat attack] 17/9/2010 18:36

envirovision - how many assets do they propose to purchase for 25m and what is the average hold?

[envirovision] 17/9/2010 16:12

ZUTALORS, no not quite. It looks like they are starting off from a slightly lower base at 5% because after the placing and bonus issue the old yield would have dropped to equivelent around 9% (from memory) if you trawl through the posts you will see where we worked it out.

Seems sensible to me since it will take at least 6-12 months to fully invest the 25 Million cash and start receiving a solid cash flow. However like I said in my earlier post would be astonished if the yield were not to escalate when the fund starts throwing off lots of cash.

I am going to set up a couple of new threads for the name and ticker changes with all the relevant links and data:

QWIL -> RECI
QWIP -> RECP

GLA

[insipiens] 17/9/2010 16:12

I heard him say 5% on current price also.

[zutalors] 17/9/2010 15:01

The dividend on the ordinaries is going to be equal to that which they were yielding pre-offer (14% I think) less the 8% pref. shares yield, I would have thought.

[pejaten] 17/9/2010 14:39

On the webcall, they said they would be looking to pay a dividend of 5 cent per ordinary share, so yield on ordinary sahres around 5%.... Seems quite good to me given potential for capital growth

[envirovision] 17/9/2010 13:08

New Presentation available from today:

Stated Pro Forma NAV per share Post Offer & Bonus Issue 15 Sept 2010 E1.63.

83% of assets in investment grade bonds; 40% of portfolio rated AAA or AA, continue to see opportunities to invest at yields in excess of 12%.

Company has increased valuation of the three UK RMAC assets, mortgage default rates lower than expected. European mortgage portfolio, cash flows increased, arrears are falling.

[zutalors] 17/9/2010 12:19

ZUTALORS - 17 Aug'10 - 15:24 - 343 of 426
Given that the offer went ex-div retrospectively as it were, difficult to see why anyone would buy the ords now. See €1 in short order and dividend cut after completion of offer to re-adjust yield to approx where it was on 13 August.

[envirovision] 17/9/2010 11:25

All the best Mark, I'm staying put and if theres any dip below a euro am a buyer. I agree with your nav value. The present discount to NAV is around 37% and I think that represents good value as I expect the NAV to continue to appreciate with the legacy portfolio in run off and the fund to throw off a great deal of cash which should increase considerably when the 25 Million cash starts to get invested. Despite the lack of clarity on return of capital, I would be astonished if there were not reasonable dividends and special dividends along the way due to the amount of cash the fund should generate. We will have to create a new thread soon.

[marben100] 17/9/2010 10:30

I'm outta here @ €1.00 ex-prefs & ex-div, given total lack of clarity about future divvies on these. I make the NAV per ord, xd & net of pref liability, following this morning's results announcement €1.58. GL to anyone continuing to hold.

Mark

[envirovision] 13/9/2010 10:59

Well market makers not letting them go for below 2 level despite the XD and happy to shaft sellers with the bid, a good sign imo.

[envirovision] 12/9/2010 20:56

marben my point was simply to highlight, using the example of lloyds ecn's that 72p on a yield over 11% would be way above so would seem unlikely. FWIW I consider the prefs to be far safer than ecn's and most bank prefs since for every pref it backed up by over 200% worth of capital assets, 2/3 being bargain bucket real-estate debt investments which in themselves baring a double dip would be expected to appreciate.

Yes that web site just playing about again with that, its a bit odd when using qtr payments, i think last night i must have put an extra zero in to get 28%.

From the anouncement:

Tom Chandos, Chairman of Queen's Walk Investment Limited, said:

"The fundraising will allow the Company to re-focus its investment strategy on
real-estate debt investments and, through the bonus issue of the preference
shares will give investors an attractive and stable income return. The increased
liquidity, price transparency and favourable risk-reward profile of the
Company's new investments should benefit investors and further our aims to
increase NAV and reduce the discount to NAV at which the ordinary shares trade."

note the: further our aims to
increase NAV and reduce the discount to NAV at which the ordinary shares trade

[horndean eagle] 12/9/2010 19:37

The blueprint to look at is IERE. Tom Chandos chairs both IERE and QWIL. Its no co-incidence it has been set up in a similar way. IERE issues prefs yielding 9% with a 7 year life. Those prefs opened at 106 and now trade at 107 and yield circa 8% ytm. Huge amount of debt ahead of those preference shares and free cash flow isn't great. Would be surprised if QWIL hasn't been marketed to the same investors as the IERP preference shares were. Cheyne are looking to dispose of their entire holding in the preference shares and it is obviously in their interests to keep the price firm.

[marben100] 12/9/2010 12:43

I have checked rat's calculation of the YTM for the prefs with a spreadsheet (assuming prefs redeemed @ £1 on 17th Sep 2017) and arrive at a YTM of 12.6% if purchased @ 80p on 17th September. The investopedia calculator also gives a 12.44% yield if ANNUAL dividend payments are assumed - and a completely wrong figure of 3.08% if I select quarterly dividends (which is how the prefs will pay out, but maybe in that case the YTM is expressed as a quarterly rate?). The figures I entered into the calculator were: Par 100; Market 80, Annual Rate (based on par value): 8%; Maturity: 7 years.

