Segro Share Discussion Threads

[scburbs] 16/3/2009 23:27

Skyship,

I know what date The Times piece was! I was referring to a principle that anyone buying bonds needs to understand what protection they have and consider what would happen in takeover and other scenarios.

I can't see the relevance of the date of the article to that.

As a more recent example, the BXTN 2015 and 2019 bonds have a clause that makes them repayable if their is a takeover and a ratings downgrade. This clause would help avoid the type of mischief referred to in the article.

I wasn't making any statement about the quality of protection for SGRO bondholders, I was just suggesting people make sure they have checked and done their due diligence.

[tourist07] 16/3/2009 05:29

SKYSHIP - the 2035 bond ... as per my previous post.

Long dated bonds tend to have a more volatile price as in order to adjust to a change in the "market-acceptable" YTR, the price adjustment is more severe than for a shorter dated bond.

I was hoping that SEGRO bonds would be re-rated as to "market-yield" on a fully undewritten rights issue and that we would have a similarly violent upside adjustment to the price of the 2035 maturity bonds ... alas no!

[skyship] 11/3/2009 10:04

scburbs - that Times piece was from 2004!!

Tourist07 - which SGRO bond plummeted to that extent - none that I can see!

[brianbuchanan] 09/3/2009 19:20

hi all
any advice on what to do with these shares I currently hold 2000... should I sell them or take up the rights issue
I would be grateful for any advice
thanks

[tourist07] 09/3/2009 03:29

Hi scburbs, sobering reading indeed. Thanks for that.

Clearly bonds written with completely inadequate protections, but as you say we went through a period of cov-lite bonds.

I don't actually plan to hold them to redemption :) I bought them with cash which I took out of equities, aiming to preserve capital and thinking that at some point inflation expectations will come way down and bonds will reprice. What I didn't bargain on is an "undershoot" on inflation to fear of deflation and widespread corporate defaults, which caused SEGRO bonds at least to plummet from around 70p in the £ when I bought them to 46p recently. I had rather hoped, and still do, that they will bounce back a bit with the Rights.

My cunning plan is then to sell and re-invest in equities at exactly the right inflection point ... :) I'll give you all a few days notice of when that is.

[scburbs] 06/3/2009 22:31

Tourist07,

2035 is a long time. Good luck, but just make sure you understand the small print and ensure that the bonds are sufficiently protected from cash strips.

[tourist07] 06/3/2009 02:33

I'm in the bonds, was looking for a good spike up today, but no such luck ... ahhh well, as they are 2035 Redemption, there's plenty of time :)

[skyship] 05/3/2009 17:43

Cerrito - RE the Bonds - joined you with another £5k @ 80

[scburbs] 05/3/2009 08:56

Silican_Kan,

If you were short you wouldn't ignore it. Someone who was short might want to ignore it, but the rights would be exercised against them reducing their average short entry price. If they could just ignore it they would make an amazing profit!

[sicilian_kan] 04/3/2009 23:26

Right, I've found the answer. It is not particularly googleable. Thanks to all those who act patronisingly and with contempt. Your time will come...

"In a rights issue a company will generally be offering existing shareholders the right to buy a certain number of new shares at a certain predetermined price. This is a method of capital raising by a company, and the shareholders have the right not to take it up i.e. if you were short you would ignore it, and if you were long you would have the right to increase your position at the price on offer. The rights issue will generally be at a price below the market price and should have a dilution effect, meaning that the share price could reasonably be expected to fall, thus moving in your favour. There is no reason why a company would decide to issue shares for free (except in a 'stock split') as this would simply have the effect of diluting the share price and raising no capital.

In broad terms, spread bets are designed to replicate the profit or loss that would arise on a position in the underlying share. Rights issues are a little more complicated then stock splits because the new shares are issued for money. So the value of the company has changed.

Let's take the case of the company which had been worth £1,000,000 to start with – represented by 1,000,000 each worth £1.

If the additional 1,000,000 shares, instead of being issued at 0 had been issued at 50 then our £1,000,000 company has raised an additional £500,000 and is now worth £1,500,000 represented by 2,000,000 shares which will now trade at 75p. So your £10 down bet at 100 would become a £20 down bet at 75. Here your maximum profit if the share goes to 0 has increased from £1,000 to £1,500 (although the company's management will presumably have to work a little harder to get the share price down to zero despite the additional £500,000 cash they have just raised)"

[skyship] 04/3/2009 17:51

Hi Cerrito - £81 inc exps would be a running yield of 7.72% & a GRY of 10.97% to 30/09/2015. Seems as though they marked them up c.£3 today. Still cheap, may also look to add.

