The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
At 1 pence a share, is that correct to wipe out the debt and stakeholders to exchange for debt. Am I correct that there will have to be issued 200 Billion shares? That really means total wipe out for any investor right?
Source please ???
Who's posted that? 200 Billion shares! What rubbish!!!
why would any new investors want to buy shares in a failing business, doesn't make sense.
I am thinking why anyone would want to invest at the minute! Shares are all over the place! It's a mine field out there across most shares!
This isn't going to end well for shareholders. Those who stay in to the bitter end are almost guaranteed to lose their investments. Far better to sell out while you still can - even a few pence is better than 0p.
At this point I would rather ride it in to the ground than sell as I think most people of this page are talking **** and just out to make a quick buck by trying to get shareholder to sell up. I would rather wait and see what happens. I have already written it off in my head so any upside from here is a bonus. I still think this is all a big game to get Cineplex to take a settlement out of court. No one knows what's going on really, it's all just speculation at this point.
This board is getting funnier by the day. 400 billion shares?
You know a thousand million make a billion?
You know the mktcap is at £38 million at the moment?
" Far better to sell out while you still can - even a few pence is better than 0p."
This is nonsense advice IMO.
I always look at the worst case scenario for each alternative. Right now I could get 2-3k for shares I paid 30k for.
Comparing two options:
Keep em. Worse case: I get zero so I lost 2-3k in addition to the 27k I'm already down for a bad decision today. Big deal.
Sell em now. Worst case: they go back up so I get 2-3k but miss out on the 27k or maybe more I could have got if I'd held. Hige regret for the decision to sell.
The holding is around 10% of last 2 years portfolio gain so hurts but got to take the rough with the smooth, what's done is done. For me, no brainer whether I should sell or hold now.
@jane i am in the same position as you. Although my losses are a bit bigger.
The market are pricing in full liquidation. Trading halt. Shares being worthless.
Anything else will be a rebound.
Could be in the ballpark if you could persuade the bond holders to take a £3billion haircut on the deal and swop the new paper for the remaining £2 billion debt.....that would produce a debt free business with a £2 billion valuation.
All totally hypothetical as it depends if the bondholders want to be left with paper....if £2billion is a realistic valuation for a debt free company, adjust paper printing according to what fair value it believed to be.....increase or reduce printing depending on 1p being a too generous or too stingy discount to sp on day of paper production.....increase printing to cover raising of funds to cover short term funding needs (assuming anyone would be willing to do it)
Once you get to your number of new shares to be issued do a consolidation to get to a manageable share base . At this point todays shareholders would be consolidated to near worthless holdings.
All back of an envelope but gives the general approach of going this particular route
@Wibblewobble1
Get a better envelope, that's complete tosh.
200 billion shares…lol there is a limit to the number of shares a company can list by the stock exchange. Also which lender would swap the five billion of debt for 200 billion pieces of worthless paper, as these shares would be…IMO
You may not like it but its an option.....another option would be to canvas potential buyers to get a ballpark potential purchase price for a debt free operation.....then go back to the bond holders and get them to haircut the debt down to that valuation....sell the company, pay of the bond holders but sadly existing shareholders get nothing at all i am afraid.....although an option this one would probably leave the bondholders holding new replacement debt as highly unlikely a cash buyer is lurking in the undergrowth although who knows if Disney would be interest....obviously the more interest the less of a haircut for bondholders.
Completely agree with wellington. Wibble Wobble, if only it was that simple.
You dont have 200 billion shares you consolidate
Or they could come up with option 3
They are not looking to get rid of all debt! They are looking to refinance and get through the next 12 months as things are going back to some kind of normality!
Wibblewobble, believe me when I say this, two years ago cine was in a better position to be sold and there were no takers. Fast forward to now, no one will buy cine, not with it’s debt. There is too much global uncertainty.
Also you lot talk about a billion, like it’s a very small amount, bloody company owes 5billions pounds worth of net debt. So after getting rid of all it’s assets, they still owe 5 billion.
The mktcap is 38 million lol.
Ajones...that is the likely choice of current management as it retains value for them so no doubt they would drive for it. You would have to get the bondholders on board and raise the finance to keep the wheels turning round in the short medium term....am sure the motivation is there....probably the current sp will reflect which option is winning over the coming weeks
Sound sense AJ: can't see what all the fuss is about but it all makes for the modern delight for rumour of disaster, penury, famine, plague, and the ice caps melting. "Need more wood, Mrs M and don't forget to put the cat and the budgie on board." cf The Miller's Tale: better read than this BB.
My understanding is the company wants to deleverage. Deleverage is to reduce outstanding debt without incurring any new debt.
I suspect, the are keeping their cards close to their chests, they will be throwing something in the mix, wait for the next rns.
Imho DYOR
Ps : Also fascinated by the talk of that deadly sin "debt" probably by many who are themselves in "debt" and as most of the population are in "debt" and not least HM Gov. Sadly thrift went out of fashion with Mr Micawber and JM Keynes though still observed by Mrs M who is looking forward to her visit to the pictures come the winter evenings.
Monteacute, if you going to be in debt, you wanna do it like cine lol.
The old saying, if you owe the bank couple hundred grand and you can’t pay it, your in trouble. However, if you owe the bank 10 or 20 million pounds and you can’t pay it, the bank is in trouble lol.
@Wibblewobble1
It's not a case of me not liking it, it's a case of your post being utterly financially illiterate.
First of all, there is no reason why Cineworld needs to be debt free, in fact being debt free and all equity funded is very inefficient. This is because the required return on Equity is considerably higher than on (say) Senior Secure Debt (because of the risk profile they face) and so Cineworld would need to create even more profit to pay the providers of the same amount of capital their required return. Apart from that the returns to shareholders come in the form of dividends, which are not tax deductible, unlike interest payments (which are the returns to debt providers) and are tax deductible. This is Corporate Finance 101. Modigliani & Miller came up with a theorem aboutthis that is the bedrock of modern capital allocation theory and it won them a Nobel Prize in 1985!
Secondly, an efficient capital structure will feature a diversity of providers (in increasing levels of risk) starting with secured lines of credit with the bank, leasing agreements with the providers of plant & machinery, landlords who rent or lease premises to companies, Senior Secured Debt, Junior Secured Debt, Senior Unsecured Debt, Senior Subordinated Debt, Junior Subordinated Debt and then Equity and even within the equity class you can have Preferred Equity and Common Equity.
All of the above have different risk profiles, required returns and pluses and minuses in terms of who wants to hold them and what they do for the company.
What we are talking about here is that the equity tranche has (allegedly) been wiped out by losses during Covid so that the high risk (i.e. of not getting paid their return and their capital being at risk) has been assumed by the Secured Debt. Given that they are not being paid for the risk that they are facing they naturally want to either have the full upside and control that an equity shareholding would give them (Debt for Equity Swap) or for another capital provider to step in and provide a buffer between them and any future losses.
Thirdly, ...I can't be bothered to go on.