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"The share ownership is indeed passed on to Russian management ..... current equity holder receive a "nominal consideration"."
- a nominal consideration of 670 million prefs, plus a 40 million debt and a 1,1 billion rouble issue with all other cash in "RRHCL" returned to RAV. All against assets valued @ c400m.
""you can hold" - but not much good if one cannot hold is it? Pedantic point."
"But you can hold." SIPPS allow unlisted assets. Some managers don't allow them. The big risk is there's a consolidation of the ordinary shares or your nominee will sell if there's an offer with out consulting you or calling a vote. They can't just disenfranchise from an asset you hold because it's wrapper status has changed. In my own experience, I've owned a Bermuda listed Russian hedge fund via a trading platform, I held the stock through their nominee when the company de-isted and they forwarded on the 6 monthly reports and allowed me, and other investors, to exit when the company provided the usual hedge fund liquidity events. Before that, they offered me the opportunity to hold the stock in my own name directly with the private company outside of it's wrappers.
"Russian owners, in a sanctioned Russia ... with zero loyalty to the west .. are more likely to worry if they do not receive the order of Lenin from Putin ... than reputation in the west .... do excuse the sarcasm."
Some Russian owners in an unsanctioned Cyprus company with Russian assets you mean. The pref's still form part of the cap table, so they are part of the ownership structure. In fact they rank more senior than the ordinary shares in the cap than you would expect the new management team now to be owners of. Loyalty to the west? Except the debt, the major shareholders, the apparently British citizens in the management team and the future liquidity pool western capital will provide. If you felt there was no rule of law in Russia, why did you even consider owning the pref's in the first case? Did you not take the experience of the team in navigating Russian politics into consideration or the inherent risks in Russia anyway? It seems an odd thing to suggest now, that the management team you invested in would just throw away something to corrupt managers or are corrupt themselves.
"If the put option goes through." but according to your logic it's irrelevant, just the process of de-listing, according to your previous statements, makes them nil value anyway.
I hold RAV shares and RAV prefs for the voting rights and income. 1:5 ratio. I have no overall substantial concerns as it's c1.2% of my (high yielding) portfolio. It now appears as a rounding error, but I agree any upside from here is going to be a bonus. I don't expect much.Overall, I think the proposed transactions makes sense. it's better to have an voluntary event, than an involuntary event down the road because you can't comply with the listing requirements.
Suspended and delisted on 17th March 2022.
Degiro did me a favor with this one not allowing dealing after Russian invasion they were still 15p on 28th February 20222 suspended at 3.82p on st Patrick's .Trading history a mess with a few 0 deals must of been a few CAs .
"-it's a nominal fee for the option. What the assets are worth it a totally different conversation."
From the RNS:
"to allow it to dispose of the entire issued ordinary share capital of Raven Russia (Holdings) Cyprus Limited ("RRHCL") (being the existing owner of all of the Group's Russian assets and related debt) to its Russian management team, for nominal consideration."
The share ownership is indeed passed on to Russian management ..... current equity holder receive a "nominal consideration".
As I stated.
"you can hold" - but not much good if one cannot hold is it? Pedantic point.
"but you are unable to prove any evidence of impropriety?" - Russian owners, in a sanctioned Russia ... with zero loyalty to the west .. are more likely to worry if they do not receive the order of Lenin from Putin ... than reputation in the west .... do excuse the sarcasm.
Up to 5p per share for current RAV shareholders, and up to 20p for current RAVP preference shares are my predictions with a forced sale for anyone holding in AJ BELL, Interative Investor or any other SIPP that adheres to UK regulations on SIPP holdings.
If the put option goes through.
I don't hold RAV shares but I have some RAVP preference shares .... I've written those assets off to zero with any return a bonus.
Spot on Jenni - more or less exactly as I see it !
What is happening here is that there is a change of management and control of the company from the current owners to the Russian management team. The Russian manages are being given the Cyprus holding company (RRHCL) for free but before the transfer occurs RRHCL which holds all the assets and debt is issuing £678m of preference shares to Raven Property Group which we have shares in.
As I have said earlier we have paid the Nominal Sum for the option to sell, it not what's being paid to us! Our shares in Raven Property Group are totally unaffected by this transaction.
".. for a nominal sum .... so read my posts below ... 5p a share maybe?"
-it's a nominal fee for the option. What the assets are worth it a totally different conversation.
"Yes it does" - you agree then whinge on.
- if you consider it whining, providing an understanding how unlisted assets provide a payment method, when payments are not transacted via a service registrar.
