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Hahahaha.....
As you’re desperately ramping SGI on other boards Pearls, I thought I would return the favour - with much better prospects too.
https://twitter.com/ArgoBlockchain/status/1517210858241155072?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet
Wonderful, so it says it in the RNS, and as they so, "wont be payable until 20 March 2023." "interest will ACCRUE at a rate of 5.0 per cent. per annum"
"it just won't be enough to make sizeable inroads into the debt mountain," so we are agreeing on something.
So that means the only hope is Phoenix to forgive debt, when they've clearly extended the obligations and indicated they are accruing the interest......sound a bit like they aren't going to trade their way out of it ,and shareholders only comfort is the crumb of hope. I can see why you feel the need to "ramp this shi7 on loads of other non related boards today" as @Daytradenovice so elegantly puts it LOL
Devon, I know it says that in the RNS but it equally says that the loan repayments are being waived. Equitably, are they likely to be accruing debt on non existent repayments? Let's face it, there's no way SG can currently pay the accruing principal and interest next year, whether or not it accrues.
Phoenix must know that, and as you know, the banking facility is on the softest terms possible, so I can quite easily see a situation here where the debt is not actually accruing.
Would you be that surprised to find out this was the case - you cannot find proof they have made repayments afterall?
March 2023 is next year - as you say, unless trading recovers to an amazing degree to say £20m turnover a year or more, this will be impossible to repay. Whilst I believe they may bring in say £15m - £16m over the oncoming year, which will be a reasonable result, it just won't be enough to make sizeable inroads into the debt mountain, especially whilst capital expenditure remains around £1.3m a year.
"They are earning nothing from the debt, and I am not sure it is actually accruing"
For goodness sake, it's IN the bloody RNS:
From the update "namely that interest will ACCRUE at a rate of 5.0 per cent. per annum but will not be payable as to principal and interest until 20 March 2023."
(my u/c to emphasis)
@Daytradenovice......I've just seen, Pearls has posted on 5 unrelated share's threads LOL
Pearls, how desperate are you to be out of SGI hahahahahah
This is the funniest page on the whole site.
Devon, I really don't know if the debt is accruing - it is not obvious or confirmed in recent RNSs. Yes, with a conventional bank loan it obviously would, but this is not a normal situation. And the banker is the largest shareholder who also is behind Castelnau. Neither Castelnau nor Phoenix presumably have an interest in the value of their investments being trashed, yet this is what is happening here as the debt rises and SG continues to fail financial covenant tests.
It seems to me that the share price is definitely a secondary consideration for Phoenix at the moment - you are certainly right there, but I cannot see how this can continue to be the case much longer. They are earning nothing from the debt, and I am not sure it is actually accruing. Remember the banking loan is provided on unusually soft terms, basically to keep the company alive during the last five years. That has now been accomplished.
Yes, they are not servicing the debt currently from what I can understand, but there is a wider issue now? Are they actually trading in the black at last? I believe they now are, albeit is probably a small profit. The current profitable level is not yet enough to fund future capital requirements, including solving the pension issues, but that will logically be why they have agreed to the loan account increasing by £1.3m over the oncoming year.
My key point was that if Phoenix cancel the debt, the resultant rise in the share price will be so large, that it would more than outdo the cost of the cancellation of the debt. It is all paper money anyway as we all know since the money goes through one Phoenix door and out of another with this company; but it does seem to me that if the market cap of SG suddenly was rerated, based upon complete cancellation of the debt, to say, 18.5p a share [to take an easy figure given the current share price], then that would value the company at £80m [whereas it is £8m currently]. Cancelling the £17m debt equates to twice the current share price but would be worth much more to the shares going forward. There is no way at all I can see a debt free SG being worth just 6p for example, the share price would instead rise by multiples [hence my 18.5p pricing].
On paper this would surely be a winner for both Phoenix, and Castelnau, whilst retaining control of SG, a control that had suddenly become a lot more valuable.
So exactly why are you trying to ramp this shi7 on loads of other non related boards today then Pearls?
"I meant if Phoenix cancelled the debt, just like Pearls said in one of his posts…"
As they can't/aren't servicing the debt at the moment, it wouldn't free up cash to pay dividends anyway. If that's what you mean. They need earnings in excessive of future capital requirements, and they just don't have those. Unless we are suggesting Phoenix would cancel their debt, but allow SGI to take other debt so they could pay external shareholders a dividend...just can't see that happening.
But they don't need to do they, they have both equity and debt.
So why would they want to share the benefits of cancelling with other shareholders...and if it was that simple why do thy keep allowing to be increased and accruing it. The share price is secondary for the foreseeable is not the main game, it's control & leverage.
Yeah, I know that they can ‘t pay dividends now… Sorry, I meant if Phoenix cancelled the debt, just like Pearls said in one of his posts…
Then you simply have to ask yourself why they are increasing debt and accruing the interest.
The company can't pay dividends anyway, have you forgotten it can't even service it's debt! It showed :
Profit before tax (£m) (4.08) for last year.....a £4m loss.
So no dividends for ordinary external shareholders, but Phoenix are getting 5% accruing. Why do they need to share it with external stakeholders? So no, they get interest and more control and the opportunity to leverage the name for their other private business....meanwhile what are you getting as an ordinary shareholder........
That answer your question?
