focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
To deliver an attractive total return to shareholders with a strong focus on income, from investing in UK commercial property, predominantly in the office and industrial sectors in major regional centres and urban areas outside of the M25 motorway.
Find out MoreLondon 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.
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.
Yes.
When you buy the bond you pay the clean price quoted and for interest accrued to the purchase date.If RGL do not pay the interest ,you lose out.That is one reason why you will sales before a coupon date on risky bonds.
I've never bought a bond.
Does this mean that if you buy that bond at the end of July, you wouldn't actually get all of the 2.25p interest payment due on the 6th of August? You'd only get one week's worth of interest because almost all the rest of the 6 months was accured to a previous owner?
I do think this is oversold.
A large buy and a large sell gone through.
React reported Oakdale house is for sale it's in old Trafford area you had to subscribe to read it so couldn't read the article.
Could Inglus float another company to buy some assets and convert them to flats??
Or another company may be thinking that,pay the bond off and you get nice cheap finance for a few years.
Divi cut perhaps but I don't think it's going busy.
Yield on retail bond now over 20% (sp: 92.436). Clearly somebody thinks there's a sizable risk of default.
Time is not going anywhere. All the REIT are in same position. Look at GRID, yesterday I have started taking position from 48p and will be keep on investing in RGL if it really hits 20p. Directors have bigger holdings than us. Hold tight.
Don't need to panic. RGL don't need to sell properties in panic. Nothing is cheap here. Please hold tight. If they do not give dividends then they will be in much better position in LTV. Keep buying on lower prices.
No Sign of interest rates coming down anytime soon,, not helping,, something will have to give,, O dividend Or higher Charges,, they need to sort out their house in order,, time is running out very fast,, 20p most likely coming soon..
Not looking good!
Given the yield on the bond, the divi yield on RGL makes no sense. While the retail bond is unsecured, I think it's a 'pretty low' chance they'll default on it, because it would kill their chances of getting any more funding or smiles from banks. I think it would be the end of the company. And even with a firesale, it looks likely they can still repay the bond, while the equity could end up worthless under a that scenario.
Looks like 20p coming sooner than i thought,,
RGL divi yield: ~19% (sp=25)
RGL1 Retail Bond Yield: ~19% (sp=93.50)
Which is more secure?
==== Bond Calc ====
Cost of 5'000 RGL1 shares @93.50 is £4,675. Final payment at maturity is: £5000 + £112.50 = £5,112.50, giving profit of £437.50 and return of 9.36%. Yield is ~19%.
Ignoring fees and 2 days of accrued interest; today is a coupon date.
// I could be wrong. Do your own research
I think the most beneficial outcome for shareholders would be if they put all of their properties up for sale , and handed residual proceeds to investors .
The discount to NAV is still huge so they could afford to take a large hair cut and shareholders would still be in profit
If you tot up all the debt, plus market cap, plus the premium that would be necessary, it's hard to see a bidder right now. Absolute buyer's market for sub grade provincial offices. If someone was attracted to their portfolio for some reason easier to wait for the first default and swoop in for the inevitable firesale when they're truly on their knees.
At this price could the company be a good take over target ?
Any thoughts?
@Etotheipi: the covenants are different for each portfolio of properties. They are known; you need to look back at their various documents; e.g. the banking covenants were published in the prospectus, issued on July 2019.
For example, the covenenant with Santander UK is that the LTV must remain below 50%. Those properties are owned by a subsidiary called Toscafund Glasgow Limited. In order to know if that has been breached requires knowing the current valuation of those properties, not the LTV for the top-level operating company.
I'm relatively new to investing, please excuse my ignorance. I'm guessing canetoad and 0715 are referring to bank covenants , I found this definition:
"Bank Covenants
Bank covenants, as described in bank credit agreements, may often be even more limiting than bond covenants. In many cases, a bank may require a debtor to maintain leverage ratios such as debt/equity, debt/EBITDA, or debt/EBIT under a certain threshold. These types of covenants are called maintenance covenants.
In case a covenant is breached, the bank will probably block further credit to the debtor involved and will require the covenant to be cured, generally under the threat of triggering a default.
Consequences of a Breach of Covenant
The breach of a covenant can trigger a technical default. However, the specific consequences of a breach of covenant should be analyzed on a case-by-case basis and depend on whether the creditor decides to waive the violations.
The consequences of a breach of covenant generally include:
A penalty or fee charged to the debtor by the creditor;
An increase in the interest rate of the bond or loan;
An increase in the collateral;
Termination of the debt agreement; and
Waiving the violation without important consequences." here: corporatefinanceinstitute.com.
There's two things that spring to mind. Firstly, the consequences are scaled and clearly open to negotiation, not quite the guaranteed Armageddon suggested. Secondly, there doesn't appear to be a standard level of LTV for a covenant breach. I would guess that this information is confidential between the bank and a the loanee, please could both of you let me know where you got your specific covenant breach information from.
If Steve Inglis doesn't sell properties within the next couple of months the covenants will be breached. They have only sold 3.5% of the assets in the whole year. They need to wake up and smell the coffee. The whole thing has 10 months left.
Valuation down by 11%
Rental down by 6% - £4 Million
Rent Collection down by 1.5%
Occupancy down by 3.4%
LTV up by 6% heading to breaches within months
Nothing positive about the update and all other REITS are reporting similar for offices, no turnaround in sight yet.
More of the usual from Inglis.Selective info.What about gross debt figures and cash available ( disclosed in 3Q report).? Occupancy down to 80%.Tenants down .They know what the NAV per share is.But chose not to tell us,rather let us try and calculate it.No mention of WAULT,so it must be declining.They have been talking about the bond refi for months.Are they deferring to wait for Interest rates to come down? Quite a tightrope.Bet ARA are very frustrated.
Almost the perfect entry point for REITs. Some good news coming but not built into SPs. Interest rate cuts soonish. As the labour market saturates, managers will have more power and push for a return to the office. As the housing market picks up, office conversions to residential will be more appealing.