Sdic Power Discussion Threads

[scburbs] 13/8/2010 17:18

I take it you didn't make it to para 3 of my short post?

[jeffian] 13/8/2010 16:54

You miss the point, scburbs. The company is in deep doodoo because it was structurally flawed from the beginning and mismanaged since then. They need to get things right at the operational level or they won't live to see the long-term stuff you talk about - rental growth and rising capital values resulting from economic growth or inflationary pressure. They don't have the luxury of time for these things to percolate through.

[scburbs] 13/8/2010 16:39

Jeffian,

Think GDP - jobs - voids/arrears. Unemployment in Germany is a key factor to 2 of your 3 points and GDP is key to unemployment. In other words Macro-economics issues are very relevant.

Rental growth is the other key one missing from your list and that will be impacted by macro-economic issues as well.

Now no-one is going to claim that macroeconomic factors will be enough to overcome operational incompetence, but being in a favourable enivorment is a big plus (albeit it may benefit other German resi companies more than SDIC).

[jeffian] 13/8/2010 14:56

Macro-economic issues (German economic growth, inflation etc.) are a complete red herring aren't they? In the short term, the company's problem can only be tackled at the operating level -
1) Fill voids
2) cut costs
3) collect arrears -
no?

[envirovision] 13/8/2010 14:44

Yea but mellon was also banking on severe inflation in germany which has failed to happen, i guess now a change of tune to euro collapse suits. Wonder what it will be after that, erm nope cant think of one, im sure you can count on Mellon to think up anouther though.

[lagosboy] 13/8/2010 13:53

What happens when it returns to zero or negilgible growth as many expect from 4th quarter.

Jim Mellon from his recent newsletter is clearly betting on the collapse of the Euro and the relative strength of hard assets such as German real estate.

They are certainly any number of events, all quite possible that could cause such a collapse.

If he is right, he will of course make millions on SDIC.

[scburbs] 13/8/2010 10:45

"The German economy grew by 2.2% in the three months to the end of June, its fastest quarterly growth in more than 20 years, official figures show.

"Such quarter-on-quarter growth has never been recorded before in reunified Germany," the national statistics office, Destatis, said.

The main reason for the higher-than-expected growth was strong exports, helped by a weaker euro."

[bisiboy] 12/8/2010 13:33

think we should have the agm in korea!

i here there they have a warrant for jim melon and he will be arrested on sight.

nothing to do but wait on this one but what a shambles hope neil is rolling his sleeves up and getting stuck in

[sleepy] 12/8/2010 12:59

Anyone know if the Directors here have insurance (or, other than Jim Mellon, personal wealth) and if so, how much?

[nicolei] 12/8/2010 12:42

Weren't the covenants due to be tested June 30th?
If they were actually broken, wouldn't there have to be a bulletin? is 6 weeks enough to do the no's?

[lagosboy] 06/8/2010 12:28

Must be holding out as a punt on Germany leaving the Euro and the thought of all that Euro debt being wiped out.

[bisiboy] 05/8/2010 18:22

just read develica deutschland r&a .
jim mellon has over 4% of these.
he seams to have money everywhere.

[kibes] 05/8/2010 17:21

nickcduk - I certainly don't understand JM's gameplan on this. As equity raising is now virtually impossible he must be assuming the banks are not going to pull the plug. I suppose they might go a for d4e swap on the basis that they would then sell off all the properties and hopefully get their money back that way. But how would he benefit from that? Does he really think it is all going to turn cash positive? Seems a very long shot to me.

[hosede] 03/8/2010 12:49

A genuine and widespread increase in German property prices would certainly help: it might not ease the cashflow problems, but at least it would make the banks more inclined to hang on in there.

[lagosboy] 02/8/2010 12:11

I think this corpse has been squeezed as far as it can go.

The banks have the big decisions to make now .

[ydderf] 30/7/2010 17:13

While the cadaver can be squeezed for more fees it will be kept on life support until there are insufficient fees to pay for the life support team, when it will be pronounced brown bread!

ps compare it with the Gagfah chart over the weeks since the Mellon purchases

[davidosh] 30/7/2010 16:36

I see the Speymill AGM just like the SDIC Agm is at a totally non shareholsder friendly time of 9am in the Isle of Man in mid August....any takers ?

Surprised they do not do a joint one on Christmas Eve ??

[nickcduk] 30/7/2010 16:24

They should look to sue Mellon personally. He has orchestrated this mess. Would happily wager his own personal portfolio of German residential doesn't have the huge issues SDIC are facing.

[envirovision] 30/7/2010 15:54

It weren't me mr. honest.

[scburbs] 30/7/2010 15:43

These bad debts we are suffering from, they are all the fault of the naughty property managers. After all you can't expect the company to be responsible for monitoring the performance of its advisors (or the original selection of those advisors). We are doing a splendid job and all these continuous problems are someone else's fault entirely.

