Raven Russia P Discussion Threads

[my retirement fund] 11/4/2018 23:05

Probably a safer world for our children and our children's children Holts.

[holts] 11/4/2018 22:09

MRF , what do you suppose you would end up with if Jeremy and McDonnell were in the seat ?

[kenny] 11/4/2018 18:41

loglorry1 – for the company’s Articles go here: hxxp://www.ravenrussia.com/investors/public-documents/ and click on Articles of Incorporation listed as a 2017 document.

Note that the original terms when RUSP was issued are no longer relevant because when the company issued RUSC they decided to update their Articles and incorporated the terms for both RUSP and RUSC into their revised Articles (after the appropriate approval by vote of RUSP shareholders). The wording in the revised Articles differs very slightly to the original wording of the RUSP offer document but differs only in relation to tidying up of the wording - not changing the effect of any of the original terms and conditions. All rather less confusing than AV, GA and Lloyds preference classes, where you have to look at both their original terms of issue and Articles, as they never consolidated them.

For Guernsey Company law, the 2008 Act, go to this link:
hxxps://www.gfsc.gg/sites/default/files/Companies-(Guernsey)-Law-2008-(Consolidated-text).pdf

[skyship] 11/4/2018 16:43

O/T - apologies all....

Kenny/MRF - rather more reasonable now - thnx.

MRF - however don't understand your bizarre 3rd para. Having been born in the UK, spent all my working life in the UK, having all my capital in the UK and children in the UK.....of course I have an affinity with the UK.

The fact that I choose to live in SW France for my retirement is based upon entirely logical financial and lifestyle reasons.

Fact - an average sized apartment in central London buys you a substantial property with gardens, pool and separate guest accommodation over here!

I clearly don't have Kenny's wealth, so not able to have a foot in both camps; otherwise would do so.

I might ask - If so ante abroad - why are you investing there? I assume for logical (to you) investment reasons. Seems rather analogous wouldn't you say?

[kenny] 11/4/2018 14:15

Skyship, I do not disagree with your viewpoint.

If people are nervous - for whatever reason - they should sell.

Selling does not suit my investment plan - even when the shares were recently in the 150p's - and, in any event, my family's holding is too big to sell. My focus is on the coupon providing a nice income over an indefinite period, hopefully, for decades.

I agree, however, that anyone sitting on a capital loss or anticipating a further loss of capital should sell if they are in any way uncomfortable with the volatility of RUSP.

You stated "To preserve one's capital one should steer well clear of anything related to the Russian kleptocracy." If that is a person's view then they should perhaps not sell - because they have already made one mistake in buying in the first place.

[montyhedge] 11/4/2018 14:09

Thanks Kenny
Great reply.

[otemple3] 11/4/2018 14:08

When you buy something like RUSP it is not normally as a short term trade - periods of volatility are to be expected, depending on sentiment towards Russia. Personally, I am not concerned that the price has fallen recently and will be adding to my already significant (% of portfolio) if there are further falls as I love the tax free yield and look forward to it compounding in the coming years ;-)

[loglorry1] 11/4/2018 14:05

Thanks Kenny - if possible can you post links to the Gurnsey version of the companies act and the articles of association of RUSP. I admit to being a bit lazy here as I could probably dig them up.

A weak rouble is bad for RUSP (hence the fall in pref prices) it's terrible because a lot of the debt is dollar denominated and obviously the prefs and ords are sterling but a lot of the rents are collected in rouble now so they have much less income to service dividends, interest and coupons. There is some hedging I understand and obviously the cash buffer. Also ordinary dividends will be hit before prefs.

Log

[kenny] 11/4/2018 13:50

Monty, not a stupid question because it is hard to figure out if - on balance - it is good or bad but here are some factors to weigh up.

A lower rouble is inflationary for imports but since the 2014 sanctions Russia has moved to producing most of its food needs. Higher inflation means interest rates will not come down as fast as previously expected. On the other hand, rouble-denominated rents, now 45%, which have annual indexation to inflation, will rise faster.

A lower rouble also means the plan to move more debt from US dollar to rouble loans will be put on hold albeit I am not convinced that plan has/had clear advantages. On the other hand, the company may decide to suspend any further property acquisition activity until the effect of the sanctions is clearer – retaining the $266m cash they hold as a rather large buffer. Of course, the sanctions will put off foreign investors therefore throwing up more bargain prices for the company to mull.

The big knock to the rouble in the last few days is indicative of foreign investors exiting but I also read that Russia is considering introducing a special status company – being a foreign company converting to a Russian company but still treated as non-Russian resident. So if the oligarchs repatriate to that status that would lead to a large demand for the rouble.

I imagine that the biggest potential negative effect is that the Russian economy does not grow as fast as projected leading to vacancies being sticky. I have read conflicting views on this in the last few days – some say the economy will bounce back quickly whereas others say the economy will slow. These are sanctions against individuals and their companies – some of which are large but, importantly, not the whole economy and the sanctioned companies are supported by the Russian government.
There may be more sanctions against more individuals and their companies to come but it is hard to see that sanctions against individuals and their companies will have a lasting negative effect - especially when those companies are supported by the state. Bear in mind Russia is one of very few countries to have no net effective government debt.

In considering RUSP alone, it is certainly true that the share price is volatile and could remain so but, even with more sanctions to potentially come and a slowing economy, the coupon here is really very secure. The “margin of safety” on RUSP’s coupon is bullet proof, in my opinion, even if the political storm continues for years.

