Sdic Power Discussion Threads

[lagosboy] 10/6/2010 11:40

scburbs

Look I think where we disgaree is that you beleive that an orderly wind up, whatever that is, will potentially deliver some value to the shareholders and that the banks loans will be serviced and repaid in full.

I think that the major shareholders ( who will have been sounded out in advacnce of an equity raise) and the banks agree with my view or they would simply put the company into some form of winding up, whether it be voluntary or compulsory and expect to realise some value.

Equity will be raised and the contributors will hope that management can introduce all the operational changes you have advocated in the past, including the fees which has already been done,to turn around the situation.

German Real Estate is a long term investment so I as I said the institutions will take their chances, and the banks also as long as more equity is injected. That is exactly what will happen.

I do not know if you how SWAPS work but SDIC counterparty will most likely hedge all or part of its SWAP liability with another counterparty and so this will go on and a chain created. To unwind that chain I suspect the costs to SDIC would be at least 10% to 15% of the SWAP value so on that alone wipes out any theoritcal NAV value. This company € 1.2 billion of loans....massive debt pile and no profits no cash

I think the true NAV is already well into negative territory.

[scburbs] 10/6/2010 11:01

Morning Lagosboy,

Your view on equity only deferring the day is essentially agreeing with my view that the company should be start an orderly wind up now! There is a complete loss of trust in management and why should they be given equity to waste.

Your comment on me being detached from reality on the banks is just bizarre. I am saying that the banks will bite their hands of for an orderly wind up because they want out. This is an acknowledge of the banking problems not a detachment from it!

You can rest assured that I haven't forgotten the swap liabilities, but it doesn't change my view and an orderly disposal over 2 years would see these reducing for some of the later sales.

[lagosboy] 10/6/2010 09:37

Morning scburbs

I agee with your sentiments, but they do not match the current economic climate and I am sorry but your view on the banks is similarly detached from the current economic climate and huge problems within the banking sector. Spreads already widening, CDS rising....very similar to the early signals for the 2007 credit crunch.

JM can't underwrite a € 100 million issue. His wealth is 70% German Real Estate, if his personal portfolio is of the quality of SDIC and similarly leveraged he will need underwritng himself !

You also seem to have missed the cost of closing the swaps which are serviced by the rental income. Closing out swaps will be hugely expensive and will only add to the huge looses a distressed company, selling poor assets into a sick economy will suffer anyway.

That's the call, put in some equity to satisfy the banks, buy some time and hope things recover. What happened to your shopping list of things to turn things around.....if investors wish to put in equity surely they are just agreeing with you that that list can be implimented ?

My view is that new equity will not save the company, it will only defer the day that shareholders are completely wiped out and the banks themselves have to take a significant haircut.

[cockneyrebel] 09/6/2010 22:36

Freddy - how many pups have you been involved it now? L.Gardener was a big write off for you, SCS tore you apart. Cattles - you must have lost a fortune there, Transware was it too? - now this one.

Geeze, you have the nerve to chase me about having a dig - shouldn't you be playing crib down at the Derby & Joan at your age - at least you might get the undies off an old wrinkly - it will cost you far less too! lol.

CR

[scburbs] 09/6/2010 22:31

"what happened to Caveat Emptor?"

Thanks for that YderrF, that is really useful!

I don't think anyone purchased thinking that SDIC was a great company just a cheap company. Personally I purchased because the underlying asset class was very strong and I admit I didn't fully appreciate quite how badly SDIC could underperform its market or how incompetently it could be run.

I was always wary of SDIC, but I misjudged the risks due to the evident strengths being demonstrated by their competitors and the benign market conditions (and by the fact that it was cheap cheap cheap).

Had I reminded myself of the statement "Caveat Emptor" would that have helped? Obviously not as I was wary, but misjudged the risks.

I do feel the need to blame the SDIC board for being asleep at the wheel and I do not see anything wrong in that. I also blame myself for not focussing enough on the management individuals themselves and relying too much on the fundamentals of the market. Maybe the second sentence is really me blaming them again by blaming myself for not fully understanding just how incompetent they could be! Well I am from the UK after all!

It is so clearly time to wind this company up. If there is nothing left on wind up so be it. If there is some value lets get it realised and distributed. However, there is nothing here that suggests giving more equity is the right thing to do. If it has no wind up value and the valuations are not realisable then why should equity providers prop it up. Lets find out if the valuations are genuine/prudent or not. The bank will not want to pay €50+m to exercise their security so they should let SDIC undertake the wind up on their own terms provided their debt is repaid on or ahead of schedule.

I suspect the reason the banks have asked for a recapitalisation is that SDIC have indicated that they want to continue. In my view the banks would bite their hand off for an orderly wind up. They want out, they don't really want an equity raise to pay down a token £50-100m of debt (although how they could possibly raise this amount without JM underwriting I don't know) and to carry the rest of the debt until 2013. They want out, as should shareholders. It has failed, let's see what, if anything, is left in the ashes, learn from our mistakes and move on .... but whilst we move on, let's whinge a little, after all we are proud to be British!

