Member Info for CaneToad

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.

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'm happy with the update this morning; if what they say is true, it goes a long way toward de-risking this investment. I'll give it a few days and may consider buying another small batch once the dust settles.

@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.

It seems to me that this has changed from being a company with loads of net cash, and in the right sector at the right time, to being one that has squandered their fortune on a huge pile of steaming turd and one that will pay 75% of their profits to the good old UK government. At least they have terminated the guy that has led them into this mess. Not something that I want to hold in my portfolio any longer. Will revisit if they can get back onto a good trajectory.

@Porchy: "phnx is a hollowed out business and the market sees it"

What a load of nonsense. There's a bonanza in the bulk annuities market at the market; all of the players have been talking about it. Even without this pickup in new business they already had ample cash on hand to cover the divi if needed.

You worried about your short position Porchy? Any mention of a divi rise is going to be painful...

It looks to me as though they must be exceedingly close to violating the Santander covenant, while the RBS loan could also be an issue within 6m given the rate of NAV decline.

Regarding the bond, that doesn't worry me too much. I think they have some options there - maybe a £50m ZDP maturing in 3-4y paying 10% or so.

The bond itself still looks well-covered, but it looks to me like they'll have to be a further cut to the divi. Wild guess is a 25% divi cut given that the Santander loan is less than 20% of the secured debt. On the other hand, maybe they can reduce the LTV enough by selective property sales as they claim in the update. All hell will break loose if they breach the Scottish Widows covenant.

It's a bad look (some might say 'cowardly') for a CEO to exit just before an update. My guess is that he's been pushed. On the other hand, maybe his replacement will be more open to not continuing to squander shareholder money in the NS.

Only a fool would double-down on the NS, with an incoming Labour government and such an unstable political situation. Thank God I have only a tiny position in this dog.

Good riddance to the guy.

Yes, I've just read the article from Shore Capital. I'll revisit STB after results and when there's more clarity on the FCA investigations.

What are people's opinions regarding the news from RLE today? It seems that they're achieving sale prices above NAV and that the Midlands market for small properties is still relatively bouyant. That seems to be the closest reit to RGL?

Guitarsolo: "CaneToad, is the final coupon (2.25p) paid on 6th August along with the redemption?"

The next coupon is 6 Feb, then the final one is on the maturity 6 Aug. When you buy the bond, you'll have to pay the accrued interest, the 'dirty price'.

I decided not to touch STB until there's a response regarding the motor finance scandal. Being a smallcap, it will crash and burn if there's any involvement whatsoever. It changes the entire investment thesis. I just liquidated my holdings in Lloyds and Barclays. It seems like banks are full of crooks.

i'm a holder of the retail bond. it's looks relatively secure to me.

not repaying the bond would be the end of the company. if it was at risk, the first thing they'd do is cancel the common share dividend - that alone would save £25m, half of the retail bond. if you assume they had a firesale, achieving just 50% of the nav, they could still repay the secured debt and retail bond. the market is weak, but i don't yet see any evidence that properties are selling at a 50% discount.

that's my back-of-*** packet analysis - i could be wrong, dyor.

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':

=====

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?