As I may already have stated, excuse me if I'm repeating myself, my favourite high-yielding property play at the moment is FCPT. Yesterday was a great buying opportunity (but then, what wasn't). They pay a dividend of 0.5p/month, so at 62p the yield = 9.7%. They have only 10% net gearing (so no LTV worries) and a 31/12/08 NAV of 85.6p; so stand at a 27.5% discount to NAV. Further details on my Post No.38 on this link:

[cerrito] 04/3/2009 16:42

just bought more of the 15 bonds but had to pay a shade over 80; had wanted to buy the 18's but there are no offers

[sicilian_kan] 04/3/2009 14:28

I am not investing here, but no one has answered the shorting question. And stop knocking people for trying to learn. That is all I am trying to do. Let me rephrase my question, because it is an important question.

If I look at the spread bet prices, the March 09 price quoted is 90.9p and the June 09 price quoted is 91.5p. So if on 23 March, each share becomes worth 15.75p or if 100p then 17p etc., why are people quoting a March 09 price at 90.9p or a June 09 price at 91.5p. Are they expecting the market cap to increase 5-6 fold as a result of this rights issue, and for the share price before 23 March 09 to hit many multiples of today's prices? Or do the spread bet companies take into account the rights issue on your bet and proportionally reduce your buy and sell figures.

I.e., why are people not shorting the share price down through spreadbets etc. These people would not receive 10p shares, which was your argument above.

[scburbs] 04/3/2009 10:16

If the price remains stable at 85p then on the ex-rights date of 23rd March it should open at 15.75p. It doesn't move before that date as anyone selling before then will not be entitled to buy at 10p in the rights issue.

Covenant renegotiation looks more expensive now it looks like it was either conditional or done with full knowledge of the impending underwritten rights issue.

Potentially misleading behaviour by SGRO, although its fair to say they haven't got the rights issue away at a better price as a result!!

[sicilian_kan] 04/3/2009 09:37

Skyship, I appreciate that, but if 15.75p is where the share price is heading, why isn't it being shorted to that price? My point still stands really, is this company worth 5x yesterday's value as a result of the rights issue? And will not people who have bought the many many shares at 10p sell them on receipt?

[skyship] 04/3/2009 09:26

SK - sorry, back to school for you - it doesn't quite work like that!

There has to be a site somewhere that explains investment fundamentals to learners - try googling for it.

In the meantime, the system is that at the moment we are Cum-Rights @ 85p.

When we go Ex-Rights, you will have:

1 share @ 85p = 85p
12 shares @ 10p = 120p
Therefore holding = 13 shares for 205p
Therefore the XR price should be 15.75p

For part of yr learning session - go & have a look at the Cum-rts & Ex-rts prices of HMSO & BLND

[sicilian_kan] 04/3/2009 08:53

VV I agree that the news is bad, however, why is the share price not tanking? People are having to buy 12 new shares for every 1 they own, at 10p. Are people really not going to take an 8-bag profit on those shares, bringing the price down? Is the share price really worth 12x yesterday's value on the hearing of this news? So how come it isn't being shorted/sold down?

[skyship] 04/3/2009 07:58

A rather tangential point - perhaps for Alanji - doesn't this make the SEGRO bonds a great buy?

[value viper] 04/3/2009 07:21

i am staggered after the covenants update that they have hit the mkt with this - shocking. why did they bother spending 8 million getting a bit more breathing space if this was in the pipeline. don't get me wrong, if the banks weren't such nightmares they would have underwritten it at a relatively decent level.

[fairoaks] 28/2/2009 17:14

Article about the rights issue in the FT

[mw8156] 28/2/2009 15:21

looks as though we will be getting a rights issue after all...

[u813061] 27/2/2009 16:02

Another disposal. Every £ counts.

[fairoaks] 26/2/2009 09:49

Citigroup upgrades Segro (SGRO.LN) to buy from sell. Says the company has re-negotiated bank covenants and has been selling assets to reduce gearing problems. "Management has been pro-active in dealing with the gearing and has suffered in part because of its tighter-than-average covenants, now resolved," it says. Reckons the company is in a good position to launch a rights issue. But believes the shares factor in "too much pessimism." Lowers target price to 125p from 245p. Shares +7.4% at 105p.

[fairoaks] 26/2/2009 09:17

Segro Raised To Buy From Sell By Citigroup