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PI’s expectation that Solus will subscribe to the open offer is absolutely ludicrous. The £170k raised from the OO is from a combination of misinformed PIs and the directors who madeprior committment to subscribe fully or partly BEFORE the SP toppled to circa 5p. They couldn’t escape it after the committment David Bestwick’s shy committment to part subscribe is a testament of the precarious situation we are in- he has the lions’s share amog his peers and chose to steer away from full subscription. The full committment from the rest of the directors doesn’t tell us much- few £k from Paul Walsh is pocket change... Solus, unlike most of us on this board, are professional investors and certainly wont subscribe unless they genuinely believe the are getting a bargain that cannot be purchased in the open market. If Solus were to chip in and extend a lifeline to avanti - the are better off going via another junk bond or rights issue given. There is no chance of them subscribing to the OO IMHO. The statement in the RNS depicts a what IF scenario to show the max extent of share ownership and nothing more. Some are over interpreting what it says....
I cannot get my head around why the open offer was only for �4mill when they need so much more ?? What was the point of the offer when it seemed doomed to failure if Solus are not taking up the offer. �4 million is not enough to get them out of trouble and then they make sure that nobody will take the offer up by issuing an RNS that is bound to eee the sp plummet. Strange.
I cannot understand that one teeny little bit either, Cassius. Why go ahead with a right issue in the open offer, which a) was inevitably fated to be massively undersubscribed and b) could only raise maximum 10% of the funding needed by end June to keep the lights on? Is the plan really to rush through another rights issue, once the SP following the D4E swap has found its new level? If so, Avanti's still up to its usual brinkmanship...
I think the OO was offered to give existing shareholders opportunity to reduce dilution. Management may have not anticipated the SP tanking on the RNS so may have planned for a much higher level of subscription. This could also be a formality too. Either way, the money raised is byproduct of the OO rather than reason behind it given max subscription wouldve only generated sub £5m which is nowhere near what they need. This brings me to the more important point-If the share prices remains at current levels after the new shares post D4E are issued, Avanti’s new market cap would circa £150m- merely a third of the $550m of dept wiped by the restructuring (post GBP-USD FX). Bondholder would still be starring at a massive loss vs book value (they’d be down circa 65%) - pretty BAD deal (close to bond prices pre D4E - as some traded at low 26% of book value in recent weeks). Even worse, bondholders now lost some of the protection/privileges of debt in the event of default (The equity they just got ranks lower than their delisted bonds ). Looks like a pretty bad deal to Bondholders UNLESS they truly believe the company is now investible and financially viable post restructuring. The 40m cash injection (via another bond) looks inevitable to me as bond holders couldn’t triggered default way earlier and chose not to on several occasions. I topped up last week and I believe the market is starting to support this thesis given the upward momentum. Wont be long before we find out! :) good luck all
So... there's seemingly either going to be a rights issue or the issuance of more bonds over the next 2 months to raise the missing $45m (or $85m)? Both would potentially seem a tad "odd", in the light of recent events - and especially a new bond issue, given that they've just managed to convert over half the existing bonds into equity... but for sure AVN is going to have to do something. Guess we'll know soon enough...
DoubleU.You really think that AVN care about the shareholders that much that they do an open offer purely for our benefit with nothing in it for themselves (except a drop in the ocean funding ). And then they issue an RNS that is bound to make the sp drop and so rendering their act of goodwill to the shareholders absolutely useless and pointless. Still can�t get my head around it.
Cassius, I wasn’t suggesting the OO was a result of management’s goodwill towards shareholders. All I said is cannot be a vehicle to raise the much needed cash give 100% subscribe would only generate sub £5m. The OO could be there to comply with a requirement by The takeover panel or mitigate legal risk arising from the D4E transaction. If you are an institutional investor who want to minimise dilution, absence of the OO the only other way to do so would be via the open market which could swing the SP due to the stock illiquidity. The OO theoretically would provide some protection in that regard...
DoubleU. Legal requirement to enable them to put the rest of the restructuring together would make sense or to enable them to do something else in the future. The wording of the RNS meant the offer was doomed to failure but if it was only a legal requirement then Avanti wouldn�t care any way. To be fair to Avanti , perhaps the RNS concerning the restructuring had to be worded in the way it was to satisfy legal requirements (again !).
And FWIW I think that if and when more cash is to be raised it will be via another bond. They have just issued 2 billion extra shares. To raise �50 million would mean another billion issued (approx). They won�t do that , surely ???
That would seem a sensible option and of course with prospects now way better than almost any time in our recent past such bonds are likely to be quickly snapped up.
DoubleU 10.37 - I lean towards your understanding of what is happening. The company is now in a closed period and Solus come under this too as they are on the board. For Solus and the other bond holders to have done what they did in one sense changes little in that the enterprise value (less expenses) has changed little as the debt and equity issues have been shuffled into different columns. I take your point that they have gone down the creditor rankings by doing this but equally you could say they see greater upside in equity going forward. Solus doesn't court publicity and this sums them up imo "The firm mainly invests in leveraged loans, high-yield bonds, and distressed securities to make its portfolio. Solus Alternative Asset Management is base in New York, New York." They know what they are doing and are proactive. I read that they are suing Blackstone owned hedge fund GSO on credit derivatives for example. The TO panel and obedient nomads are bending over backwards for compliance and fairness towards investors which oddly enough is more confusing. The sale by Caledonia has been unwelcome because it left an overhang on what is an illiquid stock with tiny turnover. The infrequently recurring pipeline revenue of $40 mio didn't seem to faze NF when I mentioned it at the GM and I have a suspicion that there is some arcane accountancy at work here and it's possible that there is some similarity between this and debt moving to equity. He hinted that it is not an existential threat. I think the current price is irrelevant and has been for some time. I expect that H4 is more valuable now it is in space and there are pipeline deals that encourage the bond holders to hang on in. I don't think for one minute that the bondholders worried about our fate but it just so happens that the equity for debt deal meant they could come out of it better than bankrupting the company. I'm no expert but I doubt Solus can now swap there equity back into debt so are aligned with the rest of us. Having Paul Walsh as Chairman has been our strength I believe. The Caledonia stake became too tiny for them is one excuse but surely the same applies now to M&G who I'm told remain supportive? It is confusing but the fat lady refuses to sing.