Our only concern for the future is that we are running out of people to blame and once the list is exhausted it might be time to pack up shop as we will be rumbled.

[jeffian] 30/7/2010 14:57

"Not too positive in most part"? Unrelentingly awful in all parts, I would have said, and a significant deterioration on the position reported only 6 weeks ago.

[devymaster] 30/7/2010 14:49

Trading statement issued. Not too positive in most part:

[envirovision] 30/7/2010 14:38

No end to this slow motion road crash then.

[lagosboy] 25/7/2010 16:58

gingerplant

Thanks, very interesting article and by coincidence raises the very same point as I made earlier about the possibility that Germany could leave the Euro.

If that did happen of course happen, SDIC would benefit hugely.


Wonder if the banks might consider a debt for equity swap.

Re-financing this pile of debt will not be easy.

[gingerplant] 24/7/2010 19:26

From today's FT (see third para from bottom which seems out of date now ????):

German property no substitute for National Savings

By Merryn Somerset Webb

Published: July 23 2010 18:48 | Last updated: July 23 2010 18:48

The indefinite suspension of National Savings & Investments (NS&I) Index-Linked saving certificates earlier this week has irritated savers (see page 2). And for very good reason. Without them there is absolutely no way to earn a real return on cash without taking a certain amount of risk.

But the disappearance
of the most attractive product on the market is not the only worrying thing about the suspension. It isn't entirely clear why NS&I decided to withdraw the products.

The press release says that NS&I was getting in more money in deposits than the government had asked of it. But, given the government's current funding requirements, it is hard to see how the Treasury could dare to dream of having too much money – particularly sticky money of the kind they get via NS&I. Savers into these kind of certificates might have been more expensive than gilt buyers but they can usually be relied upon to roll their deposits over. There is no such certainty when it comes to global bond investors.

So if it isn't that, then what is it? The general consensus among the cynics is that the suspension has been prompted by the persistent rises in UK prices. It might be that NS&I isn't buying the Bank of England's view that high inflation is temporary, and is keen to cut its future costs – either by cutting the inflation link embedded in some of its products completely or by linking to the Consumer Price Index rather than the Retail Price Index, given that the latter has long been lower. If I were in charge of NS&I, I reckon I'd be thinking along the same lines.

But the Bank of England appears to have lost interest in inflation risk and refocused on growth (or rather the utter lack of growth) in the UK. Last month, there was no mention of easing monetary policy in the minutes of the committee's meeting. This month, however – believing that prospects for GDP growth had "probably deteriorated" – the committee "considered arguments in favour of a modest easing in the stance of monetary policy."

It is ominous stuff. Until recently, most strategists were pretty convinced that quantitative easing (QE) was an emergency measure we wouldn't be using again in this cycle. That is no longer a reasonable position to hold: the MPC rejected QE this time around but, as austerity starts to bite at our already barely there recovery, it's hard to imagine they won't be discussing it again next month. And when they go ahead with it – which I think they will feel they have to – it is hard to imagine they will be doing so alone. Not at a time when Ben Bernanke is on record as considering the prospects for the US economy to be "unusually uncertain." He's a worried man.

For the past decade, worried central bankers have always done the same thing: eased monetary policy. That used to mean cutting interest rates but, now they can be cut no further, it can only mean more QE.

Our monetary authorities might think that our economies are so riddled with deflationary influences that QE brings no inflation risk with it, and they are right in the short term. But, at some point, doing it in volume will bring inflation.

Without NS&I savings certificates, that leaves investors in a very tricky situation – even index linked gilts leave your capital at some risk. So what do you do? You hold gold of course (see previous columns). You hold some equities in businesses with good brands and pricing power. And maybe you take a look at some property. Not UK property, given its ongoing bubble status. But perhaps German property.

CLSA's Chris Wood notes that residential prices in Germany have suddenly started to rise as a loss of confidence in the euro, combined with the high yield on offer relative to deposit rates, has pushed German investors into the property market.

This is worth noting, partly because German property isn't expensive on any criteria – and partly because, were Germany somehow to exit the euro in the wake of the ongoing sovereign debt crisis (it isn't impossible), holding hard German assets denominated in German backed currency would probably turn out to be a good thing for those looking to maintain the real value of their assets.

The problem is how to invest in it without actually having to go to Berlin and buy a flat in person. There are leveraged funds listed but they are risky bets. Investors have, for example, had a horrible time with the likes of Aim-listed Speymill Deutsche, which owns apartments across Germany's cities: it is now trading at an 80 per cent discount to its net assets and in need of refinancing.

That doesn't make it quite the same kind of investment as a few NS&I index linked saving certificates. Fingers crossed they reintroduce the latter before the QE really kicks off.

Merryn Somerset Webb
is editor-in-chief of
Money Week and previously worked as a stockbroker. The views expressed are personal.