Is this now attractive?19 Nov 2023 11:26
The retail bond is looking attractive on a risk/reward basis, with yield of ~15%. It would be interesting to hear some other viewpoints.
Bull:
- Only 8-months to expiry; the first secured debt expires in August 26, 2y later
- Cash on hand and cancellation of the common share dividend would allow repayment of the bond
- Not repaying the bond would be a 'nuclear' event for RGL which would almost certainly cause the banks to call in the loans, resulting in the liquidation of assets and the end of the company. This seems like an unlikely event
- The LTV includes the retail bond, so there's no reason to believe they wouldn't want to repay it as it would reduce LTV by around 6%
- All of the debt is fully hedged at 3.5%
- The Net gearing is not high by US REIT standards
- Achieving even 50% of the portfolio value in a liquidation scenario would allow repayment of the retail bond
Bear:
- The retail bond is unrated and unsecured
- How much of the cash on hand is 'restricted' by the banks?
- How realistic is the NAV?
- The NET gearing is very high by UK REIT standards