I think give the past 3 years my assumption is credible, those shouting for a share price increase...not so much.
If the accounting you're presenting is the case, wouldn't it still be a better deal for them if the share price goes up to, let's say, 8p? No debt and the company even able to pay dividend?
Just to be clear, they've never said how the debt is structured, so I'm presuming is being accrued and will be added to the principal. It's rolled up in someway, I've had a look in the past to see if there's anything available on the debt structure, but I couldn't find it. I guess it could be possible to make some assumption by looking back through published accounts. I believe it compounded, but either way it's accruing and the increased commitment isn't going away.
@Pearls, this is the point you usually say "you obviously know a lot more about corporate debt than I do"
- and then try to correct me LOL
"if Phoenix keep waiving the repayments, I cannot see how they can compound "
What? Please, look up the meaning of "accrue", they waive the payment, but let it accrue. By waiving the payment, they don't waive the commitment pay down the road.
"It's pointless"
It's a further burden. Lots of debt works on the same basis. It's isn't all just interest and repayment. You get accruing interest and Payments-In-Kind (PIK's) as long side other types of instruments. I've invested in lots of debt that accrues over the years.
My view: they will be happy to keep taking/accruing long term debt and eventually develop an interest in the equity as a way of deleveraging. They'll use gullible retail investors as an exit strategy whilst still having ultimate control of the business through debt. You must remember who that works from Debenhams....that's what I would do if I was them anyway.
Deveon, the current debt in December's update was £16m and plus £1.3m in last week's makes debt £17.3m by April next year. Whilst I understand your point about the compound interest, if Phoenix keep waiving the repayments, I cannot see how they can compound it. Equally, if the repayments are waived, what is the point of the debt if it never getting repaid?
Phoenix already hold 58% of the company, they are already its banker, so what is the point of the debt now? They have full control. The debt merely cripples the company and keeps it in permanent breach of its covenants, which in turn keeps the share price so low. It just seems pointless.
That means next year if they don't take on more debt, which would surprise me, then it's (£17m + 5%) + 5% ....in simple terms that makes repayment more difficult every year unless the earnings explode and we know there's been no indication of that happening.
Compound it out and see what the debt looks like in a few years time. SHOCKING AMOUNT.
From the update "namely that interest will ACCRUE at a rate of 5.0 per cent. per annum but will not be payable as to principal and interest until 20 March 2023."
(my u/c to emphasis)
"It seems to me that with each year that passes the financial covenants are waived, and / or interest payments on the loan either waived or largely reduced"
Nonsense, they've waived the repayment, but the interest is accumulating. It's simply compounding and increasing.
Devon, those are fair comments about their reliance on Phoenix. But surely the value of their investment on their books is of importance to Phoenix? It must be to Castelnau as well? If the price continues to drop, their stake appears to be lower in value as well. I cannot see that this is in their interest.
Bear in mind Phoenix spent £19.45m on the 58% stake five years ago, so you would have thought by now that Phoenix would have wanted the stake to be worth more than £19.45m? They are not receiving dividend payments, and SG would seem to be waived from complying with the loan requirements, so in reality what is the point of keeping such a large loan on their books?
It seems to me that with each year that passes the financial covenants are waived, and / or interest payments on the loan either waived or largely reduced. We are now five years after Phoenix took their stake, and whilst I appreciate that it was to be a long term position, it seems currently there is no alternative. Yet you would have thought it important to Phoenix that companies they invest in become worth more over time. The opposite seems to be the case with SGI - the current share price is a fraction of what they paid for their 58% share.
Even recently there was an odd decision with Showpiece - why is SG only a 20% shareholder in Showpiece when Showpiece are only selling SG items?
Ultimately Devon, you have often commented that the reason for the deal is that Phoenix benefit from the debt payments and service charges. But from what I can see, most of these are in fact waived!
-11% (minus) at open......
Cancel the debt? LOL Unless you missed it they JUST increased it, and for good measure started SGI buying from one of their other companies, so not only increase the balance debt, they also increased the business-as-usual reliance on Phoenix.
To me that suggests they aren't the bothered about the share price, just in leveraging SGI's name for their private business.
For the other SGI shareholders: you are just trading in the goodwill arising from the tarnished name. So a couple of million, c 0.5p...future earning won't translate into x PE, they'll just translate in to debt payments and service charges.
NO earnings=no share price increase. Simple.
I couldn’t agree more, Pearls. - It simply makes sense… A lot of patience is required for this stock.
Currently the market cap is only £8m and annual turnover is reported to be £12m whilst debt stands at over £17m.
All the £17m is owed to Phoenix but what would happen if Phoenix decided to cancel the debt? Obviously this would be an exceptional decision, but is it actually going to cost them £17m to cancel?
From what we already know, five years ago Phoenix bought 58% of the shares in Stanley Gibbons at 2.5p a share, this cost them £19.45m at the time. That holding is now underwater so presumably Phoenix is as happy about the current share price as the rest of us.
Suppose then that they cancelled the debt. The share price would then rocket into at least double figures. That would then value their 58% holding at multiples of its purchase price, and instead of making debt payments at 5%, SG could make dividend payments. I would guess that each cancellation of a £4m chunk of their debt would translate into an additional 3p - 4p of share price growth. It’s not even a cash neutral move, instead it would electrify the shares and be worth multiples of the cancelled debt.