Wasps 22 Discussion Threads

[aringadingding] 11/3/2021 09:13

W.r.t. year ending June 2020, I looked too, and indeed, I would not expect them to be good anyway. All 12 of those months entailed no ground share with CCFC and the last 3 or 4 of them involved covid.

In the end I agree with Bondholder regarding the binary nature of security and however you look at the valuation of the arena it's above £35m.

DR is a very experienced business person with multiple interests. The report mentions corporate finance advice regarding structuring of the refinancing. We see the wasps business planning for the long term in various ways.

So for me these bonds are undervalued (which is why I hold them... several other undervalued things out there).

[ozzie_dog] 11/3/2021 07:11

The annual accounts to 30 June 2020 are there (or were you talking about the interim accounts to Dec 2020?), I've just been looking at them (June 2020) for the last 15 mins or so, it doesn't make good reading (as you would expect), grim figures versus optimism, just have to get on board with the optimism I suppose.

[a0002577] 11/3/2021 07:05

Announcement today to the effect that the results have been published and that they will shortly be available here :

at time of writing they are still not up on the web site :(

[bondholder] 11/3/2021 04:24

The prospectus states that the security will include a legal mortgage over the title to the arena. The trustees will have recourse to the assets if the agreement is breached. I'm not sure what you mean by no direct route.

[watching2017] 10/3/2021 20:38

Before you get too excited I suggest you read the notes to the prospectus on risks. The Bondholders have no direct route to the Stadium a mistake several have made. Rockets do not always take off!

[bondholder] 10/3/2021 20:10

In practice the courts are likely to grant relief from forfeiture (subject to the bondholders paying any outstanding amounts to the freeholder). The noteholders will be able to sell to the highest bidder.
100m v 35m. It's not rocket science.

[watching2017] 10/3/2021 20:01

If WASPS default then the Ricoh could end up back with Council and be back again. There is no way SISU will ever be subject to having the Council as Landlord again and there is no intention of buying an out of date stadium in a deserted area of Coventry.

[bondholder] 10/3/2021 19:43

Agreed no definite cost for new stadium but there is plenty of comparable data on stadium costs and the Ricoh 2005 costs of construction. If Wasps default in 2022 then sale to Coventry at a small fraction approx 1/3 replacement cost is a win/win

[watching2017] 10/3/2021 18:21

The Ricoh valuation is based on DCF methods based on future cash flows

As the full development plan has yet to be released for the Uni stadium mo one can establish the costs.

FYI the latest WASPS accounts are on their website under Corporate

[aringadingding] 10/3/2021 17:46

Hi Bondholder

In answer to your question: yes indeed. It is also low relative to the professional valuation of the stadium (available on Wasps website - about £50m) which itself will be based on a moderate to high occupancy level such as is achieved by ground sharing between rugby and football.

The issue comes up in prior posts on this thread.

[bondholder] 10/3/2021 17:39

Hi all

One practical observation on the value of the virtual freehold of the asset underlying the bond. Coventry City are considering building their own ground with hotel etc for ancillary income. The cost is estimated at 100m plus for a decent size stadium. Does that not suggest the implied market value of the Wasp bond at .67 X 35m i.e. around 23m is rather low ?

[aringadingding] 10/3/2021 17:24

hi Fastcat99

"- I'm sure everyone reading this is aware that the Board's oft-repeated commitment to refinancing would not preclude a take-it-or-leave-it solicitation for conversion on terms way short of par
- There seems to a sort of consensus here that such an offer MUST be significantly higher than the current 67.5p mid-price, and 80p has emerged as a sort of working target. Why???"

When you say conversion I assume you mean conversion to equity... then in your second bullet you mean that the conversion could assume 67.5p per bond value in determining how many shares are issued... Sure, it is a hypothetical scenario yes, but it doesn't really impact the answer I would give to "take-it-or-leave-it" anyway:

I would say it's a matter of the mechanics of the situation. The bonds fall due on the maturity date. If the company wants to make a proposal to the bondholders for some other situation to occur than full repayment on maturity date then they can do so but then the bondholders have to approve it, where the % of votes required is determined in line with whatever processes are outlined in the prospectus, the company's Articles of Association and general company law. So it is likely to be a complex mechanical process, but nonetheless, that is the process. The company must make a proposal and then the bondholders have a say.

