Sherborne Investors (gue... Share Discussion Threads

[makinbuks] 04/9/2024 10:59

Half year report out today confirms the plan remains on track buy the market seems unenthusiastic. Navient was $17.76 a year ago, $19.21 at the start of the year and $14.16 at the low point in August before they announced the disposal of the medical division. It recovered to $16.93 subsequently and is now suffering again in these nervous markets.

Of course the discount to Sherbourne's price and the exchange rate have to be factored in on top of that

Cash is king and I think there will be a lot thrown off here. Navient is an unloved share that will have its day

In the meantime Sherbourne could do with being a bit more communicative

[makinbuks] 07/5/2024 15:27

So following that news on Dec 8th last year, this gives a good summary of what is now intended:



In short they expect cash released from loan repayments, plus the proceeds of selling the Business Process Division to exceed "current market value". That will be supported by an efficiency driven cost reduction process and leave them with a profitable and growing educational loans business called Earnest which is effectively in the price for free.

So what's gone wrong in the last five months with NAV reducing from 80p to 68p? The exchange rate should, if anything, have been very mildly supportive (1.27 1st Jan to 1.23 end April). So I conclude its down to the interest rate outlook and "higher for longer". I suggest it may also be due to a lack of newsflow and the fact that Navient is such a complex business.

What is presented in the link above sounds credible enough and they do talk about it taking the whole of 2024 to fully put the plan in operation. So I'm happy to hold on

[extrader] 20/12/2023 12:41

Possibly.

This might help...

hxxps://navientcorporation.gcs-web.com/node/11206/html

Item 8.01. Other Events.

On December 8, 2023, Mr. Bramson was appointed as Vice Chairman of the Board of Directors of the Company.

The Standstill agreement between Bramson and NAVI has been extended for a further year, AFAICS.

DYOR etc

[makinbuks] 20/12/2023 10:57

Navient is up c. 11% in December so year end NAV may be north of 80p again, Not sure about the effect of cable.

I assume falling rates is good for Navient who are rated on a PE of 7 with a 3% yield so clearly already in the "value" basket

Not seen anything strategic from our new CEO but 2024 could be an interesting year foe Navient results with a favourable market tailwind.

Scope for this to double?????

[makinbuks] 01/8/2023 11:42

And of course we trade at a 36% discount to NAV

[makinbuks] 01/8/2023 11:41

Sorry don't know why the link wont post, but its on the Navient Website

[makinbuks] 01/8/2023 11:39

Taken from slide 19 in this company presentation

[...]

Looks like PE is under 6 so you can see why this is considered value

[makinbuks] 01/8/2023 11:36

Over my first 10 weeks, my priority
has been to undertake an in-depth
review of our businesses. We are
evaluating a broad range of alternative
impactful strategies that deliver value
to our shareholders. In the meantime,
we remain focused on our efforts to
maximize cash flows from our loan
portfolios, enhance the value of our
growth businesses, maintain a strong
balance sheet, distribute excess
capital, and continuously simplify the
business and increase efficiency. Our
strong second-quarter results reflect
the solid foundation of our assets,
capabilities and people.”
— David Yowan

[extrader] 04/7/2023 12:31

SIGC is the largest shareholder @ 23.1% per stocko, so it might need to await some corporate activity...or evidence of 'turnaround/re-invention' that SIGC can offload into..

If anyone is in a position to bring either of those about, it'll be Yowan , newly-appointed Pres and CEO, who I believe is Bramson's man.

Most of the assets are ex SallieMae, AIUI, so should be Govt-guaranteed, no? As you say, NAVI is the administrator.

Discl.: as a learning process, I'm gradually building up my exposure to US stocks and the US market, but prefer to do this via a UK vehicle and following a successful US investor. I'm not particularly wedded to NAVI, per se.

[makinbuks] 04/7/2023 12:13

No thoughts really, as far as I can see Navient is the administrator for both public and private loans and also sells its technology platform to other applications. So the forgiveness of public loans only affects a portion of what they do and in that sector forgiveness is a limited offer.

