Can you really expect it to be back to pre-covid levels? I certainly don't for some time. Maybe in 12-24 months it might be different, but expecting a sudden return to normal maybe a little naive, but hey I admire your optimism.
I can't see the rational for takeover at the moment, but certainly there's a rash of corporate takeovers in the sector. So I guess you have to say: never say never, but it's certainly not in my expectations. Maybe when they manage to sell the York properties - if they've got lots of cash on the balance sheet, haven't reduced borrowing and still at discounts there's a higher chance, but that's some way down the road. A leveraged with a low rate, cash rich vehicle with real world assets at a discount...who wouldn't find that tempting :) It's a value investors dream.
Decent uplift of the div., overall I thought the results today were positive. I guess we'll see the truth of that through day. I last bought sub £2. Still if the great deleverage thesis pick up we could see further momentum. Interesting to see what the market/expectations make of it.
I don't believe they've defaulted in any real sense.
You are correct they aren't trading at par, but as you say c8 yield, maybe closer to 9, agains at coupon of 7.625. That's not enourmous. The YTM to maturity is much more interesting at c14%. Lots of corporate issue are trading above par, so yeah not the greatest position to be in. But is a 15% return enough to gamble pushing the business into insolvency from creditor position? Even if you are riding at the top of the cap table? I doubt it. Much better to take the 14% YTM and the roll-over of the debt in '24 if it's on the table.
Maybe, but a clever laywer would need to make it stick in a court, they need a court action for insolvency, even the Board, and we know a court, and judge , has just said that's unlikely in the short term.
I think you are correct, the Directors have notified the market about the possibility of insolvency, but not a breach of covennants, because that would be a material fact, then you would expect them to nofify the shareholders/market. That's my experience anyway.
I agree, bondholders are in a better position, as this point I don't think they hold all the cards, just most of them... and all the potential aces. I wouldn't want any more of Amigo's paper at this particular moment, but neither am I running for the hills quite yet.
As it is today, in guesstimate: coupon 7.6, yield c9% and Yield to Maturity c14%, maybe what is worrying is the relationship between market cap and debt levels, creditors like as much equity as possible in a business, the more to get burned through before it reaches their stakeholding, but a going concern that can pay double digit level of income is attractive, maybe even more attractive than a one of uncertain realisation. I can yet see why creditors, bond holders would be pushing for a restructure when there's still equity and negotiation with the FCA on the table. Too soon, but not beyond the scope of outcomes.
"I think a lot traded at 50-60p in the pound and even lower."
Your correct they did trade below the present price, so if they are redeemed at par in '24 there's a very nice YTM. That's much too attractive an alternative to wanting to push the compant into insolvency. Secured double digit returns are a lot more attractive than a company in liquidation. As there's no obvious defaults event, excluding the Boards threat of insolvency, it's too early to make a call on the next step. In normal circumstances come bond prices revert to par the market expects them to redeem, not the the opposite. But you are right, bond holders remain in a much better position than shareholders.
"As the company can’t repay within the stated period they would be paid n the driving seat."
But they have been paying the income on the bonds. They paid the income in January and the next one is due in July. There's nothing to suggest they wont made the next income payment in July.
They aren't in default, if they were Moodys would have taken them off downgrade watch on the 1st of June and down graded them. They didn't 5 days, they kept them of the same B3 rating.
I doubt if any one in the bond holders group would tell you that, for the simple reason that if it's not communicateddto all bond holders then it's potential market abuse.
The capital isn't due until 2024, so I can see how you can say "company can’t repay" they don't need to return capital for 3 years....
Not all the bonds are help by distressed funds. 85p on the £ isn't wonderful, but it's not indicating a near default position at that price. I'm up on previous purchases.
As far as I know, understand it, the bonds were rated (by Moodys) 1 June as B3, the same as they were in February. The Prospect requires them to be at least BBB, so although they are trading below "par" they haven't deterioted between February snd June of this year. They are of course on "down rating watch" and at risk of being down rating.
The next interest payment on XS1533928468 is due in July, there's to indicate that payment is a at risk, no apparent suggestion that higher yielding or futher debt is likely to be issued and the rating remains with in covs as far as my quick look suggested.
Soder are you sure there's a Creditor Committee in place? Source? At this point, creditors wouldn't have much formally to discuss as there's doesn't appear to be any breaches, just hightened risk.
Great if you'd share where you've sourced this information from.....