[lagosboy] 09/6/2010 16:04

ydderf

I am afraid I have to agree with you. I have always said that anyone who invested in SDIC, whether it be the initial prospectus or at any time thereafter implicitly sanctioned the fee arrangemenst with SYG as they were in the public domain and the terms very transparent for all to see.

Clearly there has been a rapid detiroration since Oct 19th, which is when the last audited accounts were signed off. The last interims disclosured the potential problems ahead in the Chairman's Report. An extract of which I posted here.

Some very concrete grounds are needed, being bad at your job is not a crime.Too many private investors assume management will always do a good job as a given, whereas the professionals assess the management as being the biggest risk factor.

Look at Tesco today, lost 750 million of market cap on the back of the CEO announcing his retirement.

[ydderf] 09/6/2010 15:54

The SDIC management will be comforted by the knowledge that a shareholders action group is to be formed. The SAGs are essentially a safe place for shareholders to bang on about unfairness etc to each other, and let off some steam.

The time for action is past, if you look at this thread, it is clear that a majority of posters wanted to believe that they had some special insight into the facts of the company and bought the shares hoping for a big gain. The inconsistencies and apalling exploitative relationshil between the fee takers was plain to see all along - certainly from 30p down to 15p. It was possible to sell at 5 times todays price - why didn't they?

Now that the gamble has been lost, they are understandably angry and bitter and in the true UK way, need to blame someone

what happened to Caveat Emptor?

[envirovision] 09/6/2010 13:26

I see theres talk of an action group being set up to try to take the management to task:

Good luck to them, but i'm sure they have pulled enough out of sdic long ago in order to afford the best lawyers in the business. (Asumming the group does get established).

[lagosboy] 08/6/2010 15:07

Afternoon scburbs

Just been having a brouse over on Motley.

Allegedly it was never the intention of the lending banks to retain their exposre to SDIC. The plan was to syndicate it out or securitise it and sell on but the credit crunch took care of that.

Now, the last thing they want is a € 1.2 billion exposure to a failing SDIC.

The banks must also be non plused by the claim that vacant properites were carried at nil and then a few months later at a reduced value. Seems also alot of the note diosclosure on loan terms and roll date might not be quite as accurate as it should be.

I see a potentially huge problem unravelling here. € 1.2 billion of loans and a huge shortfall of assets equal lawsuits. Connected company being paid handsomely in the meantime.

This will all get very ugly and the banks will be leading the way.

[lagosboy] 08/6/2010 10:56

Morning scburbs

I don't blame you at all, I bought just a few some time ago at a much lower level.

I agree BILL is much better prospect.

You know I would never try to tempt you into anything !!!!

Give me some credit, I was right about a fund raising and I did advocate a sale of the all the properies which you now agree with. although I must admit also that I have now changed my mind on that given the situation is far worse than I thought !!!

It would just attract vultures to pick at the carcass.

[scburbs] 08/6/2010 10:44

Morning Lagosboy,

Sounds promising, but you are not going to tempt me! I thought this comment was a touch misleading.

"The bank, supported by an overwhelmingly Manx deposit base, insists it has avoided the toxic lure of fancy derivatives and sub-prime mortgages ..."

They may not have invested in these fancy derivatives, but having £9.6m written off their NAV in relation to an investment in ESS is no better. After all one 100% write off is no different to another and halving your NAV in one fell swoop is pretty bad going. Just because it was on simple equities rather than fancy derivatives does not make it any better!

I might be tempted by BILL, but Manx Financial is too small and far too risky for me. Even if they do make £4m next year what is to stop them investing that in some massively risky equity investment and losing it all again.

[envirovision] 08/6/2010 10:11

Well there seems plenty of big trade dumping at the sub 7 cents level. Seems there could be a lot further downside still.

[lagosboy] 08/6/2010 09:13

Morning scburbs-Off Topic

Just on MFX-this is a summary behind recent activity.

Manx Financial on the prowl
Article Date: May 18 2010

Formerly overstretched Manx Financial Group is looking for takeovers in insurance and banking as it taps investors for £1.8 million.

Steered by chief executive officer Denham Eke, chairman of Betinternet who replaced vehicle insurance luminary Arron Banks at the helm after aggressive expansion led to problems, AIM-quoted Manx Financial is raising £1.8 million at 9p to expand its successful retail banking operations in the Isle of Man and pinpoint acquisition opportunities in banking and insurance. The company, whose 75 year-old Conister Bank Manx-licensed banking arm is headed by ex-Ministry of Defence nuclear weapons programme luminary and former Alliance & Leicester international chief Simon Hull, is heading back towards eventual profitability after slashing losses last year from £18.3 million to £2.6 million.

The bank, supported by an overwhelmingly Manx deposit base, insists it has avoided the toxic lure of fancy derivatives and sub-prime mortgages and is thought by local observers to be achieving margins of 8 per cent and more in asset-based lending to small businesses. Last year, Conister's card services division cut its losses from £3.5 million to £400,000 and moved into the black in the second half.

