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Says everything and nothing…..but forced on the company because of impact on equity price of an equity raising.
WTF is that RNS about? It's caused a stampede for the door. Is the clown in charge of this company really that stupid. Why not wait and announce a clear plan of action.
Unbelievably stupid announcement. You either announce refinance or wait until you can. This has just added to the enormous uncertainty. The refinance should have been dealt with months ago however painful it was then would be a lot less painful than its going to be now. Utterly idiotic. The Board and Manager must go
What a silly RNS - making it more difficult to raise capital and inflicting even more pain on the shareholders; I continue to hold the retail bond, but not the equity.
I think there are still one or two here who don't realise how serious this is. Who in their right mind would lend them money, or buy more shares? The bondholders must now be getting extremely anxious, and for shareholders (who are obviously further down the food chain) this looks pretty gloomy. We need someone to come in with an offer to buy the lot and pay the bond, but that will mean they'll want the business for virtually nothing.
They helped to create the speculation with the latest Edison research note (which must have received their tacit approval)! This is the final straw. The manager and BoD must go.
Not just tacit approval of Edison report, they paid for it and authorised its publication. The clues have been there about questionable management all along, before today's RNS for those willing to listen. Unfortunately for shareholders it's now entering that doom loop scenario I mentioned where the lower the price of the equity, the less they can practically raise and it fast becomes existential.
Why would anyone announce this?
You either - stop trading & launch the raise - or - you announce the financing has concluded.
All this does is shoot themselves in the foot. Lower share price = bigger dilution & Better bargaining position for the banks
I'm baffled as to why this was announced today. Expected details to be on 26th with ARA, as per recent Edison note.
Penta, the company is virtually worthless (it's assets are roughly the same as it's liabilities) so who is going to participate in a raise? Would you? As for banks lending them more money, we're in Amigo Loans territory.
@Krust. its not thou is it? 700+ in investments assets + the other assets (900m FY22) vs 500+ in liabilites.
Last reported FY(22) equity was 400m with a nav per share of +- 78p
Yes, the bond thing is not ideal, but we're still in a business that annually generates 35m in dividends alone.
saying its virtually worthless is a bit of an overstatement imo
Penta, see my post at 8.55 re valuation. I sincerely hope you & Roger are right but I can't see it I'm afraid. What the hell they're doing paying a dividend when they've got a £50m bond to settle in August is beyond me. Seen these situations before, when things start going bad. Never ends well for ordinary shareholders. Let's see what happens next.
Agreed re divi. I assumed things were in train re bond when they announced the divi otherwise it would be stupid but they obviously are stupid after seeing todays making a bad situation worse
They really need to get this resolved this week after todays clanger
@Krusty, ah yes i see. under that assumption it tracks. but we're not there yet IMO(I hope). i'm not gonna agree or contradict the likelyhood as all of our input is quite equal here. But i understand the point of view.
i agree on the logic that it would make 0 sense to pay dividend if the bond was at risk. But that is also just our assumptions. What may be (il)logic to us, could have another reasoning behind it, that we have no idea of.
Maybe management was acting under the assumption of ongoing options and considered it a non-risk. Aside from this horrible RNS (lets assume forced by info leak), it could be that various options are on the table.
We can just hope that the RNS has not changed The terms that were already in motion.
Again, hope you're right on all counts Penta. Fingers crossed.
Retail bond price seems pretty relaxed about today's announcement.
So what am I missing here. Debt of 437m, at 3.5% = 15.3m interest per year
Annual rent roll of £67.8m, so interest is over 4x covered.
Current annual dividend of 4.8p per share = £24.8m, so easily covered by rental income after interest - why do they need more finance??
Div Yield of 36%
Surely someone's going to come and buy this aren't they?
I feel sick after stupidly buying back into this. Surely the only option now is a managed wind up of the company and a rejection of the equity option by shareholders.
I've said this previously but if anyone was interested in buying their assets in bulk it would be easier to wait for the first default and/or covenant breach. Once the domino effect from that kicks in and they're on their knees, the hypothetical buyer could either lowball or better yet pick up unencumbered assets out of administration.
MTB,
I am with you. Surely, aren’t people forgetting that this business generates a lot of cash (as you describe) and its viability should not be in question.
However, having said that, the crass nature of that RNS is quite extraordinary and utterly counter-productive. Instead of providing a calming message containing details of a viable, well considered plan to deal with the situation, it has intensified concerns that the company may be facing insurmountable financial difficulties.
It’s extraordinary given that the information around an equity issue was already out there. Nothing has really changed, they have just made everything worse by saying absolutely nothing new. What I expect now is the release of the annual results alongside the announcement for the equity issue and a shareholder vote. Hopefully that is roundly voted down and there is a lot of opportunistic buying happening today anticipating just that.
The RNS does say that they are very advanced in both an equity and a debt option, therefore we may actually find out that there is actually a debt option on the table. That would make sense because they will need it for the going concern disclosure in the annual report.
Ideally we get a similar chain of events to Hipgnosis with the board being removed and a new board put in place to wind the structure down.
I am surprised that the shares haven’t been suspended given this fiasco.
If they equity raise is turned down and the company is unable to replay the retail bond in August, aren't they insolvent?
They may have a chance to persuade the retail bond holders to extend and pretend since the secured creditors would have priority in the windup that would inevitably follow a default. (I haven't seen the terms but would imagine that all secured notes would become immediately payable on default or insolvency.) However I would very much doubt that they would be able to salvage anything much for the shareholders.
I'm guessing that any institutional shareholders that have not already sold will not want to play Russian roulette and so will vote for the equity issue to salvage something - especially if they are offered a sweeter deal that PIs :(
It says they are very advanced in both equity AND debt options. We are talking about a 50m bond - and even if they sell the property portfolio at a 20% discount to the December valuation they would still return well in excess of the current share price. Everyone seems to forget that their LTV is 55%, not 80%.
Reckless directors in my view . They have trashed the share price..
The £50 million bond equates to just 2 years of dividends
There is no way that the share price would be so low now if nil dividend had been declared to reduce fixed term debt in order to boost LTV
They would have been in a far healthier position had they done that , with long term prosperity and security
The problem with that option is the shareholders would likely sack the board..the way they chose , they stayed in employment for 2 years
Carillon revisited , and nobody is held to account
My take on this...
What influence did the nomad have? If they strongly advised that an RNS was necessary what could the BOD do apart from agree with them?
It would have been considerably better to have requested a suspension of share trading pending a refinancing (of whatever nature).
Why has the situation apparently deteriorated so much from when they announced the dividend?
By making the announcement they have made matters considerably worse. IMHO an equity raise is now out of the question - or at least a very last resort.
Heads should have rolled ages ago. Where's the guillotine?
From a fuming LTH...