Sdic Power Discussion Threads

[scburbs] 06/6/2010 09:38

W1ndjammer, LOL! At least I hope for your sake that you are joking. Don't forget that your investment case for SYG was based on its earnings whereas you now seem to be moving it towards an asset play (as it won't really have any earnings left). With a starting position of negative net assets there is a lot of cash needed before SYG becomes undervalued compared to its market cap.

49% of Goal was worth €1m in June 2008. The price paid was 1*earnings.



The earnings may have gone up a little, but who would pay more than this for a company whose main client is in massive financial difficulty. In the circumstances 1*earnings would be overly generous (and should be paid in shares at NAV). After all Goal potentially has a negative value due to the potential redundancy costs.

Of course you have the chance that the board of SDIC will continue overpaying the SYG Group as they have done for years.

[w1ndjammer] 06/6/2010 08:41

so how much are you guys willing to pay for GOAL
say 9 or 10 mill just trying to work out how
much the special dividend will be over at SYG
could be worth topping up.

WJ.

[davidosh] 06/6/2010 00:43

Lagosboy....I think you pretty much have it spot on there. It would be interesting to know how the auditors see the current situation and whether they feel the disclosure was adequate a few months ago. I know there is a shareholder who actually wants to challenge the last accounts as he thinks they are inaccurate based on information known now. He has written to the company but did not receive a reply !

[paulypilot] 05/6/2010 23:36

Thanks Jeffian, much appreciated.

Regards Paul.

[lagosboy] 05/6/2010 17:32

davidosh

AS you know I have been ringing alarm bells on this one for several months and have taken a good deal of heat and criticism along the way. I take no pleasure whatsoever in my views being proved correct, at least in the near term.

My first port of call would be the auditors, the accounts for the year end 30th June 2009 were not signed off until 13th October 2009 so the auditors have a statutory duty to conduct a post balnce sheet review up until that date and to reach a conclsuion that the company will also remain as a going concern for the forseaable future which normally covers a period of 12 months from that date being 13th Octoober 2009.

So, just 4 to 5 months after this clean audit report SDIC was in breach of covenants and now we find it is unable to meet loan repayments out of current cash flows without taking further actions.

The company made a loss in the last year following on from a loss in the previous year and has never generated any significant cash flow from its operations. It would very interesting to ascertain exactly what review procedures were carried out by KPMG and exactly what representations they relied upon to reach a conclusion consistent with a clean audit report and the numerous bullish statemenst made in the accounts covering many areas of the business.

The accounts were full of hype and rosy comments and yet just 5 months after they were signed off we find the situation to have deteriorated so rapidly.

As for the contract with SYG, every shareholder that invested in SDIC implicitly sanctioned it as it was publicly avaiable and its terms were transparent.

My feeling as I have expressed many times is that the business model was fatally flawed. There are so called dog plots, the ones that never sell or rent at commercial rates. In the haste to put this vehicle together I suspect it has been stuffed full with dog plots. Refurb has really been repair exascerpated by the severe winter and complete control has been lost across a scattered Estate and numerous managing agents.

I would take the Estate Valuation with a pinch of salt as the banks have clearly done. Just a 10% reduction in its value would wipe out any NAV, particularly with I presume another loss making, zero cash generating year well under way.

Many people believed that they were investing in German Real Estate, the safest of asset classes, but what they were really investing in was managements ability to first select and then manage that Real Estate. Clearly they have come up very short.

[davidosh] 05/6/2010 13:49

bisiboy...that is a significant holding (3m shares) and another poster here has over 1.5% and certainly a number of us jointly have 1%. I think we can sound out other significant holders and call an egm if necessary. We need to get very active and I have heard a number of shareholders claiming they were mislead.

I am sure the institutional holders will not remain passive if serious private investors put forward a strong case for an alternative. Who is going to organise this campaign ? To be blunt I have very little spare capacity as I am already involved in tens of projects and investor groups. We need some committed individuals to step up to the plate here...

[jeffian] 05/6/2010 13:37

paulypilot,

#1131

You are a gentleman, sir.

[ydderf] 05/6/2010 11:34

paulypilot - please email me at [e-mail] - we have a few things of common interest i think, thanks, ydderf

[bisiboy] 05/6/2010 11:22

what frustrates me about this is yet again a complete lack of clarity.

it is evident that management are incompitant and have clearly misled shareholders.i feel very angry but also with myself as i chose to ignore some
warnings signs that things were not as they appeared to be. i am guilty of the classic mistake of anchoring.

this was one of my largest shareholdings and overall can speek for about 3m shares on any vote/ requisition that may be proposed.

the warning signs i ignored were

1/- recognising that those in london representing the company were saying things that were just wrong or did not tie in with what i had gleened elsewhere
including visiting the operation in berlin

2/-above included being told vacant properties were attributed zero value in the balance sheet

3/-being told covenenats would not be an issue when they clearly were.

