Listen to our latest Investing Matters Podcast episode 'Uncovering opportunities with investment trusts' with The AIC's Richard Stone 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.
So there is a risk of insolvency then and therefore making a prepackaged option viable. Have Coltrane missed the point, or have more accurate information to base their decision on?
"If they have the money, why are they unable to meet the £50m that is due now, Feb 19?"
That for once is a good question meta. Hopefully in asking the question you are aknowledging that EBITDA is in excess of £170M if the latest RNS is true.
An operating profit of £170M over the past 12months!
As a guess .....
£170M less tax £32.3M = £137.7M
£137.7M less £80M Interest payments = £57.7M
£57.7M less £80M EfW = £22.3M deficit....
Short term cash issue!
Incoming cash (but unfortunately now all too late)...£40M on completion of last EfW, £60M insurance payout's on EfW, £40M International sell offs etc........
Pigleandtoe- further to my post below, here is the The provision that would trigger a debt default if either Ms White or Mr Whiteling are removed from their roles in certain circumstances is understood to have been included in debt documents drawn up last spring.
Such "keyman" provisions are relatively uncommon in lending agreements, though not unprecedented.
Pigandtoe- I’m assuming this deal was agreed last year in March so knowing full well shareholders would give them the chop when made public, the lenders added this into the refinancing to protect him and DW from any backlash, knowing full well IRV would not be in a position to repay the amount straight away. If you are a lender you would do the same if the BOD were given you a deal that would quadruple your returns overnight. I wouldn’t be surprised now if the refinancing has 200% for the pair included in it for last year.
How come it would cost IRV £10's of millions if Whiteling gets the chop?
Some big EFW payments due in April
If they have the money, why are they unable to meet the £50m that is due now, Feb 19?
Thanks Feilb not insolvent at all, they can easily pay the interest (80m). With all these clauses in the refinancing even a blind man can see they have got too good of s deal, hence they want it any cost. I don’t think that could be the only reason, more like the BOD have been given financial incentives to agree to the deal.
The only problem with Coltrane and Farringdon borrowing them the money is what will be secured against? Everything is already secured against existing debt. Very messy situation.
The only reason I can see why the BoD would ever agree to the current deal is a desperate need for short term cash to pay the interest on the current debt or costs to complete EfW.......
This is obviously not a long term issue and hence why Coltrane & Farringdon cannot accept it..
The way out for everyone could be for Coltrane & Farringdon to lend them Money short term - there would be then no need for such a one-sided deal.
Standing in the red corner and punching themselves in the face
In the blue corner we have Emerald Investment and in the Red corner Coltrane.
Wasn`t it Emerald who came riding to the rescue with the refinancing which turns out was probably as CC states! We know whose side certain execs are on...
Bill,
THE STATEMENTS BELOW ARE DIRECT FROM THE RNS 6th FEB (I have add my comments in brackets)
£350 million of existing debt will be allocated to RMDK, of which £169 million will be cash-pay and £181 million will be converted into a subordinated non-cash pay debt instrument.
Net cash-pay leverage of the Interserve Group (excluding the RMDK non-cash pay debt instrument) will be reduced to less than 1x EBITDA (Op Profit must therefore be more than £169m cash-pay = £170m)
Total net leverage (including the RMDK non-cash pay debt instrument) reduced to approximately 2x EBITDA. (Op profit must therefore be in the region of half of £350m = £175m)
I did ask others to check my calcs........noone did, but checking again I was slightly out with my £182m, but if the RNS is true and factual the Op Profit / EBITDA must be between £170M and £175M
At this level, you can see why Coltrane are not rushing - the BoD cannot have it both ways - either their RNS is untrue or they can't do a Pre Pack Administration - they are very solvent indeed!
They don't even need another 17% Bill. They only need 50% of the votes cast. Thus I suggest why Sky are running this story. One wonders who is giving Sky the information (it must be either the lenders or one of the Board)
Brightsphere short position down again today. Less than a million left for them to buy back now!
tbh Bill I'm not sure if it's legal or not (as opposed to morally wrong which it clearly is). My view is:
1. If a company doesn't meet it's covenant agreements then debts become immediately payable so whether the Board pointed that out or not isn't relevant, an investor will be judged to have known that
2. The situation regarding Mark Whiteling and Debbie White is more interesting. I would have though it prudent to put this in the annual accounts to avoid any accusation of conflict of interest, after all the Board approved the loan and to have clauses related to individuals is rather unusual. Of course whether it is prudent or morally correct is completely different to whether it is illegal or not. I would be pretty sure it's not illegal as then Debbie and Mark would have become personally liable by not declaring it and they are far too experienced to leave themselves open to that.
Finally, I note it's now been a week since Coltrane's intervention. Their RNS came out 10 minutes after the IRV statement. Surely shareholders deserve more than a "Interserve declined to comment" on the Sky news piece.
They only need another 17.5% votes to block the deal which shouldn’t be too difficult?
Yes CC they never mentioned anything about a default being triggered if MW left the company. Makes you realise they agreed all this last year, but lenders did not want to take control since their was too much uncertainty around EFW so they let the shareholders take the pain and cashed in in the interest. Surely this is not legal?
Its beginning to look like a PT Barnum caper now.
Well, this is beginning to look a complete mess. One wonders what other clauses are inserted in the March 2018 refinancing deal which are not in the public domain and whether any of them are price sensitive.
I suspect things are going to get really ugly now with Coltrane throwing their dummy repeatedly.
One wonders how many shareholders are going to take Coltrane's approach of their loss of £5m compared with the debt holders potential loss of £800m is such that they would rather roll the dice and maybe get zero rather than be screwed over .
Oh btw I spent time puzzling over the £75m cash injection as it seemed too high and out of character for the lenders. I now see that all this does is allow IRV to repay the £50m that was due the end of January which got deferred to the end of April. Or at least that's how I see it.
Feilb you keep quoting the 182m EBITDA. Where is this information from? A credible source?
This has turned into something of a Mexican Standoff. But its a different sort of standoff, one where everybody stands in the saloon with a gun to their own head and threatens to pull the trigger if they don't get what they want.
"Coltrane acknowledged that it had yet to present an alternative restructuring plan, but said there was little urgency to do so because there was not imminent threat of insolvency."
Yes interesting. I guess paying £66m off out of their EBITDA of £182 shouln't be too much of a problem!
Interesting https://news.sky.com/story/interserve-faces-debt-bombshell-over-hedge-fund-coup-11637210 I wonder how deep Coltranes pockets are? Anyone remember that Doomsday Machine in Dr Strangelove?
Meta,
Lenders do get a massive profit: its simple maths
There will be 6.150bn shares at 8p (more like 12p but regardless) = post Dfe Business will be therefore worth £492M
They own 97.5% of £492m = £479.7M they still hold £350 debt
Add the two together = £829.7m this is more than the current £755m debt
So they make an immediate profit
BUT it is worse than this
The 8p share price is really 12p, so their £479.7 is actually £640m
£640m plus £350 debt is £990m versus £755 debt
BUT is worse than this
The SP has every chance of rising to 16p (low debt, no EfW, EBITDA £182m) so
The Lenders are likely to get £800m plus £350m debt = £1.15bn
Nearly doubling their money............
Sorry mcap 15m
Lenders don't make a profit if they have lent out £755m and only get £300m back, plus 50% of a company with a market cap of £75m