Sdic Power Discussion Threads

[hugepants] 17/6/2010 13:11

This company is a scandal. Heres a short and succint summary of todays news. Totally agree.

[scburbs] 17/6/2010 13:05

I think I made a mistake in my wind up equity value calculation previously, it is actually higher.

Silo 1 has an equity value (at 31.12.09) of €46m and Silo 5 €5.24m and Silo 6 €4.13m giving a total that will not be in breach of €55.37m (pre-swap liability). Silo 1 is highly geared at 80% LTV and Silo 5&6 less highly geared at 65% LTV.

On average the swap liabilities were 6.24% of debt and, therefore, Silo 5 and 6 would have had a net equity value of around €7.65m. This approximate calculation does look rather close to the amount of property (€7.85m) to be transferred!

The other point was that there was no comment on whether the swap liability would be included in the equity calculation. They have told us many times that it is not a real liability (as it will tend to nil over its life) and, therefore, surely they should be excluding it!!

As I said the headline prices look fair, but not keen on the transfer of SDIC's most solvent assets!

Nickcduk, How did you get to your €15m estimate for parent company cash?

[nickcduk] 17/6/2010 12:57

The outcome is about as good as it was going to be for SDIC. No cash settlement is being made. They will save on costs and hopefully will now be profitable.

[nickcduk] 17/6/2010 12:40

Don't be hysterical ydderf. The banks are pushing for internalisation. This will make SDIC cashflow positive. I will enquire later on the assets and liabilities being transferred.

[ydderf] 17/6/2010 12:38

Dn't be naive, the best bits are being siphoned out and nothing worth having will remain for shareholders after the banks have taken over.....please learn from the history here

if SDIC had a future, SYG would not have bailed out - am i alone in seeing what is happening beneath the spin?

[nickcduk] 17/6/2010 12:32

Issues with loands are likely to be dealt with over the coming months. Any potential agreement won't be ready until late into the year. The loans have yet to breach their covenants as of yet. After that they will have a time period in which to remedy any breach.

[scburbs] 17/6/2010 12:31

Is the lack of any comment on recapitalisation in response to shareholder feedback? (i.e. either reach agreement with the banks based on the equity you have or wind it up).

I certainly hope so, but maybe that is wishful thinking! If they can get the bank to agree to a refinancing without an equity raise then maybe the business has a viable future. In this scenario a orderly wind up may not be the best route.

The key question is are they cashflow positive following the removal of these fees and is the amount of the positive cashflow sufficient to both deal with the extra margin that would be paid to the banks on any refinancing and provide a return to shareholders?

[ydderf] 17/6/2010 12:31

what a disgrace - if you needed any further evidence as to the reason for SDIC's existence, here it is.

SDIC is a chicken
SYG is the farmer

Shareholders are the chicken feed

[scburbs] 17/6/2010 12:16

This announcement has a massive omission and that is which properties from which facilities are being moved and what is the LTV on what is being moved. Who is choosing the properties, SDIC or SYG, what is the yield, the vacancy etc.?



I suspect this is a grab from SYG for the smaller facilities which have lower LTV's (i.e. part of the clear wind up equity value).

The Goal agreement is ok (I like the loan agreement, but not hugely keen on the conversion option at what could be a low price, but the headline price is low so perhaps they balance out). The SYG agreement depends on which properties are being moved. Subject to them taking properties with average or high LTVs then that would be fine, taking the clear wind up value from the small silos would be less good. Again the headline price is ok as it is broadly equivalent to their notice entitlement and is not being paid in cash.

Overall it looks ok.

[strollingmolby] 17/6/2010 12:14

Must have been in the tea leaves...

[scburbs] 17/6/2010 12:14

On the money with the timing (just - as it was nearly this morning).

[lagosboy] 17/6/2010 10:46

Why are you expecting an announcement this afternoon ?????

[scburbs] 17/6/2010 10:29

Nickcduk, Thanks. Interesting post bringing us back on topic! Let's hope the internalisation is in exchange for a small equity stake. SYG's outcome (from here on in) should ride on the competence of the team they have assembled.

[nickcduk] 17/6/2010 09:27

Expecting an announcement this afternoon on internalisation of management. I think shareholders have given support to it. Also expecting some positive news on valuations. Valuation undertaken by the bank for one of the silos same back roughly in line with SDIC valuation.

[lagosboy] 17/6/2010 09:06

All this talk of crumbs and cake is making me feel peckish......but I won't be feasting on SDIC.

[scburbs] 16/6/2010 17:10

YdderF,

It sounds like you have a new description of the business model of an asset manager. Provide no capital of your own, but bake as many different cakes for others as possible and take a few crumbs from each until you can mould them into a cake or two of your own.