Depends upon the SIPP provider - as I say, you can hold a wide range of assets within a SIPP, INCLUDING unlisted equity, fixed income and commercial property.
"that destroys their public and professional profiles" - Oh dear ..... but you are unable to prove any evidence of impropriety?
Why bother to counter argue whilst adding nothing? - maybe to provide information...
Seems a case of verbal doo doo. - LOL..yet you're the one who need to start slinging around the insults.
"Doesn't it fit exactly with that, as it's the sale of the equity holding in a subsidiary?"
.. for a nominal sum .... so read my posts below ... 5p a share maybe?
"You can hold unlisted equity inside a SIPP"
Depends upon the SIPP provider - Interactive Investor would not since it requires a KIDD investor document ... as illustrated by the now cancelled sale of Evraz's now cancelled delisting of coal assets because it was being listed on the MOEX .... so as I implied ... there will be a forced sale of these assets if there are any assets to sell.
"Yes it does" - you agree then whinge on.
"that destroys their public and professional profiles" - Oh dear .....
Why bother to counter argue whilst adding nothing?
Seems a case of verbal doo doo.
"to allow it to dispose of the entire issued ordinary share capital of Raven Russia (Holdings) Cyprus Limited ("RRHCL") (being the existing owner of all of the Group's Russian assets and related debt) to its Russian management team, for nominal consideration."
Doesn't it fit exactly with that, as it's the sale of the equity holding in a subsidiary?
"It's the transfer of untradeable stock out of the SIPP/ISA wrapper that is difficult. SIPP holders will be obliged to sell. They cannot transfer untradeable stock out of a SIPP wrappper."
You can hold unlisted equity inside a SIPP, you can also hold unlisted Bonds, even if they are only traded on an OTC basis.. there may be some variation from provider to provider. I believe the companies need to have at least 3 years of accounts, which RAV has, and must not be over 75% of the total value of your SIPP total value.
"I'm pointing out that RAV as the holding company, with debt, being paid from preference shares held in Prestino Investments Ltd as a part of the transaction also needs a mechanism to pay preference share holders in RAVP."
Yes it does, first of all it needs a relevant way to manage it's currency issues, but beyond that it only needs a share register and paying agent. In the same way that unlisted corporate bonds and private companies operate.
"with the additional possibility, that with equity transferred to Prestino Investments Ltd there is no incentive to keep RAV solvent - so directors can let RAV implode, keep the assets and let banks nurse their losses."
Except that they write off £200 million, the difference between the value of the assets and the put option pref's value and after 20 plus years of running a public company decide to act in a way that destroys their public and professional profiles and face the possibility of banks suing them for the not inconsiderable 600 million of debt and the investors doing the same for dereliction of their duties as company directors.
"they've sold equity in the form of a put option, not the holding company, so the shares in the holding company still exist."
The above doesn't fit with:
"to allow it to dispose of the entire issued ordinary share capital of Raven Russia (Holdings) Cyprus Limited ("RRHCL") (being the existing owner of all of the Group's Russian assets and related debt) to its Russian management team, for nominal consideration."
.. to my mind. The equity is being transferred to the Russian management team so current equity holders are gone for a nominal value.
"they can of course be held outside on an ISA/SIPP."
It's the transfer of untradeable stock out of the SIPP/ISA wrapper that is difficult. SIPP holders will be obliged to sell. They cannot transfer untradeable stock out of a SIPP wrappper.
"banks will accept a default on RAV's debt "
I'm pointing out that RAV as the holding company, with debt, being paid from preference shares held in Prestino Investments Ltd as a part of the transaction also needs a mechanism to pay preference share holders in RAVP.
Without a mechanism, preference share holders will receive nothing ... with the additional possibility, that with equity transferred to Prestino Investments Ltd there is no incentive to keep RAV solvent - so directors can let RAV implode, keep the assets and let banks nurse their losses.
On the positive side, well you know what I mean, the majority of the debt is Rouble based, the rents are Rouble based and there's an inflationary background. I thought the last debt was financed at 5.5% and if they rents are being paid and are inflation linked, c20% increase, which give it's Russian you might put in a lease and put a fix on your debt, then there maybe more headroom that we anticipate. Alongside the cumulative nature of the RAVP pref's, so they accumulate, but don't have to get paid.
I also seem to remember a significant number of the lets were to global brands, what impact/benefit that has, has yet to be seen. We may find Western business have stopped activities, but pre-paid rents to avoid losing the space or having their stock sit in the streets!
