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You're right about fairness, Vitabella, but I think it's very important to look at where the shareholders voting power lies:
John Whittaker, through himself and his private company, Peel, speaks for almost 55% of the shares. The next three largest shareholders, a South African investment house, Coronation Asset Management, a person, Rachel Blaise and a Luxembourg company, Auriga V Lux Sarl, between them speak for almost 33%. I haven't googled Rachel and would guess she might be JW's married daughter, but she could be anyone at all. With 100 million shares, she's very lucky, even at 20 pence.
These five control over 87% of the votes. Assuming that they are all connected in some way, the PI's here don't have so much as a fly swatter to protect themselves with. I'd refer you to Sain's post of 06.33 today, where he puts it much more bluntly than my "devil the the hindmost" of last evening.
I've learnt never to expect, fairness, kindness, or gentlemanliness when the chips are down and people's backs are to the wall. It reminds me of being in the office a friend who had discovered that he was being stiffed out of his correct share of the income from a joint venture. The managing shareholder was being naughty and my pal was suing him. I asked why he was suing a fairly notorious crook. My friend slammed his fist on his desk and yelled, "Because this is a matter of money. It's not a matter of principle!" with a large grin on his face.
This debacle is a matter of money. Expect no favours.
Gewillia, intu BoD giving a lot of new shares to external parties at only 10p each (just example) would be unfair to existing shareholders. It wouldn’t be approved by existing shareholders.
External party can underwrite new shares, that is fine.
With JW as a shareholder, I hope that all shareholders will be treated fairly and equally.
Tedmak: There could be further sweetener for preferential shareholders that ... Preferential Shareholders could convert their shares to ordinary shares @ 1 ordanary shares for every 3 preferential shares in 10 years. It means, if INTU share price in future rises to over £3 than preferential shareholders can opt for converting their preferential shares to ordinary shares.
Tedmak: U might like to know how preferential shares could work for INTU.
Present situation: INTU pays on average 4.1% interest on their debt (~£5 billion) … or ~ £200 million a year. After interest and other ex-penses, INTU is left with ~£150 million.
Since debt has increased to 56 %, INTU has stopped dividend payment and because of that, INTU pays around £10 million tax (could be more this year) to Inland Revenue.
Present world situation is that interest rate is low.
If INTU finds investors, INTU issues £1 billion (could be even £2 billion) of preferential shares with guaranteed 4 percent dividend, costing £40 million as dividend to preferential shareholders (on £1 billion).
Raised £1 billion used to reduce debt from £5 billion to £4 billion, saving £40 million interest on debt. As debt would be below 50 %, INTU would start paying dividend to shareholders saving ~£10 million in taxes.
Advantage to Preferential shareholders: They get their dividend guaranteed, unless INTU profit reduces below £40.
Note: At present, profit it is ~£150 million, but would rise to near £200 million after £1 billion preferential shares issue due to saving on debt interest.
If INTU goes to receiver, Preferential shareholders get their £1 billion preferential share value paid first, before payment to any shareholders.
Obviously, this could happen if those buying preferential shares would be certain that INTU has assets and debt what is claimed in their financial reports (over £8 billion assets and £5 billion debt), plus ~£150 million profit after all expenses.
Above figures would give Preferential Shareholders surety that their investment and dividend is safe. Getting safe/secure 4 percent dividend in present environment is quite good investment for most investors and many may take it.
Tedmak: 'As per recent RNS, Intu is also talking to NEW investors. Any ideas how new investors may participate in equity raising?'
In present situation, with consent of present shareholders, INTU might issue preferential shares. Though, I doubt if INTU would do that though there is possibility.
I think, there is lot of misunderstanding around. Now think:
INTU assets are valued over £8.5 billion and they have debt of around £5 billion.
There is no way INTU could raise enough equity to pay debts due in next 2 years (2021 & 2022). Intu needs around £ 1 billion in 2021 and another £1 billion in 2022.
So, even if they raise £1 billion, situation would be same. Instead of £5 billion, they would have £4 billion debt. Even after raising equity, some fear mongers would start saying that INTU needs to raise more equity to come out of debt trap. If retail properties keep going down in value, then it means, situation would be same even after raising equity.
Anyhow, some suggesting that INTU raise capital @ 1p or 5p a share, rights issue.
If 5p a share, then INTU would need to issue 20 billion shares (twenty billion shares) to raise £1 billion, or 40 billion shares to raise £2 billion.
Before rights issue, INTU would need to write off capital value of all ex-isting shares, as paid up capital of INTU shares is 50p and INTU cannot issue shares below that.
Crunch, that would be kick on the face of Mr Whittaker: Mr Whittaker has 27.2 percent INTU shares (for which he paid ~ £1 billion) and in new equity raising £1 billion, Mr Whittaker would pay £272 million for new shares … though new equity would only delay inevitable if value of retail properties keep going down (even after £1 billion rights issue, IN-TU debt would be still £4 billion).
With property assets of £8.5 billion, debt of £4 bn or £5 bn is academic. In the end, INTU has to refinance their debt and with profit of over £100 million above all expenses, use that to reduce debt.
If INTU wants Whittaker to dish out £272 million (for £1 billion equity raise) or £525 million (for £2 billion equity raise) and still stay as 27.2 % owner of INTU, then that could only happen if Mr Whittaker is brainless idiot. If Mr Whittaker believes on INTU future, then it would be wiser for Mr Whittaker to use little cash to buy more INTU shares at this rock bottom price, then take part in equity raise.
Now let get to LTV covenant situation:
https://www.intugroup.co.uk/media/6624/investor-presentation-q3-2019-update.pdf
Page 20:
If INTU property value reduces by 15 % from its value in June 2019, then INTU would need £82.6 million to cover LTV covenant, no problem when INTU has over £495 million in cash & equivalent.
Page 21:
At the end of June 2019, each of INTU investment was producing enough to cover interest and even if INTU operating profit goes down substantially, they would have no problem covering the interest.
Apart of INTU Trafford, where INTU income is just 8 percent above the requirement, most other INTU retail properties have headroom from 32% to 77%.
I think, this equity raise talk by INTU management is just to give mes-sage to Shareholders that since debt is 56 %, INTU cannot pay divided (even though, profit is enough to pay), as they would like to
'As per recent RNS, Intu is also talking to NEW investors. Any ideas how new investors may participate in equity raising?'
By underwriting the RI. They can pick up the shares that the share holders don't take up.
Simples, Vitabella. The board, or its' bankers, just invite someone with enormously deep pockets to subscribe for, say, half-a-billion new shares at 10 pence each and then issue them, in exchange for the cash.
I'd volunteer to do this myself. After all, what could possibly go wrong? But SWMBO says there's limited headroom on her MasterCard after Christmas.
As per recent RNS, Intu is also talking to NEW investors. Any ideas how new investors may participate in equity raising?
My assumption:
There will be a rights issue deeply discounted. Anything from 1p to 5p to get the thing away for 1B.
Peel will take up their rights and will probably under-right the whole thing, instead of paying institutional shareholders.
That way, the balance sheet gets repaired, Peel do not get diluted, in fact, they will increase the stake to the extent that other holders don't take up their rights.
I have missed the stampede out there for investors willing to buy large shopping centres over the next month, so asset sales are not an option.
any opportunity is in the RI, not the current stock.
"Thus, Whittaker would make sure that INTU management sell assets to reduce debt,"
Herein lies the rub .Easier said than done .In addition with loan covenants shortly about to burst ,loan expiry dates in sight no guarantee they can shift further assets without serious distressing within the timescales