One thing they might offer as part of the refinancing is equity conversion to existing bondholders as a way to reduce the amount of new debt required to be raised. There may or may not be technical difficulties in offering shares in a private company in exchange for publicly listed bonds. I don't know. But I can see the rationale for offering some conversion to bondholders.

Don't think I'm very clever but I will look at the accounts - I would guess they made a massive loss and did some director loans or similar to keep the cash balance positive!

[fastcat99] 10/3/2021 16:41

I do remain twitchy: just about the bonds (not about either of the Clubs, Sports, DCMS, etc!!) and most specifically about the transparency of the market in them.
'In no particular order'
- I was always told to 'buy on speculation, sell on news' so I have been pretty perplexed at the general tin-ear ever since last Thursday.
- bid-offer spread widening from 1p to 3p is the sort of reaction one would expect in the interval between speculation and news, but I find it really disquieting that the mid-price is now STILL not moving
- To me, the only rational explanation for this good news not having much impact on the Bond price, REMAINS that the Bonds are considered subject to much greater, more short-term pressures, namely a high risk premium on actual payment of Coupons and/or redemption at par
- I'm sure everyone reading this is aware that the Board's oft-repeated commitment to refinancing would not preclude a take-it-or-leave-it solicitation for conversion on terms way short of par
- There seems to a sort of consensus here that such an offer MUST be significantly higher than the current 67.5p mid-price, and 80p has emerged as a sort of working target. Why???
- the Bond price behaved equally irrationally prior during the entire Solicitation period
- Bonds are not shares in the future profits of a company, they are tradable responses to two simple propositions:- will their promise actually be kept and what is IT currently worth?
- if the Board wished to banish this confusion they could have published the Annual Accounts sooner than JUST NOW - grrr !!!
(I have been drafting this message on and off during the last 90 minutes, so I just wish I had posted it sooner, ha!)
- AND PLEASE someone clever take a close look at the Accounts....

@aringadingding I don't know if this counts as a Regulatory release, but yes I was specifically promised by a representative of the company that the Accounts would be released as soon as the 'consultation period' was over.
IMO We should now press for the Forward Strategy that the Chief Executive was also promising 'in due course'....

[watching2017] 10/3/2021 14:02

It is certainly a win for CCFC as this time they get their fair share of F&B etc. ie the pie and pint money !

Plus the lease break clause!

135791113 - The so called legals were a red herring as the European complaint was never against WASPS but the Council. WASPS concerns were about getting dragged in but the SISU complaint is still rumbling round Europe

[ozzie_dog] 10/3/2021 13:53

It crept up a (very) tiny bit, which is why I checked to see if the deal had been signed off.

[aringadingding] 10/3/2021 13:17

This is basically the very good news I myself have been hoping for for a long time!

Ozzie_dog, thanks very much for posting this. I will not be too bothered if the bond price does not move, but I respect others' rights to disagree!

[ozzie_dog] 10/3/2021 12:43

The deal has now been signed!

hxxps://www.coventrytelegraph.net/sport/football/football-news/breaking-coventry-city-ricoh-arena-19989980

“August will now mark the start of a new era for both Wasps Group and Coventry City. This year will see the arena host events for the City of Culture celebrations and the Rugby League World Cup, as well as start preparations for the Commonwealth Games in 2022."

[ozzie_dog] 08/3/2021 15:22

They did say last Thursday that the deal would not actually be signed off until this week, CCFC need the EFL to sanction them playing at the Ricoh (I think that will just be a formality). I suspect(only my humble opinion) that the bond price will creep up again once the deal has been formalised, I will be a little disappointed if it doesn't.

[aringadingding] 08/3/2021 14:59

PS - I have just looked at both the Wasps and the CCFC website and can't see that the official announcement about the ground share has taken place yet. I know the rumours and the way it was described in the BBC for example was very solid, but still those articles mention official communications which I think have not happened yet. So may be harsh to ask why has not moved the price!