More pertinently, the NAV is $3bn but the gross assets (principally loans less provisions) are $50bn so if there were a severe recession it doesn't look like it would take too much to drag them down

I also wonder how liquid our stake is. If Sherbourne decide to sell can they simply exit in the market?

[extrader] 03/7/2023 12:31

Mid year NAV out = 81.5est.

@ 59.25 that's a slight widening , now at 0.725 of TBV, prev 0.78.

Navient NAVI itself is at 1.05 to TBV, so overall @ 0.76.

I'm not clear how the on again/off again student loan forgiveness programme impacts NAVI (if at all).

Any thoughts?

TIA

[extrader] 29/6/2023 14:29

SIGC has just managed to get 'their man' elected Pres and CEO. It's also announced that this will be the last activist-driven deal, they'll return eventual sale proceeds to holders.

A single trade of 250K shares @60.0p/£150,000 has gone through today.

The next NAV update is due tomorrow.

NAVI is nicely up over the month, from $15.15 to $18.78 atm, offset by slight £:$ strengthening, discount should widen some.

IMO

[extrader] 15/6/2023 19:04

Hi Makinbuks,

Thanks.

I think it's linked to Yowan's appointment 3 days earlier, and has to do with the division of the spoils post monetisation :

If you go to p 52 of the last A/R 'Related Party Transactions', there's this bit

.."The Special Limited Partner is entitled to receive an incentive allocation once aggregate distributions to partners of the Investment Partnership, of which one is the Company, exceed a certain level of capital contributions to the Investment Partnership, excluding amounts contributed attributable to management fees.

For Turnaround investments, the incentive allocation is computed at 10% of the distributions to all partners in excess of 110%, increasing to 20% of the distributions to all partners in excess of 150% and increasing to 25% of
the distributions to all partners in excess of 200% of capital contributions, excluding amounts contributed attributable to management fees. An investment is considered a Turnaround investment when a member of the General Partner is appointed chairman of, or accepts an executive role at, the STC."

My guess is that Yowan is a member of the GP. I have no idea how to confirm that, but it seems pretty likely.

Like you, I've no idea what will drive a re-rating. Stocko calls it a Superstock with a 94/100 rating, dragged down by Quality 57 and Value of 88. Apart from the numbers, there's likely an unquantifiable (by me) political angle, with all those student loans. I'm sure there's a plan:

From the first newsclip, you'll see that Bramson got his seat on the Board as part of a quid pro quo : NAVI withdrew its 'poison pill' defence, Remondi (a 2.7% shareholder per Stocko) the then-CEO had a [standstill] year to make an impact...

I wouldn't like to play him at chess.

Let's hope that Yowan hits the ground running - there's an American saying that it's the first 100 days in office that are critical!

ATB

[makinbuks] 15/6/2023 17:03

Extrader, some great research, thank you.

I have to say the wording of the 18th May RNS is very ambiguous. What it says is one thing, but why was it necessary to be released to the market at that time is also intriguing.

I don't think we know what price the stake was acquired at, but 16% was announced 21/12/21 in the run up to which the price was slightly above where it currently stands. By the time an additional 3% was announced there had been some weakness so my guess is that the average acquisition price was very close to the current level. Can they really be thinking now is the time to exit?

Bramson has been on the board for a year. As you point out now he has the CEO he wants. I'm imagining that means some "transformational change" will be attempted but will take some time to affect the SP

I just think this is a financial stock that got hit like all financials in the US by the banking crisis. Now its recovering. Meantime beneath the hood, its a student loan company with a lot of bad debts and provisions trading at a big discount to its book value. As interest rates increase its prospects appear worse. I can't see what will drive a re-rating but then I'm not Ed Bramson!

