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Canetoad,good efforts at attempting to analyse the coverage for the bond.( If it is not fully covered,the equity is toast).There is not enough info to consider if RGL is close to breach of leverage covenants.Quite deliberately unhelpful imho.Importantly,it is quite likely that a a default on one set of debt would trigger cross default clauses in other lending agreements.Unless the institutional loans are in non- recourse SPVs.
Maybe ARA will get the message and force Inglis to a better standard of disclosure.He ain’t going to do it without being kicked.As for the chairman- ha ha.
The market makers are in the same position- their analysts will be going through the same thinking ie you cannot work out how much of a mess RGL is in or not.
Understandable they I would be marking down the bid price of the bond to cater for scared dumping bondholders and to discourage more sellers- until they find enough buyers of bonds so they can trade them on.
As far as I know there 's not a single covenant of 60%.
RGL has debt with several lenders, who have lent money based on different properties. For example, Santander originally lent money against 19 properties to a subsidiary called Toscafund Glasgow Limited. That covenant says:
"the loan to value must be not more than 60 per cent. until the fifth anniversary of the amended facility being signed and 50 per cent. thereafter."
The date of the amendment was 18 June 2019, so it appears that this LTV covenant drops to 50% in June this year. We don't know what the current LTV is for that portfolio of properties, just the LTV of the overall portfolio. Clearly there could be an issue if property values were to fall between now and June.
FYI: this info is contained in the prospectus for the Capital Raise in July 2019 on the RGL website. I haven't found a more recent version.
FYI 2: Some properties have been sold since then. Perhaps the company has received updated documentation which improves the situation.
DYOR.
Https://www.telegraph.co.uk/business/2024/02/06/ftse-100-markets-latest-news-net-zero-germany-bp/
I'm a bond holder so please don't accuse me of trying to short this. Just posting as something of interest even though it's not a property owned by RGL.
40% annualised return I should have said. Just unbelievable risk premium bring demanded on RGL debt.
You'd think they could liquidate this one and at least have 20p a share left over. However, first call on assets would be bondholders and even there RGL 4.5% is trading at a 15p discount to the pound with only 6 months to run...that's a return of nearly 40% if the bonds get ŕedeemed at a pound in August ( I think it is). To price debt at that level means the Market ( it might be wrong) considers RGL a complete basket case.
Multi year Lows,, buy when others are afraid,, this strategy might work very well,, looking down the road 9-12 months could be very profitable,,
I lost shed load of money on this one sadly
Bought at 42p and sold at 31p
Will buy back in if Inglis sacked (i was very misled by his bullish comments in q1 last year and he is responsible for 'recycling' money from sales back into tne market in 2022, the desastrous squatestone deal, he is hopeless .companies reduce letting activity during elections. Hopefully 2025 will be better for the office market.
What happens if i offoce values fall again this year and the 60% ltv are reached?
I guess banks repossess property and sell?
Could they liquidate their interest rate hedges to raise cash?
In really simple terms. Assuming they have zero cash/zero rent roll:
Gross Portfolio Value (2 Feb 2024): 700.7m
Gross Debt: 431.693m
Net: 269m
==> they can still repay all the debt by liquidating everything - as long as property prices do not fall by more than ~38%. That's a fair bit of breathing space and that's the worst outcome.
There are no secured debt maturities until Aug 2026, so they also have breathing space as long as they don't breach lending covenants and those aren't going to happen all at once. In reality, they *do* have cash on hand, they have a significant rent roll and the interest rate is fixed at 3.5%, which is pretty low.
In summary: As a holder of the retail bond, I'm not shi*ting my pants yet. I think the collapse of the retail bond price is just a sign of poor liquidity. I'm not currently buying any more, but I might consider it once we get closer to maturity, depending on the FY results in March.
Maybe it makes sense for them to start buying back the retail bond?
FYI: that debt figure is a bit old. DYOR as I could be 100% WRONG.
Pity no mention was made in the update.
I am not a subscriber either, if anyone is perhaps they could enlighten us.
Worrying so many sells at this price.
