Wasps 22 Discussion Threads

[aringadingding] 04/5/2021 21:15

Up 22% in the last month... Not bad for a debt security with ample coverage and a ground share agreement. Market just being slow to pick up on it I think.

[grahamg8] 16/4/2021 07:27

ringading, don't get me wrong I'm cautiously positive. Increased in the past few days.

[aringadingding] 15/4/2021 17:39

(If it was 'bad' it would just be rejected.)

[aringadingding] 15/4/2021 17:37

Hi @grahamg8, interesting comparison to ENQ1 and I take your point that there are multiple ways the terms can be modified.

However I think you are looking on the down side there to some extent! Let's remember that the default (no pun intended) situation is that time passes and the bonds fall due. If the bonds aren't repaid then bondholders take security etc etc. Yes that involves a process but I have at least some faith in the laws of this country.

So bondholders do have a say really, in that for the situation to deviate from the above security-claim situation, they must receive a proposal from the company and then have their say on it via corporate action votes.

So EITHER time will continue to pass until like a few months before maturity, at which point a press release will go out from the company describing the way in which they intend to repay the bonds (which is their right!), OR at some other point, prior to that, a.n.other proposal, or commencement of an expressions of interest process, will go to bondholders.

Like I say that latter situation would be earlier in time than the former but long story short there is loads of security there so even if the latter situation did come to pass it could not feasibly represent a 'bad' offer to the bondholders. That's my view anyway.

[grahamg8] 15/4/2021 07:43

My fear is that the bond holders are out of the decision making loop.

Richardson is running the show and any new lender such as a bank or banks will negotiate with him. Each will want the best deal possible for themselves and we will be offered the minimum they think they can get away with.

I don't see new equity, except possibly for IEC. Currently Richardson owns everything else and I can't see him giving up that position easily.

I hold ENQ1, and you might like to trawl through the change of condition documents from a few years back. The term was extended, coupon increased, and PIK (payment in kind depending on the oil price) introduced as a way of preserving capital within the business. So major changes to bond conditions are possible.

I think Wasps need more funds to develop facilities which would perhaps favour a rollover option. So cash in at a discount, or roll over into new terms with a larger debt pile. Richardson could well support this manoeuvre as he can show his commitment by transferring all/some of his lending into the new bond. What he would really be doing is improving his own security. But at the end of the day we are all after the same thing, a successful growing business that generates enough profits to pay us all back.

[aringadingding] 14/4/2021 18:07

Yes, I guess it's worth thinking that if new debt is coming along then that will probably want to be fully senior to any debt created by the rolling over of current bondholder debt. Given that present day bondholders are highly unlikely to accept that situation, it would make much more sense for say the bondholders to be offered conversion to equity and/or season tickets at discounted prices, or alternatively redemption at a small discount to par only.

You might argue that the new lenders could rank equally with rolled over bond holders... Well the whole point of that would be to reduce debt burden for the company long term. That is, today's bondholders were offered a choice between redemption at a discount or rolling over to a new term to rank equally with new lenders (who I assume are not retail lenders). How much could the debt realistically be reduced by this mechanism...? Not very much. Maybe it could work if there was new equity as well. I guess there are a few things that can combine really:

- New debt
- New equity
- Conversion of debt to equity
- Conversion of debt to season tickets
- Rolling over of present debt +/- change to coupon

It's all fair enough but the current bondholders are not going to accept a big discount at the end of the day.

[fastcat99] 14/4/2021 17:49

My page too! Grahamg8 suggestion of a term extension possibly with a modified coupon (not NECESSARILY an increase!!) is precisely what I meant by 'conversion' a few weeks back - I believe if the issuer changes the terms so radically, it will require a new instrument (after all our current holdings are precisely defined as 6.5% may 2022 !!) - so the mechanism might be CHOICE between redemption at terms well less than par or conversion to the new bond
- subject of course to Bondholders' previous consent....

[grahamg8] 14/4/2021 17:36

We are on the same song sheet. Pragmatism will give us as bond holders a good return over the next 13 months. No need to demand blood as well.

[aringadingding] 14/4/2021 17:29

@grahamg8 - I completely agree with your overall bullish assessment and the importance of funds owed to DR. I am looking forward to some positive announcements for this holding and an increase in price.