Cakes and crumbs are probably safer than fingers and pies as you might get burnt from the later.

Clearly there are a few burnt fingers in the SDIC situation, but perhaps this is because rather than collecting pieces of pie they (together with the banks) took the entire pie and then let the shareholders dip their fingers in and risk getting burnt.

[ydderf] 16/6/2010 16:42

regarding disclosure of 'fees'

ever wondered about the crumbs which fall off your cake and end up on the floor of the cake tin? do you ever weigh them, or compress them into slices and eat them, or do you give them to the dog? or do you accept them as inevitable and acceptable de minimas waste?

a very 1.4 billion cake generates a lot of crumbs

[scburbs] 16/6/2010 14:28

Hopefully they have not breached rules on disclosure of fee payments and all the fees are disclosed (albeit in a low profile way buried in the notes to the accounts).

I believe the amounts were €3,983,995 to SYG for strategic management in the 6 months to 31 December 2009 (really valuable this one!) and €7,231,313 to Goal for property management services, accounting services and managing refurbishment. In addition €746,493 was paid to a related company for debt collection services. This gives a total of just under €12m for a 6 month period.

In the year to 30 June 2009 it was €10.2m to SYG for strategic management and €10.2m to Goal and €0.3m for debt collection for a total of €20.7m.

So the last 18 months has transferred €32.7m of fees to SYG or a multiple of the current market cap.

As they have not being buying or selling properties in this period the payments to SYG for strategic management have been way over the top. SYG setting up debt collection agencies and accounting businesses in order to cream yet further fees does not look good.

It is difficult to judge the value or otherwise of the Goal fees (as clearly the properties need a property manager). However, as flagged previously the fact that they were being paid to manage refurbishments smacks of conflicts of interests on which (and how many) properties to refurbish.

[nickcduk] 16/6/2010 13:28

Everything has its price. When I was picking up half a million TRV at 3.25 there weren't many people focusing on the parent company cash. Management have less credibility here but I think the risk/reward is worth a punt around current levels.

[davidosh] 16/6/2010 13:27

ydderf stated;

'do you believe all the fees and kickbacks are visible in the accounts?'

Just out of interest do you have any information or proof of that as I think shareholders will be looking very closely at this situation if the NAV is completely destroyed. You learn more from investing mistakes and ensuring that it does not happen again. More importantly if there has been something that needs legal challenge or investigation then a number of investors with significant holdings here may take a view about the need to do just that.

[envirovision] 16/6/2010 13:14

If this gets wound down, its going to be a dogs breakfast.

If there were any return at all for shareholders after costs, then I'm a Banana.

[ydderf] 16/6/2010 13:05

nickcduk - but why would they?

they haven't done any of the other obvious things they could have done to avoid this anniliation of shareholder funds, surely the managers are not motivated to protect shareholder value, the fees and gravy emanating from managing 1.4 billion of property will be the driver, as it always has been - this does seem to have escaped most's notice here, the only reason to ptomote and float an operation like this is fees^

do you believe all the fees and kickbacks are visible in the accounts?

ps if there were any real hope of equity being preserved in the holding cos, they would be singing it from the rooftops - look at TRV for an example of this!

[nickcduk] 16/6/2010 12:19

Thats the one I picked up on. It has a lower interest rate and shorter maturity date. Hopefully they can manage a wind down of that fund without too many problems.

[scburbs] 16/6/2010 11:29

The Silo split is on page 7. There are four large facilities which means one facility of substance is not expected to be in breach as at 30 June 2010. Which presumably is the securitised one flagged by Nickcduk which had €37m of net equity. Based solely on the LTV quoted on page 7 I make the equity in the smaller silos €6.2m. This makes a total of €43.2m of equity that is not in breach and should be largely realisable in an orderly wind up over a couple of years (although this equity is before swap liabilities and cash at parent level).

A brave move by Nickcduk, but he has spotted some clear potential wind up value. I don't think I am brave enough to chase it given the complete lack of trust in management and their apparent lack of realisation that there is nothing left to do here except to wind it up (the failure has been too great for anything else).

[nickcduk] 16/6/2010 11:21

An orderly wind up by the company is the best course of action here. Ive listed the assets where the company has time to work an orderly disposal process. The German market isn't dead so its plausible they could work an orderly wind-down. I think the haggling at the moment is probably over the parent company cash and other disposal proceeds. Each of the lenders will want to protect their interests and get their pound of flesh. They can't push too hard though. They will not want to take the assets onto their own books as their will be transfer tax to pay as well as the nightmare of having to manage the properties.