Firering Strategic Minerals: From explorer to producer. Watch the video 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.
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!
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.
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.
If they have the money, why are they unable to meet the £50m that is due now, Feb 19?
Some big EFW payments due in April
How come it would cost IRV £10's of millions if Whiteling gets the chop?
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.
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.
"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........
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?
Have a read of this it’s an interesting read. Looks like the banks cannot agree a deal between themselves let alone with shareholders. It also mentions plans to ring fence RMD have not been approved yet, so is this potentially back on the cards. Finally IRV will be put into liquidation of f the 66m is not paid, which nobody wants.
https://www.google.co.uk/amp/s/amp.ft.com/content/0de0d314-305f-11e9-8744-e7016697f225
Mayve Coltrane are bluffing as well?
Its going to be awkward explaining to some NYC pensioners that they have lost 97.5% of their investment buying magic beans. Even more if its the lot.
Meta- no idea we can speculate all we want only Coltrane know what they have planned, and only the lenders know what will happen if the deal is not approved. I have a feeling it will be a pre pack deal and plc will be made insolvent.
Bill
In reality there is no real risk of insolvency in my view (and more importantly in Coltranes).
My example (guess) was just a way showing that they could have a large op. profit but still short term cash issues.
In reality they wouldn't be paying the tax on the op. profit if making a loss....it just a way of showing if you that if you play with the figures they could very well need short term liquidity (cash).
Longer term when DfE is sorted in June? They will be back in the black and profitable.
The debt is obviously too high as too much profit is wasted on interest. The BoD know they have to start paying dividends ASAP or it will be impossible to attract institutional Investors who will give them long term stability.
It is no secret that they are trying to get rid of the private investors and the BoD see this deal as a quick way of doing that and starting again......
I wonder if it was the BoD who leaked the £66M immediate payment should the deal not go through or it was the Lenders.....
For sure, one of them or both are getting very nervous ....
A better deal or no deal is required.......
All or nothing - thats the way a significant proportion of shareholders are thinking now........
The argument that anything is better than nothing sometimes doesn't carry a lot of weight, if people do not believe they are being treated fairly.......
Fairness being the key ...ex. shareholders will accept taking a lot of pain, but if they start believing they are having the piss taken out of them....they will rebel!
Seems to me we have people working for Emerald on this board! Coltrane certainly don`t have all their eggs in the IRV basket, far from it! They just know when there`s a shafting going on...
The whole thing has been sneaky and underhand from the start.
I agree with the point of trying to wipe out private investors and DW seems to hate them with a passion. Makes you laugh when she was questioned in he commons about the share price being so low, and her response was it was down to PIs on boards such as this.
I wonder if any more news will come out of this leaky ship today or are they having the weekend off?
Meta - lol I’m sure something will come out on a Sunday as per usual.
Feileb,
I am becoming concerned about balance here. You have stated a number of times that you believe the EBITDA to be around £175m and you have provided calculations. However, you did you respond to my previous point about what is and what is not included in the calculation and the lenders wishing to present it in the best possible way.
For clarity market expectations for 2017 are an EBITDA of £93m. To suggest the company is going to deliver twice this for the year when they made only £40m in the first half is fanciful. That would suggest £135m for the second half, something material enough the management would be shouting about it. That's an average margin of 6% for the full year or 9% for the second half. Even 6% on average would put IRV as leading in class in it's sector. No other company achieves 6% or anything close to it.
I'm sorry but however much you want to believe your figures they don't add up.
Next I move to the "it's a short term cash problem". Well in some respects you are right but in others not. The challenge here is that the FD wants the EBITDA to be as high as possible to keep market confidence and has done so by loading up the exceptional costs. How many of these are really exceptional because it seems to me some of them appear to be "let's go find every job that's losing money and count it as exceptional". It's no good making lots of EBITDA if every year for some reason or other there's a new exceptional cost.
Finally I wish to put you right on the timing of the insurance payment. They will not receive it all this year as around half (£30m ish) was paid in December (i.e. before they defaulted on the January £50m debt repayment). How much will they get for EfW - well again every day that ticks by is less the Client will pay due to clauses in the contracts. I do not dispute there may be money due here but extracting it from Clients may not be as simple as just submitting an invoice.