All I would say is don't forget the mechanics of the situation. The company will make a proposal to bondholders that they then may accept or reject. It is possible the proposal is put forwards for redemption at say 95p, with bondholders given the option to convert etc etc. There are loads of potential structures but I'm just saying that mechanistically the bondholders overall may accept an offer valued less than 100p. They would not be mad or unreasonable to do so (the opposite potentially) - but this is a detail really as if it is anything less than say 90p they would be mad to accept it, and I strongly doubt they (we) would... So even it it was 90p that's 20p higher than today or 29% ignoring coupons.

[grahamg8] 14/4/2021 17:12

Finances should gradually improve going forward. End of lock down, pent up demand for events, hotel and exhibitions, seats sold for rugby, income from Coventry City all look good. My biggest comfort however is that Richardson is owed £18m by Holdings and the Bonds are classed as senior debt.

Come May next year bond holders can't be short changed without Richardson losing the lot. Or am I missing something? If external finance is not forthcoming then I would put my money on a term extension with an increase in coupon to compensate. Kick the problem done the road by a couple of years and see how things go.

Any views?

[bondholder] 26/3/2021 20:02

Ricoh stadium valuation looks modest by comparison

[bondholder] 26/3/2021 19:59

35 million bond divided by 30,000 seats at Ricoh equals a tad over 1k a seat.

[bondholder] 26/3/2021 19:57

Bramley-Moore Dock could cost £700 million, according to construction experts. Everton confident that they could stick to the updated estimates.
UK stadium builds have never come in on budget in last 50 years.
£15,000 construction costs per seat is a realistic cost.

[aringadingding] 15/3/2021 14:05

Ozzie_dog, thanks for posting the quote and link. Very relevant of course.

To say "really confident" I agree there must be various conversations going on. Early stage conversations must look to frame the most realistic and possible ways forwards before getting into more detail with funders about a specific proposal. There is a big difference between a long list of names to be approached and a plan plus funders who like it in principle. Maybe it's at the latter stage now.

A CEO will obviously look to make positive noises to help it happen, but it does seem to me that the refi ought to be do-able.

By "really positive way" I wonder if that is code for a structure where bondholders are offered something like a choice of a season ticket for 5 years at a discounted price, some equity conversion (at a good price), or repayment (at a slight discount?! Ideally not.). Then following gathering of expressions of interest for one or other option the allocations are made. Actually the discounted season ticket thing could make a lot of sense if the bondholder had not bought a season ticket before (if they had then it would eat into revenue)... could they limit it to such people? I don't see why not really.

I see in the accounts that group net debt moved upwards slightly between June 2019 and June 2020, while June 2020 now features circa £2m overdraft from AIB, making up most of the difference between the years. I wonder whether DR gave AIB alternative security for this, or whether they are in the frame for the refinancing. Just background but good to see they are able to borrow and probably have a good relationship there.

Overall certainly seems to be highly positive.

[ozzie_dog] 15/3/2021 13:07

That was not my quote above, it was from Wasps chief executive Stephen Vaughan (which of course carries a lot more weight than just an outsider like me saying it). It makes very good reading, assuming that there are things going on that his confidence is based upon.

[bondholder] 15/3/2021 12:06

Ossie. I agree. Now they have revenue from two clubs. If Wasps can't refinance alone Coventry could buy into the stadium ownership either 50/50 with Wasps or 100%

[ozzie_dog] 15/3/2021 06:08

Wasps confident that the bond issue will be resolved:

hxxps://www.coventrytelegraph.net/sport/rugby/ricoh-arena-coventry-city-wasps-20144087

“There's been a few [headaches],” he said. “The refinancing of the bond has been mentioned as well. That's another one we're going to have to tick off shortly and I am really confident we're going to do that in a really positive way.”

No actual details, but maybe he isn't in a position to say too much at the moment.

[aringadingding] 11/3/2021 12:50

Bondholder, thank you for that. Sounds good to me!

[bondholder] 11/3/2021 12:30

Almost every lease residential or commercial has a forfeiture clause. Forfeiture of a lease would often result in unjust enrichment of the freeholder which the courts do not like. As a result relief from forfeiture is almost always granted (subject to payment of rent arrears etc)

[a0002577] 11/3/2021 10:50

Ozzie_dog - there was an RNS late yesterday which I heard about just after midnight : may have been a bit tired but didn't see it then - but did see this morning - as you did.

