Sqn Asset Finance Income Share Discussion Threads

[makinbuks] 05/3/2018 12:33

Sorry just to clarify I mean no update on how the ruling affects Suniva in a practical sense

[makinbuks] 05/3/2018 12:16

So far as I'm aware there hasn't been any update on precisely how the positive White House ruling affects the operation of the company. If it was positive I think they would have put out an RNS. As they did when Snoozebox was "resolved".

You're a brave man Spec, good luck

[spectoacc] 03/3/2018 07:57

Went XD on Thurs but only marginally. I'm finally in, for the first time, but I still expect the solar loan to go completely sour (whatever they say, whatever Trump says).

[andyj] 03/3/2018 00:44

A sudden widening of the discount. Anyone know why?

[spectoacc] 07/2/2018 13:52

Indeed - "Extend & pretend", seemingly each time with lower security. Let's hope it all works out for them.

[makinbuks] 07/2/2018 12:36

You are not missing something , that is a point very well made. And again there is an unfortunate lack of transparency around that "restructuring". I appreciate it is commercially sensitive information but it just raises more questions about the provisioning levels

[rick138] 03/2/2018 14:09

I think the problem may be broader than just Suniva and Snoozebox. In the accounts for 2017, page 71, it states: "During the year, 8 investments totalling £59,671,296 (2016: 3 investments totalling 19,201,474) were restructured resulting in repayment
terms being amended." That's about 11% of the net assets at that time. Doesn't that suggest these loans were unsustainable under the original terms and had to be extended? What does this say about the judgement of the investment managers? I don't remember seeing comparable statements from GCP. Am I missing something?

[spectoacc] 02/2/2018 15:55

Premiums have gone for good on the likes of these - and that's before we have a recession! Can you imagine what the bad loans would look like then - or in a credit crunch? Never understood why they deserved to trade at an (at times large) premium, other than the desperate hunt for income.

Agree they've managed to pull something off on Snoozebox - or at least kick the can down the road.

Not impressed with how convinced they are on Suniva recovery - from the way I understand it, solar panels will just switch from China/South Korea to eg Vietnam, & Suniva still won't be competitive/able to repay.

Wonder how much management time now has to go on loans gone bad?

Everything has its price tho - the yield justifies the NAV going nowhere.

[makinbuks] 02/2/2018 14:51

89p is maybe 3p below NAV excluding Suniva. A 3.25% discount is tempting given the premium these traded at just a few months back

[makinbuks] 02/2/2018 14:42

Credit where its due, that is an innovative deal they've pulled off on Snoozebox. Of course I'm not completely convinced but full marks for making the best of a bad situation. Hard fact we now know is they have to write off £8.2m from the old deal. To replace it they have a slightly opaque arrangement, part fixed part variable over 10 years with a counterparty whose credit rating we don't know. Do the accounting rules allow them to value that operating lease at £8.2m and therefore leave NAV unaffected? Presumably they think the answer is yes otherwise they would have announced otherwise. I assume 10 years is longer than the original deal which is what makes it more affordable to the new party, plus an operating lease is generally less secured than a lease isn't it?

[spectoacc] 24/1/2018 08:04

Agreed, tho don't know what their security's like (presumably not brilliant).

Still - saves them having to write down any of the NAV yet!

[belgraviaboy] 24/1/2018 06:37

Makinbuks - you are completely correct. Four years of reducing tariffs does not make an industry viable.

The only hope for a reasonably quick resolution is that one of the Chinese manufactuerers buys the plant - but I think this is very unlikely.

Otherwise - restarting production is expensive and takes a long time, so unlikely repayments would start any time soon.

Will this enable the parent Suniva to stand by the guarantee? Unlikely again, everyone will want their money back.

It is going to be a long expensive road for SQN

[makinbuks] 23/1/2018 18:18

They say "These tariffs, which will take effect within 15 days, should pave the way for Suniva to be in a position to repay SQN's investment. " Really? What has happened since the problem arose? Have they laid off their workforce? Surely in a prolonged period with no production and no income they must have incurred losses from which they need debt relief to recover in time. Are there no one off costs to restart production? Also, this means higher prices to the consumer so what will happen to demand?