4/-being ignored when i said i could introduce them to a serious purchaser looking to set up a fund of residential german property for 50m seed money
5/- alarm bells on FFO.
6/- vacancy rates

so at the risk of anchoring yet again my thoughts are

1/ the underlying asset class is very sound and should be increasing in value

2/ assuming the properties are valued correctly there is therefore significant value for shareholders if the banking issues can be resolved

3/-a lot of costs need to be taken out of the operation and here there is multiple vested interests obvious one is jm but also i am not sure about some other costs at company level.
4/-we need at director level to restore credability and a sensible ned to
represent ALL shareholders.

we are at risk of being diluted heavily which was always my one fear with this investemnt, at the end of the day jim mellon is going to come out with a significantly increased stake and as i have said all along the weekness in the share price and uncertainty has played into his hands. if i was being a cynic i wonder whether the continuing lack of detail given by the company is deliberate.
we are very relliant on the major institutional shareholders to do the right thing here including king neil at IP.
For those very brave these could be a screaming buy opportunity but we need to
know.

1/- how much capital is required know to meet the amortisation breach,and how nuch will be required over the next 3 years to be met from either sales or surplass cash flow.
2/-whether internalisation of goal will be sufficient to restore icr on
other 2 vacility. my feeling is it will be but am i anchoring again
3/- whether in fact GOAL are asgood as i thought they were or have we been paying a very substatial fee for a poor service
4/- that if there is to be an ordinary equity fund rasing that all shareholders will be able to participate via an open offer along the lines of pspi which was very successful in that way any dillution would be voluntary.

good luck to all who hold

[lagosboy] 05/6/2010 11:16

Morning scburbs

If you feel 40 cents per share is realsitic I would certainly support it. I am just not so sure that is achievable.

The banks have a simple choice, they either take control of the company and wind it up as it is breach, or they impose new conditions and restructure the loans. The second option will be conditional on additional equity being raised.

New equity is free to the company and can be applied to reduce leverage and eliminate the breaches.

It is for shreholders to decide if they wish to stump up, but I suspect that the major shareholders will have aleady been sounded out and will do so, or this whole process would be a complete waste of time.

Presumably if they agreed with your view that the company could be wound up for 40 cents a share they would not support an equity raise.


It's all very unpleasnt particluarly as this was sold as a long term retirement SIPP type of investment and if you will forgive the pun it was meant to be as safe as houses. Unfortuantely it was over loaded with expensive debt and incompetently run.

I guess the only variable will be if a suitor enters the frame, but with €1.2 billion of debt that might be unlikely.


Davidosh

Does all this fit with what you were told by JM ?

[scburbs] 05/6/2010 10:40

Morning Lagosboy, Whilst you may think it will not take much to shrink the theoretical NAV further in a wind up there is one thing guaranteed to decimate it and that is an equity issue.

Certainly no one should expect to get NAV in a wind, but I suspect most would be happy with 40 cents per share as I expect everyone is tired of SDIC/SYG's incompetence and would just like to exit at a reasonable level.

As to the management contract not impacting on the covenants that may be correct now they have left it too late. However, we both know that the refurbishment programme and the inflated fees to SYG have both directly impacted on the covenants and without them there may not be a breach. The SDIC board has been asleep at the wheel of the truck full of shareholders cash whilst SYG empty its contents! The sensible thing is for the Directors to wake up, realise they have failed and return what value they can to shareholders.

The banks want their money back so in my view the banks should waive or defer covenant breaches if the board changes strategy to an orderly wind up. This is the only way to preserve any material (per share) value. The company could try and do an equity issue to preserve some value, but it would be obvious (based on the impact on future potential value per share) within moments of the announcement that this is the wrong strategy for existing shareholders (to such an extent that even a sleeping SDIC director should be able to spot it!).

[lagosboy] 05/6/2010 09:59

I suspect that the banks continued support maybe conditional upon a fund raising and cost savings. Terminating the management agreement with SYG is clearly the quickest and most obvious way to generate cost savings.

I am afraid Davidosh that the banks will be totally uninterested in the negogiation or relaxation of their covenants. If any thing the opposite will be true, as slowly but surely their loans have become more exposed. Just has you have no confidence in the management they will no doubt see things the same way.

All European Banks remain woefully short of capital and over leveraged, many still up to 30x, they are all looking to shrink their balance sheets and despite huge govt pressure they continue to retsrict their new lending and impose tougher terms.

My only surprise is that the bank has not insisted on Board changes and a new management team much the same as happened at Speymill MacCau.

The termination of the SYG Management Contract will produce net cost savings I guess around € 7 to € 8 m as some additional offsetting costs will be incurred. Hardly a game changer and it will have no direct impact on the covenant issues.