Bulls reckon Manx Financial could make as much as £4 million pre-tax in the next financial year, helped by exploiting its Isle of Man tax attractions for rich non-domiciled British clients. Floated at 25p 15 years ago, the shares have had a dreadful history, plunging as low as 6p within the past year, but now at the equivalent of 8.5p, they offer handsome, albeit speculative, recovery possibilities for strong-nerved punters.

[lagosboy] 07/6/2010 17:21

scburbs

I did notice that also, and of course anyone relying on it may have taken the view that it was a very conservative approach to valuation. If true there would be considerable hidden value irrespective of whether or not they remained vacant. Just the sort of thing a savvy investor would be looking for.

What happened to valueing assets at the lower of cost or net realisable value.

Do you know how other companies apply a valuation to vacant properties.

The first statement in particualr makes no commercial sense whatsover, just because a appartment is vacant does not mean it has no value.

Perhaps someone with sector knowledge would care to comment on the valuation method adopted.

[scburbs] 07/6/2010 17:18

This prudence is a common theme through the presentations. However, if I had a pinch of salt I wouldn't waste it on this!

"The Manager believes in a prudent valuation approach to valuations." [P8]

[scburbs] 07/6/2010 17:01

Here's another view where it looks like the inaccurate statement has been corrected. It is a fairly fundamental error (either that or they increased the valuation of the vacant units)!

"Vacant units (which generate no rental income) are attributed a much reduced value. It is therefore a core focus of management to reduce the vacancy to maximise the value of the portfolio for the Company's shareholders Refurbishment"

[scburbs] 07/6/2010 16:57

Bisiboy made reference to the SDIC claiming that vacant properties had no carrying value. I recall this reference as it seemed very bizarre to me at the time.

I attach the specific reference from the June 2009 presentation made in September 2009. As it appears in a SDIC presentation I have no particular belief that it is accurate.

"Vacant units (which generate no rental income) are currently attributed a theoretical value of zero. It is therefore a core focus of management to reduce the vacancy to maximise the value of the portfolio for the Company's shareholders" [P10]

[lagosboy] 07/6/2010 16:23

scburbs

Afternoon, I guess the answer to your question is that they would stump up in the belief taht the company could be turned around after implimentation of the many changes needed, changes that you have highlighted so eloquently.

Unfortunately you can't simply turn on switch, revert to wind down mode, sell the poperties and return 40 cents to shareholders.

Too many people (myself included), I think have relied upon the safety net of the hypothetical NAV and ignored the lack of profits and cash flow generation. It is easy with hindsight but questions should have been raised about the lack of divi's but management had their answers and the share price went up so everyone stayed quiet.

When I first questioned SDIC I was made to feel like a leper.


I don't think a wind down would produce any value to shareholders, and I am pretty sure it is not an option anyway since the banks have set the rules. They are, management internalisation and new equity or they will step in. The former probably the last thing JM would want.

When a company breaches its covenant the bank must act to protect its own shareholders. The best way to protect them is to get cash into the company and quickly.

SDIC it too indebted and its obvious to me that Estate is of a very inferior quality to it peers however badly management may have been. Indeed, if the management had been absolutely superb, as they claim, that would only further confirm that the Estate is the issue and that is irreversible.

Over leveraged against, over valued and far too many dog plots. All very depressing.

[scburbs] 07/6/2010 14:59

Afternoon Lagosboy,

Why would someone who thinks that an orderly wind up would generate no proceeds for shareholders even consider stumping up for an equity raise?

This company is very much an asset play, if the asset value is effectively nil there is no investment case and it should be put down. If there is an net asset value then it is time to realise it as management have failed. Either way it seems time to put this one to bed.

[lagosboy] 07/6/2010 14:33

nickduck

Thanks for that, seems as I thought, the banks have made loan restructuring conditional upon the internalising of the management agreement and a equity injection. Just what you would expect the banks to do in the circumstances. They probably think if they try to liquidate properties now that they will take a haircut.

TTh eone thing that has really surprised me is that to date (a maybe it will follow) there has been no mention of Senior Management or Board changes.

In view of your final comment do you think SDIC is investable & do you think shareholders should stump up, or are we just deferring the day of reckoning?

[nickcduk] 07/6/2010 12:29

Had a chat with Fairfax this morning. They said it was the banks who have been pushing for internalising the management agreement. I guess I wasn't the only one this morning to be giving them grief about the company. Was told that shareholders would be given pre-emption under any potential fundraising. Guess its just a case of wait and see now. Worth bearing in mind that the company is now probably valued at its parent cash and equity value it retains in its 2 smaller borrowing facilities. Those have much lower LTV ratios.

[envirovision] 07/6/2010 10:47

Just kidding.

[envirovision] 07/6/2010 10:39

The euro notes can be identified by the country it was issued in via the serial number which has coded letters preceeding the number.



So a Greek euro note starts with X.

If you took a 500 euro note to the ECB with the letter X on it and asked if they can change it for you, they will gladly do so. However they will only give you 250 Euros back.

[jonwig] 07/6/2010 10:33

Bangor - it's Euro coins, not notes.

A couple of years ago, we saw a bookshop in Bonn which advertised a discount if you paid in 'German Euros'.