PIN/PINR26 Jan 2017 13:29
After the AGM, and following some discussions with other PIs, some very knowledgable; I believe the company needs to do something with PINR.
In theory the PINR are redeemable at NAV, but doing that would not really be in the interest of the voting shares, certainly so long as they sit at a discount.
But there are probably a couple of things the company could do.
1. make an share swap offer 98 PIN shares for 100 PINR. This would dilute the voting power of PIN holders, but the conversion would enhance the nav of the PIN, so I suspect the PIN share holders would be happy.
The PINR shareholders would see a their share price increase, as the discount is less on the PIN than the PINR. They would lose 2% of their NAV, but a bird in the hand..., and also the PIN are more tradable with a smaller spread.
The valuation of PIN is based on the PIN shares valuation. The conversion of PINR to PIN would therefore increase the valuation of the company and it could then move into the FTSE250. In the FTSE250 and with a simpler share structure the discount would likely narrow.
2. The PINR are tightly held but there is a risk that conversion may result in the sale of shares that would have negative impact on discount.
The market is very keen to value income highly at the present time.
I suspect that the market maybe very receptive to the marketing of a Guaranteed Income share, or a Bond. Maybe 15% of total NAV. 5% 5year, 5% 10year, 5% 15 year. This would reduce risk at redemption.
This would add a degree of gearing, but I don't believe that investors in a company like PIN would be totally averse to this modicum of extra risk/return.
The moneys raised would be used to buy any PIN shares, either from the market or as part of a tendering associated this the conversion of PIN to PINR. Maybe at 5% of NAV.
Any tendered would therefore increase NAV.
If Guaranteed Income shares where offered I would suggest offering warrants at the same time. This would give opportunities for capital growth of the GIS holders as well as income, and I believe could help catch the imagination of potential PI as they read the financial pages of their Sunday Papers. Advertising on the cheap.
New Years resolution to see if I can get these ideas as resolutions at the next AGM.