The NAV at 31/12/09 was 65 cents or circa €220 m. The company has lost €150 m over the last 2 years and € 30 million last year. Also highly likely that the Estate could be over valued especially if you believe other posters sentiments as inflating the Estate Value equates to higher fees. It will not take long to shrink this theoretical NAV much further.

One can only speculate without all the facts, but a fund raising maybe the best or indeed only way to proceed, winding up the company would in my view simply result in the banks being made good on their terms with little or no assets left for shareholders.

It may in the long run be better to suffer a dilution to secure some value in the future.

[crawford] 05/6/2010 08:06

Do we vote on this fund raising or do we have to call and EGM to have it stopped?

What baffles me is that rival are at least stabilising value, voids are falling but we don't have any management, just pigs at a trough.

I am equally very angry and will vote down any proposal. Where are the large shareholders? Surely a NAV of 86c should mean the logical option is a wind up of the trust?

[davidosh] 04/6/2010 23:17

I agree with scburbs and to be brutally honest I have lost what little confidence I had left in the current board and the overall management structure. There has been poor performance by the teams that are on the ground indicated by the voids and the refurbishments are simply not delivering any value.....so why should we want to continue with them and have direct responsibility for the teams that have driven us to this disastrous point ??

There needs to be a review of which properties can achieve a satisfactory and easy exit price and negotiation on relaxation of the covenants on the basis that a new strategy is in place to maximise return for the banks and shareholders together in the most efficient way. The fundraising merely dilutes the poor shareholders who cannot or are prevented from taking part in what will be a hugely discounted placing....Worse than that though it will probably serve to extend the pain of watching what appears to be incompetent management gain a lifeline to continue more of the same value destruction at slightly cheaper but still extortionate rates (As they are perversely admitting to in the RNS!)

I say STOP this now. We should get together and call an EGM....Sack a number of directors that have allowed this situation to progress and install three capable directors who will undertake an orderly wind down and review all operations to see how savings can be made and contracts unwound. Jim Mellon can decide where his loyalties are but I intend to test this plan with the institutional holders and larger PI holders who were not happy bunnies when I last spoke to them and most had little appetite for a huge placing at any price.

[hugepants] 04/6/2010 22:59

"The Internalisation is an important step towards achieving an overall funding
solution as it is anticipated that it will enable the Company to realise a
substantial level of cost saving, with an immediate impact on the level of
monthly cash outflows. "

Its a racket. Only when the company has almost collapsed do they finally admit they have been squandering shareholders money.

[lagosboy] 04/6/2010 19:23

windjammer

I still hold a few & was surprised that it did not tank along with SDIC today.

I wonder what sort of shape JM personal portfolio of German Real Estate is in. Does anyone know if that is highly leveraged as well?

[crawford] 04/6/2010 19:17

Totally agree with you guys, the company needs to be winding down, sell the assets worth 90cents after costs and the banks will be repaid, give the proceeds back to the owners.

Quite why this incompetent management would want to raise money at the bottom beats me.

Can we vote this down?

[scburbs] 04/6/2010 19:03

What would be the investment case for SYG other than it being JM's baby? Speymill Contracts was a disaster and they have hardly done a good job here. Who would give them a new fund management mandate, or is it just reliant on JM(or on SDIC overpaying them for Goal)?

[w1ndjammer] 04/6/2010 18:58

scberbs

to be honest its anyone`s guess
i allready hold SYG with an average about 7p
i wont be selling but probably wont buy either
unless it drops to silly money
but bear in mind it is Jims baby and he wont let it go bust
also his old man is involved so double truble

WJ.

[scburbs] 04/6/2010 18:51

Windjammer, Do you see SYG as a buy off the back of this news?

[scburbs] 04/6/2010 18:50

YdderF, Yes, you are preaching to the converted when it comes to blatent conflicts of interest. However, I will say for IERE that they did make some sales (not enough, but some), they did refinance and they took steps to ensure that when they raised equity they did not do so at the bottom. However, look at TEIF or MERE for companies who have sold in the interests of shareholders rather than acting for their managers against shareholders interests (just to show that some boards do understand their fidicuary duties).

[w1ndjammer] 04/6/2010 18:48

hmm well GOAL don`t only manage property on behalf
of SDIC so if they want it they need to pay SYG
and who`s share price has droped not SYG
no doubt Jim will have somthing up his sleeve.

WJ.

ps. Lagosboy you still holding SYG

[scburbs] 04/6/2010 18:47

I agree that I don't trust the board to do the obvious as they have illustrated their incompetence in this short sentence "substantial level of cost saving, with an immediate impact on the level of monthly cash outflows." (wakey wakey guys!!).

As for the agents, 1-2% per property should see them sorted. The main question would be getting enough time from the banks and trusting the board to actually do it properly. However, I certainly don't rely on the later given performance to date.