[makinbuks] 15/6/2023 16:24

riskvsreward, good point. In fact from the declared last NAV of 70.3p NAVIENT share price has increased 22.7% tempered by 3.5% adverse currency. By my calculations that makes the current NAV 83.6p and the discount 23%

[extrader] 15/6/2023 15:20

Although Bramson made a loss on his BARC tilt, he appears to have been successful elsewhere :



.."In a letter to investors on Friday, Sherborne said it was taking advantage of the rise in Barclays’ share price to exit its position, having seen the stock rise to more than 180p from 73p a year earlier. However, the share price is currently 15% lower than when the fund’s position became public.

Sherborne Investors told investors it had joined the boards of five other companies since taking a stake in Barclays, and launched “successful turnarounds at all of them”. It said: “Each of these investments returned 100% or more , so it is a pity that the opportunity did not arise to join the board of Barclays to assist in a turnaround with a similar result."

Let's see what happens with NAVI.

[extrader] 15/6/2023 14:58

As I understand it, NAVI had a standstill agreement with Bramson, he/SIGC being its largest shareholder, that prevented a Bramson concert party from going over 20%.

hxxps://delawarebusinesstimes.com/news/navient-sherborne-seat/

Per the article, that expired at the recent AGM (Q? either May 25 or June 1st, stockopedia isn't clear).

Separately, David Yowan (believed to be Bramson's man-or, at least- 'a man Bramson can do business with') was appointed Pres and CEO on 15th May 2023. He's been a NED on NAVI for abt 5 years.

Yowan appointment was based, inter alia - per the press release - on his "proven track record in transformational change.."

His predecessor, Remondi, "according to a U.S. SEC filing, was terminated without cause, meaning that he was laid off but not because of any misconduct."

See hxxps://delawarebusinesstimes.com/news/navient-yowan-ceo/

Meanwhile, over at SIGC, they issued an atypical RNS on 18th May 2023 that says :

.."The board of Sherborne Investors (Guernsey) C Limited (the “Company”;) announces that, it has been advised by the Investment Manager, Sherborne Investors Management (Guernsey) LLC, that, following the distribution to the Company of any proceeds from the Company’s indirect investment in Navient Corp., the Investment Manager does not intend to seek to recall any funds for further investment."

I read the italicised bit as SIGC may be expecting some kind of corporate activity or rerating that warrants exiting the investment; and the bold bit that, in either case, SIGC will in due course be wound up and proceeds returned to shareholders ie the discount will pull to par.

Activist Bramson didn't get his way at BARC, but maybe he has at NAVI ?

All IMO, AFAICS, NAI, DYOR etc etc.

[riskvsreward] 15/6/2023 12:37

It has not gone down as much as navient on its downward movement in the previous months, plus the £/$ appreciated quite a bit, so the discount may have actually narrowed from nearly 30% to about 25%.

[makinbuks] 15/6/2023 12:08

Since I wrote that p44, Navient share price is up about 17% and while Sherbourne has risen nicely in recent weeks it hasn't kept up. Trouble is I have no clue what is driving the Navient price. It was at similar levels at the end of January but fell away, I assume, with the concerns over US tier 2 banks. I'm just beginning to gain in confidence that our man may be onto something here

[danny500] 06/4/2023 15:34

yes fair point but original investors well under water here and when there has been so many good opportunities out there. I dont see this progressing at all and nobody least of all management has tried to convince me. Im only here last couple of years so a wind up and return of cash would be welcome and walk away in front. This fund is down 100's of millions, need to call it a day

[makinbuks] 06/4/2023 09:36

Navient share price has gone nowhere in the last 12 months. To be fair given recent turmoil in financials thats not bad. But interesting to hear the investment thesis and how it is progressing

[danny500] 05/4/2023 17:30

Results must be due soon.
A continuation vote would be good, give us a chance to get out near NAV

[makinbuks] 01/2/2023 11:14

On face value, yes but what is the exit strategy? What is the investment theory behind taking this stake? What progress has been made in executing the thesis? It could be a great plan, I would just like to hear what it is

[ceaserxzy] 01/2/2023 07:57

As expected NAV 84.1 p. Share price should be good value at 60 p on about 30% discount.