Having said all that, however, I don't consider the risk on the QWIP prefs to be too much worse than that on sound bank prefs and observe that NWBD's are currently yielding 8%. So a 10% flat yield, 12.6% YTM seems reasonably attractive to me. I wouldn't go overboard in buying, because there is undoubtedly some risk. I would also leave plenty of room to buy more at lower prices, if those prices are offered. Over time, besides perceptions of Queen's Walk, the market view on interest rates will dictate the market price. Peronally I am an "inflationist" so suspect we'll see a significant rise in interest rates at some point within the 7 year maturity period. That also makes me cautious.

Another factor that may put a floor under the price of the prefs is that QW will probably buy back. Buying back at a big discount would help NAV for the ords (and hence Cheyne fees) significantly.


enviro, can you point me to the part of the prospectus that says that the aim of the proposals is to reduce the discount to NAV? I can't recollect seeing that. Having studied the prospectus, my conclusion was that the overall effect would be to increase Cheyne's fees, especially if the discount to NAV was HIGH (making the market cap. low).

Mark

[envirovision] 12/9/2010 08:52

heres the calculator i used:

Has Lloyds gone up another percent then? amazing what QE can do!

[rat attack] 11/9/2010 23:27

envirovision - I certainly dont mind you criticising my comments (after all everyone has a right to their own opinion), but what does cause me concern is your failure to publish accurately on this and previous occasions.

For example, and for your information Lloyds core tier 1 capital is 9%, not 8% (see interim results). Secondly, if the prefs traded at 72p the YTM would be 14.662%, not >28%, at 80p YTM is 12.444%.

I dont have a crystal ball so I dont know what price the prefs will begin trading at, but to me I would not purchase initially if the price were 80p or above, but 72 would be attractive to me - of course it could prove to be unrealistic in the market as people perceive greater value in the asset, or see a reduced risk profile for the asset than I do. However, if after a period 80/90p is where the price settles I will re-evaluate because clearly my risk perception would have been wrong! However I would say that a YTM at 90p of 10.058% would not be attractive given alternative asset pricing at this time!

[envirovision] 11/9/2010 19:44

72p, in your dreams. If that happens I will put the entire equity of my house in them. At 72p the yield is >11% moreover the yield to maturity becomes an eye watering >28%. The underlaying value of the risk weighted assets would need to drop in value by around 65% before you 72p capital experiences any real monetary risk of devaluation.

Just a quick comparison. Lloyds ECNs lets say LB2Q trade at an average yield of 9% with a yield to maturity also of 9%

I understand Lloyds tier 1 is around 8% right now. That means if Lloyds risk weighted assets eat into to around just 3% of its capital, they get converted into shares which could easily be worth 10-15p in the pound (judging from the last time it did problems).

Moreover most banks would have gone bust long before Queens assets experienced a 65% devaluation.

[rat attack] 11/9/2010 17:40

If the prefs trade at around 72/73 I will be a buyer, at 80 I will be inclined to wait and see how trading goes. My personal view is that for the first month or two the prefs could trade at an artificially high price, once price has settled we will then be able to make a better judgement. However, either way I am not convinced I would pay over 80 as there are better counterparties around for a yield of under 10%. I do not find call term and prior ranking to be particularly important, they are more technical issues, although callable date important in calculating yield to maturity!

[envirovision] 11/9/2010 15:45

Some thoughts.

The NAV on the ords will fall to EU1.61 after the offer and bonus issue. The discount to nav was 40% before the ex entitlement. Since fresh capital a tad under two euro after costs is going in 2 for 1, i would expect the discount to nav to fall by around a third to 26% so the Ords in theory would trade at EU 1.19. Currently there was 32c PA available for distribution. The new prefs will swallow 23 cents of that leaving an adjusted 9 cents left for the ords PA. The new capital should start producing a return fairly quickly once invested, so the capital return on the ords should increase far further than 9cents. The new constitution will not guarantee a dividend distribution, allowing the fund manager to be flexible, so it could be used to simply increase NAV by re-investing in the fund or even discounted share buy back. In the event though, it should be remembered that the whole exercise of the new structure is to reduce the discount to NAV this is very clear (Please see prospectus), therefore I would not expect the fund manager to aggressively grow NAV if the ord shareprice wre to fail to reflect the NAV again, so that implies cash distribution by dividend.

That leaves the prefs. Since they will be called in 7 years at £1, i would not expect an eye watering yield to call even if there were a large seller (cheyne) for an extended period. Certainly a yield of 10% max or 80p worse case under extreme pressure, that's 1.25 x 80p =£1 worth of prefs at FX rate = EU1.20. One key fact which really underpins the quality of the prefs is that they are first in line in any payout shoulod the fund be wound up, they are cumulative and theres a nasty penalty for late payment. Since the fund carries no leverage and the underlaying assets outstrip the pref liabilities 3:1, the prefs carry practically zero risk, this makes them highly investable.

Therefore total worth after dust settles 1.19+1.20 = EU2.39