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My worry here, is that the board is so clueless and careless that they'll buy another NS project, using up the debt facility to buy something that nobody wants and then an incoming Labour party increase taxes further. If so, I think the fortunes of this company will evaporate into a debt-laden pile of junk, AIM share from which it came.
It looks like the effect of high rates is finally hitting the portfolio; clearly the credit quality has deteriorated, especially in Europe.
I've been a holder of this several times over the years. The big risk that I currently see is it being taken private, with a low-ball offer from the big shareholders. It would make perfect sense... For this reason and with no current dividend and without further clarification of the situation, the risk (for me) is too great to open another position.
I've spent some time looking at TORO vs FAIR. The possibility of a mandatory low-ball offer is what worries me about TORO. There's nothing that could be done if that happened? That looks far less likely for FAIR.
Thanks for the clarification.
That makes more sense, now that I've studied the company some more.
Newbie question. Is the company being wound up?
I noticed several RNS mentioning 'compulsory partial redemption':
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8 Dec 2024:
'The Company announces that it will return US$2,100,000.00 on 20 December 2023 (the "Redemption Date") by way of a compulsory partial redemption of Realisation Shares (the "Third Redemption").
The Third Redemption will be effected at 57.15 US cents per share, being the NAV of the Realisation Shares as at 31 October 2023 of 59.15 US cents per share less the dividend for the period to 30 September 2023 of 2.00 US cents per share.'
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That looks like a 10% repurchase of shares @ NAV, which is barely above spot atm?
At the current buy price (120.333p), I make the yield on these to be ~10.8%
While not claiming to understand the intricate nature of the portfolio underlying EJF, these ZDPs seem to be 'relatively safe' if the the low gearing and fund history is anything to go on. I see they've hedged the portion of the portfolio required to repay the ZDPs in 2025.
Unless I'm mistaken, the gross portfolio value would have to decline by 75% or so, before the ZDPs were at risk.
At the current price of SDVP (buy: 119.40p), I make the yield of the ZDPs to be roughly 8.5%, with repayment still possible in full after more than a 50% in the equity portfolio. This looks like a decent punt. I'm less convinced about SDV itself except on a momentum basis.
"running yield of 4.824%" is not a useful figure for any comparison..... it's just the coupon dividend by the price. i.e. it ignores the main element of the yield, which is the capital gain. Running yield is not a useful figure to compare to other bonds.
If you calculate the 'yield' of this bond, it's around 16%.
"I do not believe that the 15% you are suggesting is remotely likely, particularly in the now almost certain environment of declining interest rates anticipated in 2024."
The yield on the retail bond is ALREADY > 15% .....
I cannot see they have any chance at all at a refi at 10%. Just look at the yields being achieved on any HY debt at the moment (e.g. within the SMIF, TFIF, CVCG, NCYF). Most are in the high teens - and that is for senior secured/leveraged loans. The RGL retail bond is *unsecured* - it has no assets at all set against it. There is just no way they can get that away for 10%. Even some of the AT1s with the big banks are close to 10%.
Of course, I do not want RGL to fail. I am a RGL bond holder..........
"nav must be about £3.10 so really cant get a safer more predictable investment than this."
But isn't the NAV for private investments? Isn't it just an opinion? It does look attractive, but it's a long way from being the 'safest and most predictable investment out there...'.
Anybody able to shed light on this loan facility which supposedly had been due to expire in Dec 2023...
I thought Franco presented well. The writeoff of CS and other bonds, without any major disaster to the fund shows the difficulty of credit analysis and the advantages of holding a diversified fund rather than picking out individual bonds yourself. The dividend history here is quite impressive and it's probably going to continue in my portfolio for the forseeable.
"Still High risk.Nothing has changed."
Absolutely my view. It will be interesting to see how much it costs to refi the bond. It has to be North of 15% as the yield on the existing one is already beyond that. There's no way they can achieve that sought of yield on offices. I expect they'll have to sell assets and clear the bond rather than refi. So this is likely to be a much smaller fund going forwards.
Any sane person ignores Porsche, because the guy is a small-time shorter that never offers anything worthwhile on fundamentals. He flutters around any board where there's a declining share price and the hint of a smell of something unpleasant blabbering the same thing every time - just look at the guy's posting history.
On the other hand, I'm not prepared to buy the equity here, except possibly as a momentum trade, but I'll be avoiding that too - it's just too darn risky. I am an RGL1 bond holder though.
"Market abuse and intelligence teams at the FCA notified."
That will result in a big nothing, like it has on literally every other occasion that the FCA have been notified of anything. It's hilarious to even think they'd do anything for private investors.
I've bitten the bullet and dumped my entire holding here (2% of portfolio). There are just too many flies on this turd and the technicals are grim.
I see HBR being of zero benefit to SQZ and vice-versa.
The only future for either (sadly, I own both of these dogs) is buying something OUT of the reach of UK taxes.
@TheTrotsky: You can definitely trade RGL1 online with HL. That's how I bought it. I've had to use the phone service for some other securites, but not RGL1.
I don't currently hold any gilts, but yes, some require a phone order. I don't know why that is. I have a threshold of ~7% before I become interested in fixed income and I mostly prefer closed-ended funds (e.g. SMIF) than single bond holdings, due to the complexity of the credit analysis. RGL1 caught my attention, because I already knew a bit about the company, having previously been an equity holder. And it appears simpler than others.
Unfortunately, the LSE Order Book for Retail bonds (ORB) is very limited. You need to know what you're looking for. HL do have a list of bonds/gilts etc, but it's small. Most of the prefs that I hold are US ones that I research through Seeking Alpha and various fixed income sites such as 'The Preferred Stock Channel'.
For prefs, you get a good idea by dividing the annual coupon by the price, but for bonds of finite duration, you might need to look elsewhere or calculate it yourself using the Excel/Google YIELD() macro or Seeking Alpha for the US names. The more sophisticated platforms (e.g. Bloomberg) already show this stuff.
@KinkDink: Why would somebody short it just because the per-share price is higher? I don't understand your argument. Why would the consolidation change anything? The market cap/enterprice value stay unchanged. I couldn't care how many shares that I have; clearly some people do, but I don't get it...
It's like saying that you'd prefer two quarter sized pieces of cake rather than 1 half sized one. It makes no sense to me.
@Trotsky: I bought the bond with Hargreaves Lansdown (online/ticker RGL1). The spread is prohibitive if you plan to trade it. Unless something drastic happens, I will hold until the maturity in August next year.
I try to keep it simple when analysing credit risk. Gross portfolio value: £752.9m, cash: £32.6m and debt: £428.5m ==> net value: £357m and LTV: 52.6%. It seems to me that the gross portfolio value would have to fall by 50% before the retail bond was at risk.
I don't know the latest LTV on the Santander portfolio, but clearly they need to quickly sell some of those properties before the covenant drops to 50% next year. At £62m, the Santander loan is not that big. And with some of them being voids, maybe they don't need to sell many of the income-producing ones - but I'm just speculating.
Regarding your other comment on the bond. Almost all fixed income has dropped over the past year and this one doesn't look that unusual. UK prefs with investment grade companies (e.g. Aviva) are yielding 7%. Some of the US prefs with high quality names are yielding 8-9%. The RGL bond is unrated/unsecured, so clearly it needs to yield well north of 10%.
I could be wrong. DYOR.