[aringadingding] 11/3/2021 10:24

Ozzie_dog - well you have got in at a great price though I would always compare today's price to what I think they are worth myself.

Bondholder or others, what do you think about the below text from page 16 of the prospectus?

"Risks relating the head lease of the Arena granted to ACL2006

Under the terms of the head lease granted by Coventry City Council (“CCC”) to Arena Coventry (2006) Limited (“ACL2006̶1;) in respect of the Arena (the “Head Lease”), CCC have reserved the right to forfeit the Head Lease if ACL2006 becomes insolvent. Insolvency in this scenario means a situation where ACL2006 becomes unable to pay its debts, has a receiver/administrator/provisional liquidator appointed over its assets, has assets seized in order to pay debts of ACL2006 or has a winding-up order made against it. The effect of forfeiture would be that the 250 year Head Lease would fall away and that ACL would then become the tenant of CCC at the Arena for the remaining 38 years of its existing lease. However, the right of CCC to claim forfeiture of the Head Lease is not an automatic right. If CCC made a claim for such forfeiture, this could be contested by ACL2006, any third party that held security over ACL2006 and any subtenants of ACL2006 by making application to a court in England. Further, if an administrator was to be appointed over the assets of ACL2006, then CCC would not be able to forfeit the Head Lease without the consent of the appointed administrator or with the leave of the courts.

If forfeiture was to take place prior to maturity of the Bonds, then U.S. Bank Trustees Limited, the entity that will hold the security on behalf of Bondholders, may not be in a position to assign the Head Lease for value in the event CCC forfeited the lease as described in the preceding paragraph. This may have an impact on the Bondholders’ ability to receive full repayment of their investment in the Bonds on the occurrence of such an insolvency event."

To be honest I don't really see what this is getting at. The main paragraph states the right to forfeit is not automatic and can be challenged by those with security over ACL2006 (so e.g. bondholders) but then the last paragraph seems to say, "Well, if the forfeiture happens, because you haven't successfully prevented it, then you can't get any value from it". This seems to be a statement of the obvious so I wonder whether it is just exhaustive legal drafting. I would be interested to hear others' views on this.

[ozzie_dog] 11/3/2021 09:56

Those were up there early this morning, maybe they were uploaded shortly after you opened the website page, because I was reading them at 7 am this morning.

[ozzie_dog] 11/3/2021 09:46

I agree with you aringadingding, when you see all the long term planning going on at wasps, it is hard not to imagine that there must be a lot of confidence that they are not going to go under. So I expect the worse case scenario for bondholders is that the bond is refinanced, but that it involves paying the bond holders less than 100 pence. I thought that my average price was just over 60 pence, but I recently noticed (on the HL website) they include paying partial interest in the bond as a cost, but of course that is incorrect, because when the coupon is paid the bond holder recovers that (temporary) cost due to buying between coupon dates. and having to pay partial interest to the selling bondholder. So my actual averaged weighted price paid is 59.2 pence, and if compared to a safer investment, I have also recovered (due to a high running yield) about another 4.2 pence (net of tax) on the coupon price, so my break even price (including allowing for a safe investment return) is about 55 pence. I must admit that I cannot apply any logic and come up with an expected figure, I did actually think of selling some of my holding and taking a small profit, but I decided against that because of the wide spread, so I guess that I am in until the end game is played out.

[a0002577] 11/3/2021 09:42

I was referring to the two reports relating to the year 2020 - which are now up there, Ozzie_dog,

They are dated respectively 4th and 5th March 2021

[bondholder] 11/3/2021 09:24

Here is the exact security :

The security includes a legal mortgage granted by Arena Coventry Limited (ACL) and Arena Coventry (2006)
Limited (ACL 2006) over their title to the Arena, a mortgage over the whole share capital of ACL and ACL
2006, fixed charges over the insurance policies held by ACL and ACL 2006 in respect of the Arena, a fixed
charge over a cash account held by the Company and a floating charge over the undertaking and assets of
the Company, Wasps Holdings Limited and ACL 2006. In addition, if the Invested Units (previously P-Shares)
held by Wasps Holdings Limited in Premiership Rugby Limited are sold prior to the maturity of the retail
bonds, then the proceeds are required to be secured by a fixed charge.