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umm. So, basically they convert the debt to shares (with apparently no haircut) and then you can buy the shares off them in an open offer so the debt holders can get their money back.

And you best hope the share price opens higher than the open offer price or you get screwed again.

Oh and once the debt is converted to equity, you can buy them freely in the market and the debt holders get their money back that way.

Not bad when much of the debt was bought at less than 50p in the pound. Bearing this in mind the debtholders can let the shares trade down to far less than the OO price and still make a killing on this.

Or have I misunderstood this? or is it we are unable to make a decision as the terms of the OO haven't yet been published?

Hi Dar-,

The spread is in general defined by how much volume goes through. The more volume the tighter the spread. With NMCN the volume for the size of it's market cap is low and so the spread isn't very tight. Further due to the low liquidity there are no investors trading the order book directly so it's completely down to the MM.

The market cap is now £70m. As it gets towards £100m the liquidity and spread will start to improve significantly.

Having said that the actual spread when trading is alot lower than the published spread, around 25p usually.

I would suggest care is required when posters with no previous posting history appear out of nowhere and start posting on only one stock. They may appear to know lots about the stock market. They are often persuasive and not open to opinions not in line with their own.

It appears government blocking lenders rescue plan as it would mean it would be almost impossible for government to continue giving IRV work.

“Some of the lenders are facing much more pain than others so even getting agreement from the banks is difficult,” said one of the people. “They are also being asked to keep trusting the management team, even though it is perceived to have made serious mistakes over the past year.”

The lenders — which include RBS, HSBC and BNP Paribas, together with Emerald Asset Management and Davidson Kempner Capital — would be “quite happy to see all the shareholders wiped out”, said one person close to the talks. But the government is concerned about the reputational damage and has pushed for outside investors to retain a 10 per cent stake.

A couple of things.

1. You might want to add the warrants into your calculation. I appreciate it doesn't affect the thrust of your argument but it does affect the numbers

2. You assume that the current value of the company is £18m based on the share price but remember share prices can't go negative. I don't perceive 12p a share reflects the true value, more shareholders having a punt or not being prepared to sell. If the true value of the company is -50p a share, because the company is insolvent without bank support and write off of debt the numbers look very different.

3. You assume this is going to be a nice straight D4E swap. I doubt it. I suggest there may well be an element of convertible redeemable preference shares giving the debt holders further enhanced rights over the existing ordinary shareholders. Further all the covenants and interest rates will get likely get renegotiated as part of the write off incurring massive fees (it was £40m last time) meaning the new clean position won't be the same as the existing position.

Good luck. It will be interesting to see how things play out whatever the outcome.

https://www.building.co.uk/news/council-asks-interserve-to-make-backup-plan-for-its-own-collapse/5097257.article

Council after £3m to fix a job completed in 2012

Let us remind ourselves that the most recent set of lenders were vulture capital. Their objective is usually to lend money at an onerous rate such that the company can just about afford to pay it over the long term. In this case the lenders appear to me to have screwed up and not understood just how deep the problems were at IRV with EfW.

What it looks like they want to do is get as much of their debt back as possible before they do the D4E (take RMDK and give IRV time to get EfW handed over so they can swipe that money).

However, I feel they still underestimate how much trouble IRV is in. Viridor are after £60m, every day EfW doesn't get handed over the liquidated damages grow and more fundamentally the customer and supply chain have lost confidence.

What the lenders need to do right now is do the D4E and write off 90% of the debt. This would result in an EBITDA of £90m and an interest bill of £10m and that should be enough to persuade the supply chain IRV is a viable business. I strongly suspect the lenders won't do this and will be too greedy once again making it challenging for IRV to win work and challenging for them to operate at a decent margin as the suppliers that will work for them will be loading up their prices to cover the financial risk.

EfW delayed again

Interserve EfW plants now due to finish before July
By Will Ing4 January 2019

steam chimney efw energy from waste
Commitment made by Interserve’s partner on three incomplete EfW jobs

American energy-tech firm Babcock & Wilcox has said all three of the incinerators it is building with Interserve will be finished in the first and second quarters of 2019.

The completion date for incinerators in Rotherham, Margam and Dunbar have been repeatedly pushed back, with problems in the EfW sector costing Interserve hundreds of millions of pounds and forcing it to enter rescue talks with creditors.

I would be concerned Bill that shortly this is reaching the point that the directors will be thinking about their legal responsibilities not to trade insolvent.

Year end debt is forecast by the FD at £625m-650m although personally I think it has deteriorated further by now as the supply chain get more and more anxious. They have already received £27m insurance with another £27m to come.

I note of course that why is it a company with £650m net debt and a debt facility of £834m cannot meet it's £50m debt repayment in Feb? The accounts show around £30m ringfenced which they can't touch but he answer of course is year end window dressing - not paying suppliers for the last week, fortnight or month of the year. The cash of course all then piles out the door on 2nd January.

