Sme Loan Fd Share Discussion Threads

[spectoacc] 03/3/2017 08:54

Did it go XD yesterday or not? Can't find mention of the March divi in the RNS, only the Feb one, and my data feed says no XD. But as the proposals are only proposals until voted on, I'd have expected divi to continue as before (& would also explain the mark down on the bid).

[spectoacc] 28/2/2017 15:39

Just WINS unfortunately - faking is my guess! If we did that we'd have the FSA after us. I note he's not quite managed to go on the bid.

Edit - WINS yet to move back and although bid online is small size & only 89.5p, can no longer buy at 90p, so perhaps whatever overhang there was has been shifted. Still the small matter of placing tens of millions at 90p of course!

[orinocor] 28/2/2017 14:56

A sudden upward move in the offer price to 92.5p

[spectoacc] 24/2/2017 11:40

@orinocor - but remember that relies on someone actually buying! As yet, it's up in the air. But per post above, I agree it's good news if they do get the placing away, and SQN appointed. I'd not have bought in otherwise.

[orinocor] 24/2/2017 10:52

My intepretation is not as negative as spec's and makinbuks. I don't believe a large shareholder can sell 45% of a company without it being at a large discount to what might be classed as fair value. So if they are selling it at 90p then whoever is buying must feel they are getting a more than generous deal.

[spectoacc] 24/2/2017 10:48

@Kenny - best to read the recent RNS, they're about to undergo some big changes, in recognition of the fact that the co hasn't really succeeded in its original aims.

[kenny] 24/2/2017 10:42

I don't know this company well so could someone who does comment on the following. The company does not seem to be producing sufficient returns to cover dividends so effectively the dividends are mostly return of capital?

[spectoacc] 24/2/2017 07:55

Think we all agree the placing needs to get away, but WINS now below 90p on the offer - must be an element of "why take the placing price when can buy cheaper in the market".

[orinocor] 22/2/2017 11:57

From 90p to 115p in 5 years is a good return for people who have completely given up on life. Anyone paying 90p would have to be expecting a much better return than that surely?

[makinbuks] 22/2/2017 11:41

Had a quick look at SQN Asset Finance Income Fund Limited and you can see the model they are trying to replicate here. Could be great if the placing gets away. Growing to the size they envisage depends on the shares being rated at a premium to NAV. GLIF and associates had the same plan

[makinbuks] 22/2/2017 11:04

This is also significant:

"provide shareholders with an opportunity to vote on the continuation of the Company if it has not grown its net assets to more than £250 million by 31 December 2019."

So SQN have ambitious plans to raise funds and clearly see the demand to place that in the markets in which they operate

[spectoacc] 22/2/2017 11:02

Also assumes little default risk?

I'm happy to buy here - but in the expectation it all goes through.

[makinbuks] 22/2/2017 11:00

Today assets are c £53m costs are about 2% or £1m. To run off you need to maintain a company structure for maybe 5 years during which time costs reduce in a linear fashion to £200k in yr 5. Total costs £3m. Average loans outstanding through the 5 years of £24m (50% of current £48m) at 9% gives income of £11m. So you'd realize maybe £61m or £1.15 per share

That's very rough and rounded off the top of my head with no real research but its that sort of calculation that SQN are doing. Plus they get fees on the AUM as well.

So 90p is attractive if you have a medium to long term view but £1.15 in five years time is no use to you if you have loans to repay next month

[orinocor] 22/2/2017 10:00

Based on what you are posting why would anyone pay 90p for 45% of this company?

The NAV figures they publish every month, are they just made up numbers with little basis on reality?

What would you expect to get back if the book is run off? TIA.

[makinbuks] 22/2/2017 09:37

If it doesn't complete, GLIF will seek to get the cash from the wind up asap via the above mentioned secondary market. Assuming c. 25% of NAV in cash plus March - May repayments that leaves 75% or c.40m to sell at a discount. the question is how big is that discount? From GLIF's point of view 10% would be fine. However the gross yield is c. 9% and we have less than 1% assumed for default so that's optimistic.

So for example very roughly £13m at 100% and £40m sold at a 15% discount makes a 12% overall discount to NAV slightly worse than the current 90p.

I conclude we would prefer the deal to go through and see the book run off

[spectoacc] 22/2/2017 06:42

Agreed - made me wonder why they'd picked the price already. Why not just say "subject to demand" or similar.

Edit - 90p must of course have been the price they agreed with SQN, who'll take "up to £7m" (placing is c.£22m in total).

If it all goes through, I reckon it's a good deal, and have bought some this morning. The risk if it doesn't is encapsulated by:

"..The weighted average maturity date of the portfolio was 2.8 years.
Amberton considers that it would be possible to expedite an orderly realisation with secondary transaction in some of the Company's investments. However, it could still; take a significant period of time to realise the Company's portfolio in its entirety."

And of course, it'll be several years before SQN are managing all of it, hence I guess the lowish dividend target. Amberton would be kept on as sub-manager initially.

[orinocor] 21/2/2017 21:01

spec, That's interesting.

[spectoacc] 21/2/2017 19:57

@orinocor - I called them this morning & didn't learn a lot, but def isn't done/dusted yet.

[orinocor] 21/2/2017 19:36

It's almost certain the 90p placing is done and dusted otherwise they wouldn't have mentioned it. More than probably its a better deal for buyers at 90p than it is for the sellers GLIF who need the funds to pay off a loan.

[makinbuks] 21/2/2017 17:31

Agreed, run off costs are a threat to our 10p nav. However, 12% current cash with repayments of 6.5% in March and 4.5% in May(from the list of major loans) is a good start

[spectoacc] 21/2/2017 16:39

SQN are good; I'd worry more about the residual portfolio, how easily it runs off, and at what sort of cost.

90p for the placing perhaps says it all - and it won't be for a few weeks so share price set to drift.

If they don't get the placing away then they're slowly winding up, & 90p might then prove optimistic (particularly vis a vis costs on an increasingly smaller portfolio).

Agree there was an element of "dead man walking" about SMEF - but outcome still uncertain as yet.

[makinbuks] 21/2/2017 16:26

1. The dividend was not supported by the fundamentals of the business so a re-alignment was inevitable. If you have costs of c. 2% and you target a gross return of 8% you are assuming secured lending at 10% which is unlikely in the current market. In addition several of the biggest loans are due to be repaid shortly some of which, to be fair, had attractive rates but it was always going to be a struggle to replace them. On top of that there is already a drag effect of 12% cash.
2. GLIF are in the middle of a significant restructuring. They had a loan to repay in March and needed to realize their asset.
3. The tender offer was an attempt to ensure the share price tracked nav and it backfired

GLIF originally intended SMEF to be much larger and considered it sub optimal at the current size. They foresaw a virtuous circle of new shares being issued at a premium to NAV and reinvested in attractive loans lowering fees in % terms.

The model has not worked so this is simply plan B.

Still attractive however in my view. At the end of the day we still have 100p of value to be realized in the next 2 years despite today's SP

I don't have a view on the new manager or what direction he will take the business. More research needed there

[orinocor] 13/2/2017 11:27

Great little income stock this one. Looking forward to the tender offer next month although I don't expect to be able to tender more than 10%.