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Was looking at jumping in on this or maybe the bond. Today there has been a lot of offloading on both. Fortune favours the brave but i think only a fool would go against the market sentiment.
Fair enough - for those of us still in it we don't have much option but to hold at this point and hope for a SP recovery over the long term! It would be bonkers to sell out at the current level, IMO. If they can show a clear plan for the bond repayment that will help relieve immediate liquidity concerns which is depressing the price. This will also have to be dealt with as part of the going concern and longer term viability review as part of the annual report, which will be happening as we speak.
Buy the bonds not the ordinaries, have portfolio worth 700mil, they will sell something to repay the 50 mil bonds due in August and in worse case the bonds will be repaid at some point-@ 86.5 it’s a gimme and great return on a 6 month investment
You would think so re the Bonds but they are unsecured.
The way I read the Bank loans RGL must be in covenant breach with them and they ARE secured and have the right to call in the loan. I suppose I'm wondering if the risk here is the banks pull the plug and by the time the fire sale is over the Retail bonds are too far down the queue to get their full nominal back. The market seems to be discounting these very sharply in recent days...makes you wonder why.
The problem with the retail bond is that there's almost zero liquidity. Actually, the BUY price is higher today than yesterday... it's just that they're massively illiquid. You can see that if you do a dummy buy. It's just that the spread has widened.
The Retail Bond is indeed secured against nothing, but it stands ahead of the equity. Even with a firesale, there should be a big enough buffer for the retail bond to be repaid. It's a simple calculation. Obviously if the assets were sold at a MASSIVE discount to NAV (e.g. 50%), the bond will also be in trouble and equity will be entirely wiped out, but I don't think we're at that scenario. The banks would take only a relatively minor haircut even with sales at 50% of NAV.
The MTM changes in the bond price have no impact whatsoever on the final payout - unlike equity. I'll continue to hold the Retail Bond so long as there's no deterioration in their credit situation. I don't see anything so far; just zero illiquidity. I'm currently happy to wait, but I fully expect there to be an equity raise and/or a cut to the equity dividend, both of which I would welcome.
Agree holding the bond is the smart money at the moment given it is almost certain to be repaid.
Interesting that many are assuming they have breached an LTV covenant given that if this had happened as at the year end, they would have had to include it in the RNS on 2 Feb.
Bond wise there's no way they'll be able to refi £50m in this sector and market. With the cliff edge deadline coming up, management inaction over selling is the clearest signal something is amiss here.
If your glass is three quarters full, there has been some UK reit M&A lately (eg BBOX/UKCM merger announced last week), so maybe they will surprise everyone with a white knight lined up to come to the rescue and make an offer for the equity. The only alternative I can see is default followed by administration.
RGL can buy back 10 million of the retail bonds themselves with spare cash, and issue redeemable preference shares at 10 percent coupon for the rest, and then carry on the sales program in an orderly way. I don't think things are at a critical stage yet, but they may well be in June.
We don't know their current cash position as they noticeably omitted it from the most recent quarterly report, so there is no indication that after all their other current liabilities they have anything spare for a bond buyback. Nor have they indicated in any document that buyback is something they intend to do.
@404x: "The only alternative I can see is default followed by administration."
Why? They have cash on hand, a significant, diversified rent roll and the ability to do an equity raise. The secured debt maturities are >2 years away and the interest rates are quite low/fixed at 3.5%. I think the bankers will come up with something creative, like a 3-5y ZDP and be rid of the bond coupon cost. Unless property prices drop really significantly, there's still plenty of wiggle room.
Anything is possible, but I don't see administration as likely at this point.
Keep in mind that the dividend on the common shares is ~£25m. If it was really desperate (I don't think it is), they'd liquidate/auction properties and the dividend will then reduce proportionally, i.e. RGL would deflate like a balloon, without risking the REIT status. I think they still have plenty of options.
Yes points taken, but my thinking is that if they cut the dividend substantially early on in 2024, they could use some of this rental income cashflow in the short term to sort out the retail bond situation, and move the Reit dividend income to the end of 2024 or beginning of 2025, so as to stay within the REIT constraints. Hopefully by the end of 2024, the market stabilises with the first interest rate cut sometime between May and August ,and they have made further sales by the end of Q2.
@CaneToad you've done that annoying thing some posters do on here and quoted just one part of my post, while leaving out most of it and the context, which gave the implicit answer to your why question.
@404x: We're both just offering opinions. Opinions can be wrong, but it's simply not true that there's 'no way they'll be able to refinance the bond'. Anything is posssible. It just depends on the price. If the NAV was negative, I'd agree that it's very unlikely they'd be able to refinance themselves, but this is not the case here. You can't read anything from the RGL1 prices re: market sentiment; there's insufficient liquidity. FYI: That's very typical of large parts of the bond market that don't trade on the exchange (i.e. most of the bond market...).
Can they reduce the dividend? I thought being a Reit commited them to a minimum percent of income (profit??) to be payed out.
They do need to pay the dividend on rental income but on a yearly basis, so for 2024, Im sure they can wait to pay it until 2025 after year end, say Q1 or Q2 2025.
404x; I don't think that's a fair comment. Canetoad didn't take your post out of context .We all got the jist of your post, the context, that you believe RGL is doomed. By quoting your grand standing end, and asking why, they merely highlighted the tunnel vision view your post holds. Nobody is doubting RGL is in a difficult spot. What you have taken out of context is the difficulties, by totally ignoring the opportunities. Many posters here have questioned the debt/viability. None with such nilhilsm and negativity.
I look forward to the oppurtunity to misconstrue/misquote/take out of context. Your opening post wasn't that oppurtunity.
Damofarl it's a bit odd that on all the rough and tumble of these boards you've chosen to single out my post and username for your paragraph there.
On this board, I hadn't noticed any rough and tumble. Differing views, debate yes. I've not singled you out. I've singled out the hypocrisy of your post.
And I unstintingly question posters who focus in on the messenger, whilst choosing to ignore the message. I got your message - it's unviable without a white knight else it's administration.. What I didn't get was any context as to why you felt such. I prefer to focus on the fundamentals, good or bad here. I don' agree with a great number of the posts/views here, but I find the context invaluable in adding to my understanding/considering things I hadn't considered, precisely because posters give context to those (differing) views. I hope we can focus on the content, the context, not the poster.
CaneToad - I got out with a small profit at just over 30p…. Looking at options to get back in but reading some of your commentary on the bond I’m wondering might that be a safer option with the u certainty? My one observation is that the bond price was fairly stable until the start of the month and it has since been mimicking the SP - any thoughts, thanks
@damofarl I stand by every word, it's absolutely right to call out parts of my post sliced out of context.
From that exact same post of mine else could have cut out this part:
"they will surprise everyone with a white knight lined up to come to the rescue and make an offer for the equity."
See the difference? This is why context matters.