So if the debt average was 5.5% and 40% was in Euros, which they can't pay because of currency control, and there's no pref payments to fund, perhaps it's not quite as bleak in the short term, as long as the Russian economy doesn't completely implode and we return to some semblance of normality in the next few months.
You can understand the listing, if you can't place a value on assets, alongside maybe not wanting the public profile it brings, then a voluntary de-listing makes sense.
As far as the Russian Management is concerned, I saw the headline name, but I'm sure I found the NewCo when searching the Cyprus register of Companies, and the rest of them have anglacised their names.
Raven property group(RPG) which we hold shares in is the 100% owner of RRHCL which holds all the Russian property and related debt. I had been suspicious that there would be corporate level debt but I'm now thinking there isn't and that all the debt is passing over in the transaction.
The transaction is the transfer of RRHCL to the Russian management but RPG will receive £678m of preference shares in RRHCL.
After the transfer RPG will have no assets or debt other than the preference shares and the loans to RRHCL.
On face value it doesn't seem a bad deal as long as the Russian management can be trusted to be honest and honourable.
The amount of preference shares and the dividend rate seems high and I'm not sure how this is going to be paid. The RNS states the EBITDA was £108m, At the half year report the debt was £673m at about 6.4%, that would be interest payments of £43m. The payment of dividends on the £678m of preference shares would be £67.8m, add in interest of the debt of about £4.4m and that another £72.2m. Add this in the bank interest and that is payments of £115.2m out of income of £108m. To make matters worse, on the 31 December 2021 there were 100 Rouble to the pound, now there are 142. This reduces the quoted EBITDA to £76m and there is still tax to be deducted!
My somewhat simple take as it stands
ordinary shares will be converted into preference shares by way of a bonus issue (at what rate is anybody's guess at this time but I'm guessing (and hoping) somewhere in the range one for three to one for six)
the preference shares are simply a surety against debt - again the market will ultimately value something approximating their worth, it'll be personal choice whether or not you trade them if and when a market actually opens up for them.
Apart from the delisting and conversion - it's all been "hedged" into a put option which may or may not be exercised (depending on the Ukraine and sanction situations) at some time in the future
The whole thing being put in place to mitigate exposure to sanctions against Russia and the uncertainty of the Rouble exchange rate and even their ability to get revenue out of Russia
Nobody knows what the outcome in Ukraine is going to be and Raven are simply trying to "protect" their assets for the "benefit of their employees and stakeholders" (take that as you will !!!!). I think they are actually kicking the can down the road a little bit as I'm clueless as to how long any "required regulatory and other approvals" are likely to take - if Ukraine is "all over" or massively improved by the time the approvals have come through then the nature of the "put" option means they can re-assess the whole damned mess !!! (which is not, let us remember, of their own making !!)
Lets face it - there's nothing we can do at the moment - can't even sell - so it's back to the bottom drawer for these little bunnies and hope for the best !!!)
GLTALTH !!!
"My reading is that ordinary shareholders are just about wiped out … by the put option …. Since that equity is gone by virtue of agreeing tonthe put option …"
- they've sold equity in the form of a put option, not the holding company, so the shares in the holding company still exist. The value is debatable, but the existence is not. The use of a consolidation remains a risk.
"what happens to holders of RAVP preference shares is unclear … and difficult because as a delisted company any rights will not be suitable for SIPP or ISA wrappers …. So those folk will similarly be forced to sell or will equally be wiped out."
Similarly, the RAVP shares are help in the holding company, not in the subsidiary. They probably won't be suitable, but they can of course be held outside on an ISA/SIPP. It's a simple transfer of the assets to a un-nominated holding outside of a wrapper.
"the preference shares mentioned in the new holding Cyprus company will be used to pay off debt held by the now shell company Raven Properties"
I'm trying to work out how that works? The limited cash in "RRHCL" gets returned to "RPG", there's then a £ and rouble debt between "RRHCL" and "RPG", in "RPG's" favour, and a potential non-cash transfer of assets, the put option, settled in non voting preference shares in RHHCL. Where does the cash come from to settle the external bank debt? Are you suggesting the banks will accept a default on RAV's debt and accept settlement in the form of RRHCL's non voting preference shares ? Or that RAV will somehow find a buyer of those non voting preference shares? Someone willing to pay £678 million to acquire £437 million of assets?