I'm sceptical this solves all the problems and the loans get repaid in full with interest and costs.

[makinbuks] 19/1/2018 17:27

No factsheet published today? Normally its the same day as SSIF. Maybe postponed pending announcement in US?

[spectoacc] 15/1/2018 08:24

Surely they have to take a prudent approach - it'll be in one of the FRS's - and it needn't signal to the defaulters what level of recovery they're expecting, since it's a figure derived from a number of loans in default.

ie we all agree 100% recovery is unlikely, but hey, still possible. The prudent approach in the accounts (by which I mean how it relates to the NAV) is to estimate the probabilities. So there might be eg a 10% chance of getting 100% back on all the loans, and a very high chance of getting eg at least 50% back. What there clearly isn't is a 100% chance of getting 100% back.

So they should have provided for eg a 25% hit on the defaulted loans, as a group. That's not saying they expect only 75% back on any one loan. It's not even saying 75% as either minimum or maximum. But what it is doing is taking a prudent approach to the NAV by taking a best guess, such that anyone coming fresh to SQN can see a NAV that has a basis in reality.

All IMO. Can see it being done at RDL, with a steady increase in provisions for the Princeton fiasco as the fiasco unfolds.

[horndean eagle] 15/1/2018 08:08

Its a bit complicated. They will get recovery of some sort because they have charge over the equipment. If they were to write that down then it might hamper any discussions re if they had to dispose of the assets. Not as straightforward as some of you are arguing.

[belgraviaboy] 12/1/2018 22:31

Horndean

In either of the scenarios you suggest do you think SQN will get 100% recovery?

Of course they will not.

So why is the company not writing this asset down already?

[horndean eagle] 12/1/2018 20:31

The report was actually positive for SQN. They have reported it accurately. I imagine Trump comes in harsher than what the ITC recommended. They then have options re what to do. Either sell the company on to an overseas buyer or re-start production.

[belgraviaboy] 12/1/2018 18:00

Was it likely that a company that has taken no provision for this debt would regard this as anything other than good news?

Having worked within commercial lending, this would almost certainly have had a 100% provision (i.e. been valued at zero) much earlier.

This company's failure to adequetly value its portfolio is the biggest reason not to invest. What are the Snoozebox assets worth? Highly unlikely to be 100% recovery there either.

[makinbuks] 12/1/2018 17:30

They seem to have put a very positive spin on the government delaying the report. Maybe they are in the know. Certainly you would expect this "America first" whitehouse to act in a protectionist manner but will that actually mean the business restarts and generates enough cash to repay in full?

[makinbuks] 07/12/2017 13:45

RDL is something like 40% down in a year and the discount looks to be around 30% currently. I guess that's not helping sentiment in the sector although to be fair they are very different to SQN

[spectoacc] 06/12/2017 06:49

@Horndean - inclined to agree, though Suniva also relies on unreliable political moves.

RDL's Princeton is a shocker - supposedly been in arbitration since 20th Nov but whole thing looks a massive con. Still - RDL's discount would seem to reflect it being zero.

[horndean eagle] 05/12/2017 19:51

There is a little sympathy re Suniva. When they invested Suniva was doing ok. Solar prices then crashed. The market cap of the parent company that provided a guarantee on the Suniva loan was over £1b. Its now worth about £170m. Therefore difficult to enforce. They still have the charge over assets which must be worth something. If they can get 50% recovery or so I think sentiment might change. Unlike RDL (Dodgy unauthorised loans) and the p2p I think market will be more forgiving about the issues they have had

[spectoacc] 05/12/2017 15:55

Agreed re provisioning - not sure how they can get away with that.

To be fair - they may yet recover quite a bit of capital - I guess that's the whole point of "asset-backed". But it's an unknown and as you say, isn't in the NAV.

[makinbuks] 05/12/2017 14:42

Yes I agree the rate is high in these low interest rate times which is an indication of the level of risk. And indeed the managers value is in having a strong credit process that minimizes bad deals in the first place and then being fleet of foot and flexible enough to create a solution for those that beat the system.

What I question is their continuing reporting of NAV without any provision for these known issues and a general reserve for those they don't know of but experience says will be there.

I hadn't picked up on the ship issue. Is that resolved?