[aringadingding] 08/3/2021 14:23

Ozzie_dog, re. your comments on inside information, I do see what you are getting at and I'm not an expert in how common this is, however, it is certainly something the FCA or market observers look for. The situation you describe of contacts of anybody close to the situation making a trade would definitely constitute trading on the basis of material non-public information. I think the key point to consider is the balance of upside versus downside for such actors. The downside is obviously major (though can't recall if it's criminal or civil offence) and the upside, well how big an order can they really place without arising the suspicions of the market makers they are required to place the order though? Therefore how much profit are they really able to make? It is certainly true that companies sometimes hold on to information that outsiders may consider to be material for many months, for example discussions with potential acquiring parties, without the share price moving a lot or without being required to release the information to the public. So I get what you are saying in that it might sometimes happen that way, that rumours go around, but I don't think it's universal.

I think as someone says above that the price seems to be anticipating major communication from the company, and in addition the quite thin trading volumes probably don't help price movements. However, the company if they have the cash can just pay our interest in May and then keep working on their refinancing before making a proposal to bondholders for what might happen to them in said refinancing. Interesting question in fact as to what historical precedent there might be for how many months in advance of maturity it is likely to be put forwards.

Fastcat99 are you saying one of their regulatory news releases is overdue?

Let's say a reasonable refi price (literally picking a rough number) was 80p. So they are now about 66p versus 80p in 14mths... that's a growth of 40% including the interest or 36% annual cf. 14mths (approximate). It's a lot but it's not an unusual annual share price movement for an equity cf. bond, and you would expect some sort of discount. My personal view is this is just what happens with small cap listed securities sometimes. Sometimes you can buy things that are good value.

[ozzie_dog] 08/3/2021 13:25

No, individual corporate bonds are not subject to capital gains tax. As I said below, I am relatively new to corporate bonds. When I sold most of my investment property in the last 3 years, I wanted to keep a diversified portfolio, so rather than just piling into similar equities as what I already held, I invested in REITs and also invested corporate bonds (as well as bond etfs). Soon after doing so, I discovered (to my surprise) that there is no CGT on individual corporate bonds. It works the other way as well though, it means that you can't offset or carry forward a CGT loss either, if things go badly. So obviously I am hoping for some sort of a tax free windfall (it wouldn't have to be at 100 pence to be very good for me), my average weighted price is just over 60 pence.

I was trying to find examples of where bonds had ran into trouble and some sort of deal was struck at a price less than 100 pence, but I couldn't find anything, does anyone know how that process would work? There has been discussion on here at a deal, but how would that work, if not all bondholders agree, would they not be in automatic default? Or could a minority of bondholders who vote no, just be ignored and have to accept the consequences of losing (from their perspective) the bondholders vote?

[fastcat99] 08/3/2021 12:58

I read the two replies above as saying substantially the same as me - a refinancing proposal should be fairly imminent, and that is what is holding back the bond price from reacting to very positive news on future trading arrangements.
Though they may not necessarily subscribe to my quite stark analysis:
- I don't see how the plc can afford to make another coupon payment on existing terms
- I take it EXTREMELY badly that, DESPITE ASSURANCES I was given during the Consent Solicitation (my post #147 above, on 12 November), the accounts for 2019-20 have still not been published; one has to
- the sinking fund designed to ensure that interest obligations were always covered no longer exists, thanks to Consent given;
- ditto, the provisions requiring a premium to be paid on early redemption no longer apply

By the way @Ozzie_dog, surely capital gains achieved by buying at today's prices and holding to any better-priced maturity would NOT be tax free ? (unless of course the bonds were held in a ISA). These are ORB bonds, not gilts!!

[ozzie_dog] 08/3/2021 09:41

Obviously I would love the second part to fastcat's post to come to fruition, but it is hard for me to see that happening. We are only about 14.5 months away from the bond maturity date. Surely some people within Wasps network will at least have an idea of what the plans/options are, and what the chances of those plans working out successfully are. So I'm guessing that if there was a realistic chance of buying at about 68p and making a (tax free) 47% profit (on top of a running yield of 9.6% for over a year) the bond price would be higher. But I must admit that I am quite new to the world of corporate bonds, so I have no experience to guide my thoughts, only gut instinct. Take Derek Richardson for example, he could make a killing (although would that be insider trading, even if he was acting merely on a hunch of what was about to unfold?), but what if Derek simply said to one of his rich friends (the subject must come up occasionally) that he was optimistic the bond would be refinanced at reasonably decent level.