Tutusadaxus …
My reading is that ordinary shareholders are just about wiped out … by the put option …. Since that equity is gone by virtue of agreeing tonthe put option … the preference shares mentioned in the new holding Cyprus company will be used to pay off debt held by the now shell company Raven Properties … what happens to holders of RAVP preference shares is unclear … and difficult because as a delisted company any rights will not be suitable for SIPP or ISA wrappers …. So those folk will similarly be forced to sell or will equally be wiped out.
I’m afraid this looks a case of writing off the holding and keeping fingers crossed something comes back.
They say:-
".......converting the total of its existing share premium account to preference shares by way of a a bonus issue."
So by the sounds of it, they will swap/convert the ordinary shares into a consolidated preference shareholding and cancel the ordinary shares. These new perf shares would attract 10% yield until maturity. I've no idea what the swap ratio would be.
So will Ordinary Share holder own anything after "The transaction" ? ie will our holdinsg be swapped into anything else , or do we just continue to own the Ordinary shares in a company thats transferred it's assets elsewhere ?
"The Transaction is structured as a put option for nominal cost in the Company's favour, to allow it to dispose of the entire issued ordinary share capital of Raven Russia (Holdings) Cyprus Limited ("RRHCL") (being the existing owner of all of the Group's Russian assets and related debt) to its Russian management team, for nominal consideration."
Put Option
"an option to sell assets at an agreed price on or before a particular date."
It's Raven Property group that has paid the nominal sum for he put option, not the other way round! It is an option to sell the assets of the company for £678m of preference shares in the management company. Short term at least there will be no offer for the delisted shares!
4-5P for each share would be better than nothing at all …. Really need details for the nominal sum, is it £25m or £1 ? Waiting with trepidation
https://www.rrhcyprus.com/about/
looks not dissimilar from
https://www.theravenpropertygroup.com
With £437 million net assets from todays RNS that would seem to equate to a £1,100 million portfolio valuation minus £673 million loans, so with 226 million prefs valued at £1 and 566 million ordinary shares that would fill in the gap valued at 39p each.
From the RNS:
"the Company is unable to assess the current value of these loans and preference shares or the ability of RRHCL to service these loans or preference shares in the future at this time."
and
"to its Russian management team, for nominal consideration."
Suggests to me that shareholders will be given an offer .... probably a paltry premium on the last traded price so perhaps 4-5p a share?
I rarely find paying a premium satisfactory.
I think we are working with assumptions at the moment, so we can only guess what's happening to the debt structuring. I know they were working towards it all being Rouble based. I get where you are going with the "RRHCL at 31 December 2021 had net assets equivalent to £437 million" v "the Company would retain an economic interest in RRHCL via existing unsecured loans of £41 million and Rub1.1 billion to RHHCL and non voting preference shares of £678 million, attracting a coupon of 8%, 15% and 10% per anum respectively and with a term of ten years until maturity." Maybe that does suggest the debt will remain on the RPG's balance sheet, but secured against the loans and prefs. We don't know what the mix of the instruments is (8-15%), but we do know the broad financing costs were 5.5% in the last full report. I can't imagine they've negotiated the debt from secure to unsecured, but may be in the circumstances the bank would prefer RPG paper over holding a lein of a Russian building directly. Maybe the same would apply to RAVP holders as well. There been a long term reason why those assets have been held through a Cyprus entity and they've been reporting on sanctions being a risk for sometime. I maybe wrong, but I don't feel overly concerned yet about the transaction, the environment certainly yes.
Whilst I'd have expected most of the debt to be secured against property I find the payment of £678m in preference shares overly generous in the debt is going with the property. They state net assets at 31 dec 21 were £437m, add in the £252 of preference shares and that's £691m but the rouble has fallen 40% in value since then. Taking the £50m of intercompany loans into consideration as well, they are paying a premium to December valuation, that doesn't make sense to me!
If memory serves me well, the debt, bank debt is 60/40 Rouble/Euro which I believe there was a cap in place on the euro element to hedge the rouble earnings.
There's no longer any Sterling based debt, bonds, have gone.
Jennifer, I was under the impression it was secured debt, secured on the property, first lein basis I presume , so will transfer alongside the underlying properties that it's secured against.
There was a recent "corporate debt" held by the Cyprus company, I presume secured bank debt again. They also mention a £40m, loan that will be between RPG and the NewCo. alongside the preference shares they will own as their major asset.
It sounds like they've already got a deal done with the major shareholders. I more concerned about post deal and the potential of being consolidated out. Overall, it's not a great worry. I don't think they can do that with the pref. holding, RAVP.
RAV is around 0.25% of my portfolio, so not a great concern, RAVP around 1.25% - I would have preferred the combined holding to be/ less than 1%