So, the bondholders want RMDK. Clearly if the bondholders offered £400m for it that's a good deal for shareholders and it would happen. If the bondholders offer only £100m, the directors would turn it down. In between it's a matter of judgement.

But, what if the bondholders offer £100m, insist that it happens and the directors have little choice due to breach of covenants. Well the directors reach the point perhaps were it may be appropriate to put IRV into administration as this would produce a better return for creditors than to carry on trading. So, it's a game of cat and mouse.

But, there's something that's bugging me. Wtf does "placed in a separate holding company owned by the lenders mean" How oblique is this language?

Numbers wrong...

In the first half of this year, RMD delivered over £18m profit from revenue of nearly £100m, accounting for just under half of pre-exceptional group operating profit.

And that's pre-exceptionals which I suggest is worthwhile looking into.

Also, there's the pension fund split to consider...

http://www.constructionenquirer.com/2018/12/17/interserve-plan-to-hand-rmd-kwikform-to-lenders/

edit: debtors aren't stupid.

Or there again they might be if they have underestimated IRV's ability to get jobs finished on time...

A couple of points
1. It would be my view IRV did a D4E in April. They didn't call it that but issued warrants. Effectively an extra 20% shares, i.e. the existing shareholders got diluted in exchange for the lenders keeping the interest rate low at 10%.

2. Not all the banks have received the interest. Instead the agreement adds about half of the interest to the principle (non cash interest) so the debt is still increasing all payable at 10% (which the company has to pay at 10% even if they have a healthy positive bank balance as it is designed so they can't set the two off)

3. Now the lenders are stupid and they want their debt paid so there's an instalment of £50m due in February, which will reduce the principle.

Last years operating profit = £75m. Significant improvement = £100m???
Interest = £80m
Exceptionals = £???

IRV miss long stop date on Derby EfW triggering further potential EfW liabilities

Rather than focusing on the 7% that are short perhaps it would be more beneficial to focus on the 107% that are long as it's the 107% that are driving the share price not the 7%.

The shorts are very slowly closing for a profit and moving onto the next trade. As you suggest if the 7% short are reducing and buying back their shares, then the 107% long must be supplying them and more since the share price is falling. Clearly the shorters buying back are helping to support the share price and without them the share price would be falling faster than it is.

So, if you want to know why the share price is falling you need to look at the motivations of the 107% long. They presumably think the share price is going to fall further or see better value elsewhere.

News is spike in US bond yields makes equities look less attractive leading to global sell-off.

4 more rate rises in US will move bond yields even higher.

Further, RBS comments on lending less money to construction and retail.

Quality stocks BLND, HMSO backed by assets were down 5% yesterday and FTSE down over 1%. FTSE down another 50 today.

So, cost of borrowing going up and bond yields rising doesn't leave equities in a good place. It's not just an IRV thing but given IRV's gearing it's going to fall faster than the average

Thanks to a Jeffian on advfn

https://www.bbc.co.uk/news/topics/c1v20ym0z2dt/derby-city-council

Very hard to work out whether it's just disgruntled residents or there is actually a problem. And how much is new news and whether the tests were failed recently or a year ago.

The rights issue is not plausible not only because the market cap is now only £82m but because the liabilities on EfW remain unknown. The most recent news on Derby with implications the Client is going to terminate the contract introduces a high level of uncertainty. In addition the FCA investigation is still continuing.

It seems more likely that if dilution is to occur it will be the bondholders swapping debt for equity. For the moment they are bleeding IRV of £80m interest a year, which may or may not rise in 2019 as the ratchet is applied. If IRV do well enough to pay the debt great, if not the bondholders will waive just enough debt in an equity swap, so that IRV can just about pay the debt. And so it will continue in a circle until such time as equity holders are diluted away over and over or IRV manage to find enough EBITDA to start paying down the debt.

it is worth considering who the lenders are. They aren't high street banks like LLOY or RBS where the government will have a quiet word in their ear, perhaps remind RBS they still own them or remind LLOY it's in their best interests, they are corporate vultures who are their to maximise their returns.

That's why LLOY and the others dumped all their bonds at less than 50% of face value before the re-financing. The government can't strong arm and ask them to take the losses on the chin if they don't own the bonds

Research from companies house shows Regent Gas has £48m of net assets of which £36.5m is cash, although presumably about £2.75m lower having bought all these T Clarke shares. Further research shows the directors Nandal and Deep Valecha pop up on the Sunday Times rich list with a wealth of around £128m for 2017. Plenty to buy T Clarke without the need to raise cash. (so no banker is going to get a tip off about this if that's the case)

Regent do all the stuff up to the meter and T Clarke do all the stuff after the meter.

So, Regent could buy T Clarke with the cash in their bank account. Who knows whether it's an investment or they have some other purpose. Sometimes these things take a while to play out.

https://drive.google.com/file/d/1eM1zY9hJ5J-iA4vAfvscdo3GRpFT5Qtm/view