On the other hand, it's not going to surprise me if they've breached one of the covenants (most probably the one with Santander). I really doubt that they're going to be Mr Nice Guy if that happens; I reckon they'll force a liquidation of those properties before they drop any more. They will not give a monkey's about the pain inflicted on equity holders; that's not even going to factored into the thinking.
I thought you might be interested in this if you didn't already know about it ..
Sorry but I am not a member so I don't know any more
The divi (~£6m/quarter) dwarfs the retail bond coupon (£1.125m).
In the normal scheme of things, the divi would be cut/eliminated if there was any chance of the bond coupon being missed or principal not being repaid. I don't think there's any problem with that coupon. In the event of a firesale, I still think they can repay the secured lenders and the retail bond. Obviously the equity holders might be wiped out in such a firesale, but I don't think we're at that stage yet. On the other hand, it depends whether or not the banks want to lighten their exposure to CRE.
Previous payments havent reached my HL a/c until 10th or 11th, so dont panic if it's not there by the end of this week!
Any bond holders actually received coupon (due yesterday, I think)?
Inglis has a long history ( not alone in the sector) of providing information which ignores the negative trends in the business.The annual reports and company presentations do not mention the LTV covenants in financing structures or if they are ring- fenced from claims on the company if there is a shortfall ( unlike NRR or Capital and Regional).Most LTV covenants are normally in the 55- 60% range but can be varied or waived.
The update from 2 Feb is typical of the stance of ignoring the liquidity crisis caused by the failure to address the imminent maturity of the bond.
RGL is a distressed seller so achievable prices for sales will be under valuers figures which are based on a normal market scenario.That is why they have only sold £26m.Just look at the Canary Wharf office price drop.It is more about distressed sellers having to take big hits.
Divi announcement in two weeks.Prelim results on 26 March.What odds on tangible developments on the bond.It is to be hoped so.
Noticed some large sales yet the share price is not down much, someone buying shares up.
They have said they can refinance the bond, it's not a problem,don't they have some cash to reduce the amount unless they have spent it but guessing it will become clearer in the next coming months.
The board have said they are looking to reduce the LTV to 40% so perhaps something is imminent, perhaps Oakdale house is about to be sold.
The whole sector is unloved.
Someone could buy this and make money
RGL shares have been sliding for some time- 24p currently, down >15% in the past week alone- and reading between the lines of the update on 2 February, I'd be worried as an equity-holder about being wiped out at some stage due to an inability to realise enough value from future sales to cover the debt. So my guess is a (single?) holder of RGL1 is worried enough about their ability to refinance this bond and repay us in full. I'm still assuming that some combination of cash, a dividend cut and a sale or two will allow them to scrape together the £50m by August, but I'm not confident enough to add to an already very large holding.
That's a significant drop for a bond, definitely a red flag for distress. With it being unsecured, if they did default practically speaking there wouldn't be a tangible creditor to fire the gun on administration, so the company could in theory stagger on. But the consequences for the company would be almost as disastrous in terms of ever accessing credit again.
CaneToad,
I've just been looking. Ouch! I'm glad I thought better than to buy the bond....leave it to people who know more about it.
But I agree with you that defaulting on the bond would be unimaginable for the company.
0715 and others have been right, they should have offloaded some properties to get the LTV down when they had more time. Now they need to do it urgently, and that is not a good place to be.
Inglis really should be issuing statements explaining what they are doing to stop this. Perhaps his silence is because they don't have anything to say that would calm people!
All rather worrying.
Guitarsolo
Big volumes of the retail bond being offloaded (actually, it's just 5 sales as of 9am, but there's no liquidity). Somebody wants out in a hurry.
On the other hand, it's suspicious that somebody wants out of this so quickly, given that it matures in only 6m time. I guess they think they're not going to get repaid. It looks like a bargain, but I'll be keeping my exposure below 1%.
The bond price has collapsed today... sp = 87.7 currently, giving an annualised yield of over 30%, that's a 10% rise o/n... it could just be the extreme illiquidity or that somebody knows something. I don't see them defaulting on the bond as it would surely kill the company. I welcome other views!
Can someone share the instructions holding information please or let me know where to find it. Many thanks
How can they sell property under the market value to his own other company. Institutions are also holding shares in RGL. Conflict of interest.