Anyone wanting to look for the Prospectus:
Issuer:Amigo Luxembourg S.A. (the "Issuer")
Title:7.625% Senior Secured Notes ,2024
ISIN: XS1533928468
Yeah, I thought you had it wrong the first time. I agree I think, the bonds on the face of it are in a superior position. But then, that's the nature of senior secured debt, it's higher in the cap table.
You didn't mention your sources for the formation of the committee or the appointment of advisors?
In these circumstances it's not the decision of the bondholders to liquidate the company, that's a decision only for the Board. Iit's not possible for holders to just push a company down unless it's breaching it's covenants. At this point I haven't seen any evidence of that, Amigo appears t be servicing it's debt and isn't in breach of it's covenants. Yet.
Soder, you might of missed this, but I responded to your original post about bondholders.
Do you mean Houlihan (Lokey)...just out of interest where did you pick that gem up from? Not hoolihan as you originally posted.
Bond: last time I checked were trading around that amount, but with a bit more liquidity. Interesting, but not surprising for the moment.
Still interested in your source, as of 20th February '20 RNS says "the company" appointed Houlihan Lokey. Are you sure it's the bond holders? Seems unlikely that, even with Chinese Walls, the Company and it's Bondholders would use the same house to work on potential restructuring. Surely a potential conflict of interest.
Broadly agree with you that Bondholders are in much stronger position vis-a-vi the shareholder, that, and illiquidity, of the Bonds may be the underpinning the price of the secured debt.
If by bybrook , is the absolute value fund (Bybrook Capita)l, it wouldn't be unusual for that type of enterprise to be holding positions in both equity & debt. I don't think in practice it stops them being part creditor committe, if the other creditors agree.
"asymmetry of information" if we are talking about Houlihan Lokey..retained by Company & Bomdholders? Can you post any sources on the formation of the Creditor Committe and the Bondholders advisor?
Hi Soder, do you mean Houlihan (Lokey)...just out of interest where did you pick that gem up from?
Bond last time I checked were trading around that amount, but with a bit more liquidity. Interesting, but not surprising for the moment.
"Why not take a look at what else is going on in the auction arena, at home there is Spink, Grosvenor and Cavendish, in Europe we have Feldman and Corinphila all with very strong auctions starting next week."
I used to have an account with Spink. I haven't thought about them in years. I see they have an auction later today. They've certainly expanded over the years. I think they now have offices in China, Switzerland and US. I may have a look around and see if anything catches my eye. In the past they used to offer OTC bullion, I bet they've stopped doing that now.
And the rally, everywhere else, continues ;)
How to miss out on a global rally......do we need to say? ;)
They are the bottom of the cap table. That's because they provide risk capital without any form of security. That doesn't mean they are without rights, just they are there to provide a form of capital. In this case there sound like the company isn't quite at the point of going pop. What that means for the share price is any one guess. As you have to recognise the Company isn't the same as it's share price (or shareholders)
I don't think they can sensibly move towards admin now. As they are obliged to take the position of all stakeholder into consideration, including bond holders and scheme creditors, before applying for admin. If the FCA and Court has said it's not an imminent risk then Directors risk finding personal liabilities come into play if they do it to protect shareholders over creditors. Admin. isn't intended to do that, it's supposed to protect creditors, not shareholders. I would guess their advisors will be telling to take that card off the table for the time being.
Because it suggests there's enterprise value even once the bond holder have been paid off, it's relevant to the 90% haircuts scheme creditors would take. Their loss would be absolute and final, they have no option to trade out of their hair cuts, where as equity holders do.
So it appears insolvency is off the agenda after the FCA & Court's comments and move down that roads would push up their own personal risk as they are expected to balance the best interests of ALL stakeholders - no pun intended.. I can't see the 7.625% bond needing to take a haircut, so you'd expect the brunt of the pain to be with the lowest part of the cap. table. Either way it look likes dilution is on the way, with or without the existing scheme. Offering equity to the Scheme Creditors looks the most likely route. It avoids the potential conflict with secured creditors, bond holders, and gives SC, and existing shareholders, a share in the future of the business. Obviously that has some implications for earning per share, but it does substantially rebalance risk and offers a less risky form of restructuring. Follow that up with Rights Issue, that most scheme creditors most likely won't participate in, and it's all water under the bridge.
Calamari, last time I checked YTM was c14% so they are trading well off par.