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Hi HeresHopin my point (not entirely clear, I admit) was not that a £1.3bn raise cannot happen. It is of course possible. It just seems puzzlinging improbable. For an investor looking to acquire an equity stake/ bigger stake in intu, the open market (for the time being) would be many times better value than a stake via the rights issue.
if it does happen, it would seem that the banks are simply forcing JW to inject cash in and he has no other option. Unless JW cash call underlies this and is locked into the raising deal, who in their right mind would underright the raise
A lot of further negative market sentiment for this share it seems.
One thing that goes for us is the timing of the RCF announcement RNS. The facility wan until 2021 so there was no immediate time pressure on agreeing a re-finance there.
Therefore I cannot see the BOD having progressed with it, knowing the £1.3bn requirement would be in the announcement unless they had it tied up, especially just shy of a week before results.
GLA, likely to be a bumpy week!
Ownthingowntime, with respect you clearly don't have a clue. 25 shares for every 1 held at 8p - what does that raise, as an example? Lonmin did a 46 for 1 in the past, so it can be done.
The equity raise will happen.
It will be underwritten to ensure the money is raised.
The underwriters will effectively dominate the share register.
The bankers and bondholders could well end up owning a portfolio and having it managed for them...like in the case of Debernhams ....with which they are having to close stores and continue to struggle with the downturn
Plenty of "speculators" have bailed out...me included at 14p and a touch, the tiny profit not worth the risks at current situation
On reflection, I don't see how a rights issue can possibly work. Whatever the level of dilution applied to existing shares (e.g. 1 to 100, or even 1 to 1000), they can still only in effect sell 100% of the company, and if the market cap of 100% of the company (at £187m) is approx 15% of the required raise, it would appear that a successful rights issue of this magnitude plainly and simply will not happen. The bankers must be laughing at intu management, while not busy keeping their hedgie mates updated.
Yes EPG, a Preference Share is equity, because on a winding up, it ranks after debt, but ahead of the ordinary shares. Typically, they were regarded as securer, because they bore a fixed interest rate and ranked ahead, whereas the ordinary shares rank behind the Prefs and carry a fluctuating dividend.
Very popular from the 1800's through to the 1920's. Seen as good for widows and orphans. Went right out of fashion in the 1930's, during the Great Depression, when shareholders realised that they really weren't any more secure. The ordinaries required profitability to pay a dividend and, the Pref holders realised, if there were no profits to pay the ordinaries, how were they going to be paid their 2%? They weren't, of course, as all insolvent companies eventually go bust and take the Prefs with them. Investors today realise that Prefs carry a skewed Risk-Reward ratio; No possibility of a capital gain and almost as much risk as the Ordinaries.
If they receive £1.3bn of equity that will only arrive at a huge cost . Any investor is only going to inject that sort of capital into Intu if they have all the pies In other words the majority of that wafer between debt and value of the assets
The only route forward which might help private shareholders extract any value is for Whittaker to takeout Trafford Centre and maybe Lakeside pitched out too That should stop the rot temporarily
However it really isnt the best of times to get a decent price for either
Does anyone know whether preference shares is generally considered as equity in this case?
Sain - thanks for you reply. I think I understand and agree with the following: Metro bond breach, extremely reluctant lending market, somewhat falling rental rental income, RCF maturing in 2021 only being extended as a smaller facility with £1.3bn equity raise.
All that said, if intu recieve £1.6bn of equity, then surely that- coupled with the possibility of further asset disposals- is an ample 'war chest', so as to, for example, bring the Metro bond LTV back into line, bring any other debts back into line post further valuation write downs, possibly pay off one or two other maturing debts.
Further prediction- JW will not want to be diluted and will therefore be good for his share of the rights issue. In order to stimulate appetite amongst other would be investors the rights issue will have to be priced at monumentally dilutive levels, i.e. so it becomes almost 'an offer that existing shareholders cannot refuse', and to outside investors the potential return becomes worthwhile bearing in mind the quagmire of extremely high risk and sectoral uncertainty.
"How about they simply derive rental from their assets and service the various debts, and plan ahead re future maturities."
Yes wouldn't that be wonderful . They have already triggered a breach of one of their £435 bond on the the Metrocentre as LTV had become 71%
We will find out soon enough when the revaluations out and how it affects others It might be like a 21 gun salute
The lending market is beyond tight
Rental income servicing the loans has been reduced
Meanwhile the loan that matures next year they have been told in no uncertain terms it wont be renewed on the same terms and in addition they raise a huge amount of equity
Which about that don't you understand . They cant afford to wait til next month let alone next year
In addition the potential threat of coronavirus to add to the party
Only wish -we will find out very shortly howmany ofthedebts
So pessimistic Sain- on 'dealing with the debt': how about they simply derive rental from their assets and service the various debts, and plan ahead re future maturities.
If £1.3bn equity can be raised, survival ought to be an absolute shoe-in.
