No, I dont believe so Pearl. Only if SPD takes control of the private vehicle and then finds away for renegotiating with the bond holders. Offer to buy them out. The nature of the cap table means there's more power with the debt holders than the equity holders. You've seen the evidence of that already.
My money is on SPD contolling the private business in a way that it best for them.
Any attempy to buy the dissenting small holders out would trigger a maturity of the bonds, and if they haven't been renegotiated, several hundreds of million price tag, so if I was them I'd avoid that and just treat it as a subsidiary and try to settle with lenders by realising assests that SPD doesn't want. Then using the remaining vehicle to cross sell. Never offering any opportunity for dividends, never buying it out, and just run it for the long term . Sevice the smaller debt and obigations, asset strip it whilst cross selling .
"SPD hinted at criminal proceedings in their recent results if I am recalling correctly"
"In light of its strong views on the subject Sports Direct continues to examine with its advisors exactly what happened, who was responsible and investigate avenues to seek redress through civil and/or criminal process."
"examine" doesn't mean anything in practical terms. There is no criminal case.
It would still be the position that if the company has engaged in criminal activity lenders would have as many rights, if not more, than shareholders. The Company has contractual obligations via it's debt raise to act in a proper manner and provide accurate information.
These obligations have been manifestly proven by SPD's unwillingness to launch a take over and exceed the "30% change of ownership" clause that would have forced them to mature the bonds. Pay the bond holders.
Every company has obligations beyond it's shareholder. In the case of highly indebted companies, even more so.
but it isn't a criminal proceeding and there's no sign that there is one coming. It's a civil proceeding to reverse the administration.
If there was, it would negate any talk of insurance based compensation. Insurers don't pay out against criminal activity.
So just for clarity, who are these criminal proceeding against? If it's the Directors, then it's a negligible amout of money.
There would still be creditors and they would still rank ahead of the shareholders in dissolution of the company.
I think you might be suggesting if there was collusion between the Board and some lenders you should be compensated. But, if that's the issue, then the company, as represented by it's Director, should also compensate bond holders not privy to the arrangement. As those are largest stakeholder, and rank senior, they would again come ahead of equity holders in a dissolution of the company
"If the court case was successful"
It would mean you are small shareholder in a private business that remains heavily indebted.
At best, in the short term, you will likely to be a dissenting shareholders in a private business controlled by SPD.
If the administration is reversed, why would there be any compensation? The company would be back to it's original shareholding, but without a listing.
The LSE would not be compelled to re-list the business.
So you would have no exit opportunity, expect those arising out of the Companies Act covering the interests of minority shareholders. That would require SPD to buy your shares privately. They would do that on a "fair value basis" for dissenting shareholders (as they are required to do by Law) but there's a myriad of ways for them to side step that. From simply running the business like it's a subsidiary, but never taking a dividend to initialting a consolidation of shares that can see your shareholding evaporated. Or simply argueing the "fair value" is 0 as the business is now worthless. It would require another group of shareholders to fight that valuation.
I wouldn't rush out and buy champagne if Debenhams loose this first round, they'll challange it any way, it's a very long and rocky path either way.
Very attractive if they get back to paying that div!
I never intend to encourage anyone.
It does feel that there's value in there. So now we have bond, pref and ordinary holders. LOL
Is there a spread better out there.......? Ha ha ha
"If I had any spare without having to borrow I'd likely follow you into the debt."
It's priced 85% of par, so you can buy 100p of it for 85p, current yield is 9%, yield to maturity (August '20) 14.3%
The bad news is the £100,000 per go.
You could buy some here in much smaller slugs (£100 initail, then what's about on the market place) https://www.wisealpha.com/market/corporate-bond/rea-holdings/147/GB00BYY8MM32
But it sold out same day (or there abouts)
The equity looked well priced. I might have considered it before the recent rally. But as you say, there's likely to be another opportunty.
If I was in a position to buy equity, as a long time holder, I see potential for 247p with a little bif of luck.
Hope that works out for you John. I'm always interested in capital appreciaition, but for the moment my focus is on securish income. Recent very early retiree. It's just a little bit volatile as an income play and it's not like there's aren't other investable plays. If you know what I mean. Few years, I might come back to the equity. By then I'll have secured enough income to take more risks.
"As I said before a wide margin of safety if you follow the fundamentals."
Agreed. That's why the debt feels attractive. Happy to sit back and take 15% with little volatility and a reasonable amount of risk. And there's plenty of space for shareholders to pony up if needed.