P.S. We also have to factor in the rising oil price which is now above 12 month highs. As oil is traded in US dollars a lower rouble means more roubles for the Russian government.

[montyhedge] 11/4/2018 12:36

Kenny probable a stupid question, is a falling rouble, good or bad for Raven Russia?

[kenny] 11/4/2018 11:07

I have checked and Guernsey law provides much more protection than UK company law (by simply not allowing such a situation).

In Guernsey company law (and the company's Articles closely mirror those) there is no concept of a company’s right to cancellation of capital – the exceptions being that a company may cancel shares held in treasury or unissued capital.

I have looked at both the Articles and Guernsey company law and neither give a company the right to undertake a return of capital. Neither are there any terms similar to those contained in the AV and GA Articles e.g. wording such as below:
“On a return of capital (otherwise than on a winding up or on redemption of or purchase by the company of shares of any class).....” (from the GA 8.875% preference class terms).

There is provision for a return of capital on a liquidation or, in the company's Articles, a very limited circumstance namely, a takeover of the company, but in the latter instance a preference shareholder is not obliged to tender their shares.

I assume that because Guernsey company law allows companies to issue no-par capital it would be impractical to also give a company a right to reduce their subscribed capital by compulsory withdrawal of shares. It would produce all sorts of potentially strange situations and scope for fraud e.g. a company could issue some no-par capital at 100p each and then choose to redeem it at 1p shortly thereafter.

It just so happens that RUSP are 1p nominal so I don't think anyone would have subscribed for them on issue - at 100p and a subsequent further issue at 134p - if there was any danger they could be cancelled at 1p. On the later issue at 134p, I doubt that anyone would have subscribed if cancellation at 100p rested in the company's hands.

I am glad you raised the matter because it is very important to me to be certain that my interpretation is correct. If there are any other aspects that occur to you, or others, do please post your comments.

[loglorry1] 11/4/2018 07:54

Kenny re post 2320 I'm afraid I'm not sure that the research you have done is valid. The problem is UK case law has deemed that cancellation of capital is not deemed to be a variation or abrogation of rights. CF House if Fraser case and many others. Yes that's under the UK companies act and Gunesey may be different but you'd have to check.

What you need to see us a clause in the articles stating that a cancellation requires a class vote. This is for example present in the NatWest articles.

It's not all bad news though because the shareholder and pref shareholder registers are very similar so it's unlikely the ordinary Shareholders would shoot themselves in the foot and vote for a par cancellation of the Prefs they also hold.

[kenny] 06/4/2018 21:46

The point is that Russia can reduce the gas to the European grid. Then European countries are going to look after there own citizens first, therefore reducing the amount available to be sold to the UK. We are at the end of the pipeline - which might be pretty empty by the time it reaches the UK.

[hpcg] 06/4/2018 16:48

Putin has 3 objectives for its campaign of murder in the west / UK / London:
1. Eliminate enemies of Putin - see all the "accidents" which happen to exiled Russians in London.
2. Scare potential enemies of Putin.
3. Appeal to the populist sentiment of a strong Russia.

In this case the objective was mostly 3 and 2. Those that fall out of windows are mostly 1 and 2.

The most likely corporate victim would be BP's Rosneft stake. It would be a non-trivial intervention though given that Russia tends to need international expertise and project development money, especially off Sakhalin. I certainly wouldn't want to be a BP shareholder.

Russia can't ban gas sales to the UK. They can cut off gas to the European grid, but once transported all gas is equal. They don't get any money if they don't sell gas. There is in any case an ever increasing supply of seaborne from North America, so that leverage reduces, and if the UK would pull its finger out and replace Rough then we would have the storage anyway.

[kenny] 06/4/2018 00:48

The UK cannot ban trade with entities not linked to Putin but even if they could, presumably the Russians will retort with a ban on gas sales to the UK: so we would all freeze to death in the next cold spell? I think there are already enough trade wars looming, with Trump this evening asking for another $100bn of tariffs on China.

[my retirement fund] 05/4/2018 23:32

Regards the other theory. If it were Russia trying to frighten its minions to be loyal then they are doing a bloody poor job of it. Throwing tantrums, at the UN denying it, 24/7 across all their forms of media denying it over there, jumping and screaming how unfair they are being treated etc.I can see Russia really falling out with Britain. Perhaps its time to sell before they put a blanket ban on the British doing all forms of business and travel.

[spittingbarrel] 05/4/2018 12:07

As I remember the security services had found the killer within 5 hours of finding the Skripals - one of the fastest crimes ever to have been solved...

[hpcg] 05/4/2018 11:52

Assassins are well known for leaving a trail of evidence. Sack the security services for not having found it yet.

[my retirement fund] 05/4/2018 11:40

No its not blood obviouse. What ever people think we dont have evidence and prehaps one should now ask themselves if they feel safer and more secure following HMGs circus show topped off with its very own clown or do they now feel less safe.Now the answer to that one is pretty bloody obvious !!!

[spittingbarrel] 05/4/2018 10:56

Craig Murray (British ex British ambassador to Uzbekistan) thinks a minimum of 2 dozen countries are capable of producing Novichok and quotes a professor of Cornell University as saying anyone of his students could produce it. Sounds like it's not as difficult to get hold of as HMG would like us to believe.