The problem for any potential buyer of the company is they still have to deal with the debt. It's not just one big debt ,its
a whole host of different debts tied up up in various packages with their own different charctersitics,idiosyncrasies and maturity dates no doubt with a whole load of redemption and loan covenant breach penalties stitched in to make life more difficult
It wont' be simply a case of just signing a big cheque to pay it off for the very few who can and who would want to now in any event with a flotilla of black swans cruising
Not only that anyone trying to get funding when the world has effectively come to a halt it won't be on favourable terms Battening down hatches being the order of the day
This couldn't have come at a worse time The BODS should have jettisoned more stock potential buyers like LlINK have other things on their mind at the moment
"Given the law against issuing shares at less than par value, (unless stating that they're only partly-paid-up), I imagine the way around this is to split all the existing shares 5 for 1, reducing the existing 50p par value to 10 pence each and the Rights issue would then be 2 new shares at roughly 13p for every 5-1 split existing share." Thank you, Gewilla. all sounds entirely plausible.
I think I would/will take up my rights and not have my lifetime interest in all future cash-flows from these assets be diluted by approx 90%. Of course, I believe that such cash flows should be many times higher than current SP.
In case this may be of any use to anyone: https://www.sharesmagazine.co.uk/article/how-rights-issues-work-and-the-decisions-investors-need-to-make
I know that, which is why they'd only pay £300m for it, if a buyer could walk away from the debt this would be worth £6bn or so!
The market cap is shy of £200m, how could this BOD facing no real potential of getting themselves out of this mess not recommend accepting a bid equivalent to £300m for the entire share capital & faced with the choice of obliteration or a cheap sale how many II's would vote against it?
Different for the debtholders obviously they will no doubt want to see this go a different away as the asset values (even now) outstrip the debt.
They couldn't buy the whole business for that though could they? If your neighbour has a house valued at £500k with a £480k debt on it and just £20k equity, how much do you have to pay for the house if you want to buy it - it isn't just the equity is it, as you need to pick up the debt as well. It's exactly the same here.
The thing is a cap raise which raises £1.3bn also gives Intu that cash and head-room. Theoretically we're only at today's value because of the risks, so a cap raise of £1.3bn adds that amount plus any value uplift from reduction of risk so as shareholders we will go from owning 100% of a £160m company to owning 10% of say a £1.5/6bn business.
What I can't work out is who is going to invest £1.3bn to own 90% of shares when they could buy the whole business for £250/£300m tomorrow?
Poker, as RNS's go, it's very clear. Intu confirm the bankers have pulled the £600m RCF, which has been blindingly obvious for months. Its' been cut by 25%, down to £440m and even that is conditional on an equity raise of £1.3+ billion. The raise is being organised by Merrill Lynch, UBS & Rothschilds. This is nothing to do with selling existing properties, or getting a "credit" of £600m from earlier sales this year, or future later sales. It's having to raise a minimum of £1.3 billion in cash now, in return for new shares being issued. Like right now. No raise - No RCF - No cash.
That's another 13 billion shares at 13 pence each. A 90% minimum dilution.
Given the law against issuing shares at less than par value, (unless stating that they're only partly-paid-up), I imagine the way around this is to split all the existing shares 5 for 1, reducing the existing 50p par value to 10 pence each and the Rights issue would then be 2 new shares at roughly 13p for every 5-1 split existing share.
When the smoke clears, and Intu is hopefully recapitalised, this would hopefully be followed by a massive share consolidation, otherwise the company would have roughly 20 billion shares in issue. Which smacks more of the wilder corners of AIM, than a would-be FTSE 250 plc. It would also produce a quoted SP north of £1, which always makes the PI's feel more secure.
sure, fair assumption ....but on the balance sheet ..."equity" is the result of all financial positives against financial negatives....and in that sense "equity" can be cash raised from asset sales,share issues, whatever
so..anyway ..guess we are looking at either
a. Rights Issue of £1.3bn
b. Rights Issue of £1.3bn - £600m asset sales of 2019 = £700m
c. £1.3bn raised from £600m asset sales of 2019.... plus further announced sales of £700m ?? (time running out on that one)
Poker- would be good to have that clarity. but in the absence of it, surely a fair assumption has to be that equity means equity capital raised from shareholders and not cash generated from any disposal past or future
It is all a bit vague and lacking detail.
Does it mean that £1.3bn can be "equity" of a mix of asset sales and right issue..... and is the £600 million raised from asset sales in 2019 included as part of that £1.3bn to be raised...in total ?
there you have it a raise £1.3bn+ mcap 170m(ish). do the maths. dilution hell coming.
Given this condition, I'm appalled that intu put out the RNS as if it's somehow a done deal. CEO's comment being most guilty of this. Lacks integrity.
They're not lending unless the condition is fulfilled. Condition = £1.3bn equity raise.
I think it is a very good news that banks are still lending to intu in the current market. The question is : what is the cost of the RCF? Is it similar to the existing RCF?