Out of interest John have you done this calculation:
"Valuation: Palm plantation stocks have fallen out of favour with investors in recent years, due largely to weak commodity prices. The Asian Palm Oil Plantation Index fell 12.8% since Jan’18, while the Asian palm plantation sector saw an 18.8% valuation decrease, ending Jun’19 at $10,933/planted ha vs. $13,468/planted ha at end-Dec’17."
"We expect REA to have ca.33,423 mature ha by end-2019,"
Hardman & Co report, June of this year.
Good morning John, there is plenty of debt and yes I think they are likely to need to raise more to money to settle the outstanding August 2020 commitment. Senior Unsecured Debt in REA's case.
Overall it's an interesting issue that many investors, PI's, haven't and don't consider. In my opinion.
There's a process going on out there which has "big money" moving away from listed stocks to having a broader portfolios. They've embraced corporate debt as well as private businesses. One of the reason you see a decade long fall in the number of companies on public listed exchanges, with the exception of Asia. Delisting is speeding up in the West.
At the same time you see a more "acquisitive" stance from bond holders. Where highly leveraged asset rich companies get taken into the hands of bond holders once they default. I'm not saying this applies to REA as such, but it is an interesting business with an asset they've stopped making. Land.
It's just another thing to consider when stock picking.
The belief that shareholders are sovereign should be dismissed and an analysis of the intentions of bond holders should be included. They win assets, shareholders get a bonfire of confetti on defaults.
As of today REA's August 2020's offer a nearly 15% return if they mature.
It's a small position for me, so I haven't done a ton of DD, but I might out of interest explore how much of the 40,000,000 is outstanding. It they do need more cash, my guess is on local, non sterling. The rate they pay is the hand of the gods. Cancelling the Pref. div. and the discount to par on the debt might be a message yet.
Interesting business. Interesting few months ahead.
Bloomberg has a public article on delisting and the changing attitudes of bondholders. I tried to find it, but I'm a little pressed for time this morning. It's worth a read.
"Anyways I agree the gearing is top heavy the Prefs need paying and it's not as if investors are unaware of this."
I believe they've cancelled the Dividend on the Prefs, they don't need to pay those (as far as I know), but they don't have the same luxury on the 8.75% Sterling Notes that are due for repayment in 2020, those mature August next year.
They are trading at a significant discount to par at the moment, although they are very illiquid. That indicates a concern.
I'm not sure if they've bought any back, but the initial issue was £40,000,000.
I haven't read the articles, or looked at the Pref's, so I don't know if there any "accumulation" element associated with a cancelled dividend.
"I don't know whether your comment...'LOL I'll await the new comer to call me a shorter'.... is aimed at me?"
No, not at you. Experience tells me that once the day trades get into an illiquid stock like this any comment on the future of the business less than glourious, especially on this site, leads to comments about you being a "shorter".
I prefer an honest discussions about the merits, or not, of a business.
You are what this site needs more of. Sensible posting.
I hope it doesn't become a stock that day traders piles into. It's neither good for long term investors or the company in my mind.
I suspect they might need to raise more capita. Either in the form of debt or equity, but of course I might be wrong on that point.
I'm long in the debt, don't expect to get involved in the equity, but it's interesting seeing what's going on.
Flash in the pan stuff when Evil Knievil comments. I also expect them to show a reduce loss, I also wouldn't surprised if there's a cash call in the near future. They've got those 8.75% to pay off in 2020.
That's the shareholder burden.
LOL I'll await the newcomer to call me a shorter.
Correction my 8.75% 2020 haha
"We are still optimistic"
Yes, received 2 payments now from the bonds. Now it's just collect the income till they mature. With luck, a final 50% payment .
"Tasty, as in around the all time low levels?"
Yes, it's at all time lows. It's recently been added to the fund I mentioned below. If they can keep that div. going it pays for the waiting. I guess the thing that bothers me is when you look at the relationship between profitable years it breaks down quickly. That was my initial response looking at it quickly. Deep Value Trust comment that it's been profitable for the last 13 years. There's a suggestion they are having a problem with some staff. That's not a very good sign, it is after all a people based business. I may put a note on my wash list and a trigger, mainly to see if it test 38p again. This close the 31 October I don't see a need to rush. I also can't see a trigger point to drive it forward. Sentiment doesn't do it for me. If you are long term holder you can find sentiment evaporate quickly. I might see if i can put together a long term div & simple profit spreadsheet, just to satisfy myslelf about what they do if tough markets. We might be getting one of those.