Finally they have another "short term cash flow" problem coming up - settlement of the account with Viridor where they claim they are owed £60m ish. How much EBITDA is that going to eat up?
I suggest the situation is nowhere near as rosy as you paint but I wish you luck with your trade. The situation is so volatile and difficult to predict the share price could well go up as well as down.
CC2015 -
You point out a particularly nasty habit of most construction and service companies. Any profit on a project is normal business and any loss on a project is booked as exceptional. Surely it is the job of the accounting and audit function (both internal and external) to differentiate between truly exceptional items or losses arising from poor management of work. Without this then every outturn from a project should be treated as exceptional, whether it is a loss, profit or breakeven.
If you were to believe the double speak of accountants and construction companies, 'exceptional' losses, 'outstanding' payments and such like, you would think that baskets like this were doing very nicely, thank you very much. And then little tricks like amortisation, 'yeah we haven't got a pot to p*** in, but we do have lots of good will' Who believes this nonsense? Cash is king always has been, always will be and it doesn't look as though IRV have any. We will soon see when they publish their results. April?
CC2015.
Balance is good.
But your view does not provide a true balance or anywhere near to it. Why?
Simply because you posted just your opinion. And to simplify your post into one sentence it would read ""EBITDA cannot be £175m this year, because I (CC2015) doesn't think it will be".
You have provided no evidence of facts to back up your opinion whatsoever, but purely your gut feeling.
This does not provide any balance of view whatsoever. If you want to provide a balance of view, I will list two simple statements below from the RNS. I will write them word for word. Just give me a logical interpretation of the statements, that is different to my interpretation - that is all you need to do to provide balance. Or if you are unable to provide a different logical view, then just state that the RNS is untrue and the BoD have lied. That would be providing a balanced view. Just stating "it can't be becasue CC2015 cannot believe it" is self indulgent and not balanced.
The two simple statements are:
RMDK will remain part of the consolidated Interserve Group. As part of the transaction, £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. The debt allocated to RMDK will be non-recourse to the rest of Interserve Group and have maturities extended to 2023;
Net cash-pay leverage of the Interserve Group (excluding the RMDK non-cash pay debt instrument) will be reduced to less than 1x EBITDA and total net leverage (including the RMDK non-cash pay debt instrument) reduced to approximately 2x EBITDA.
This is the RNS - interpret it.
Putting aside your contention that Interserve are cheating using "exceptional costs" (again which is your speculation only) do you agree that they will announce a EBITDA of between £170M and £175M? Yes or No - simple question...
Thank you for putting me right on the insurance timing, but you have not. In my post I have not referred to previously received insurance payments (that incidentally, I have previously posted about). I refer only to future insurance payments. Please re-read carefully.
Please re-read my previous post, you mention £50M EfW, I go further than you.... suggesting £80M
Please re-read my previous post regarding Viridor, that mentions the "£60M ish" and goes further than you, suggesting they should be involved in any deal!
If you are going to critique a post, read it properly please and inline with previous posts and do not suggest you are providing a "balance" if you only offer your opinion against a company RNS.
GL
Hi Feileb, I'll try a different way.
Gross debt =£830m. Write off £480m = £350m
Net debt = £830m-194m = £636m,=. Write off 480m = £156m
Covenant ratios are calculated on net debt not gross debt. Therefore predicted EBITDA based on x2 = £78m which would fit with market expectations of £93m.
The £194m is sourced from the interims. It will of course have moved.
I stand by the insurance timing by would be happy to be corrected. My understanding is that total receipts would be around £54m and that half was received in 2018. I have sight of an email from the FD on this. This means only £27m can be received in 2019
CC2015
From the RNS:
· The Deleveraging Plan is expected to result in Interserve Group's pro forma net debt reducing to c.£275 million achieved through issuing c.£480 million of new Interserve equity;
Net Debt (not gross debt) is £275m add the new debt (£75m) gives a total NET debt of £350M
That is from the RNS please use the correct NET debt figure in your calculations and come back to me......