Member Info for devonplay

Another 5% this morning. At least the spread has come in a bit, now 10%.

https://www.genesisemf.com/

Well worth a listen. Not so popular with retail, but it's a decent, well regarded fund.

There it goes, proper market drop 5% and the spread back to the corpse incinerating 15%.

"Today is a good day to hide a position being taken as the overall market is being knocked for six."
Why would you hide a position in a stock like this? When it has such a dominant stakeholder who own the majority of the shares, all of the debt and describes it as a "Subsidiary", even the CEO can't be described in the recent transaction as independant! It makes no sense at all. I'd love to hear what you think they'll achieve taking the risk of not declaring that position to the market...

"there is a general sell off "
That's my point. I'd be taking profit and heading for more certain returns.

So, selling 780 items over 7 years, a shop renovation and London 2020 - if it goes ahead...
Why doesn't that fill me wish much confidence.
With this major sell off going on if i had any profits here I'd be taking them and buying something CV discounted with a yield.
I'll be keeping an eye on IWRD over the next few weeks myself. Buy the entire world on a discount and with some income!

And where do you think any uptick in volume and profit will go?
As I've said plenty of times, they don't need price momentum to turn a buck, but you do.
They only need external shareholders when there's a need for more cash - a la Horny.
Could you imagine an equity raise here to reduce the debt....little bit of equity dilution usually benefits debt holders. Just remind me, who owns the debt?
It's a deeply complex recovery play...it's not just about increasing turnover. It's taking into consideration the key stakeholders game play.
And that spread, down to 10% at the moment, a slight recovery from last weeks 15%, buy today and sell tomorrow and use lose a chunk of cash, or even worse if the figures turn out to be pooron release and you could take a 20% knock in the blink of an eye. It's a very high risk, speculative share.

"There is more here than meets the eye..."
Major shareholder, debt holder and a "related party transaction". How could you not come to the conclusion that "there is more here than meets the eye...". It's what the market has concluded. As I've said before, they don't need the share price to increase to turn a profit out of this business.
Loan facility with Phoenix SG
"related party transaction" with Phoenix SG
And "subsidiary' of Phoenix SG
Even the "CEO of the Company and a Partner of Phoenix Asset Management Partners" and as such "is not considered independent for the purposes of this transaction."
All that's an acceptable structure, but it does make the market nervous when you have a "related party transaction" becuase you can't easily tell if it's just a simple commercial transaction or blood and oxygen being provided to the still warm corpse.
Whatever the value per item there obviously expecting it to take time to sell. They've got time, has the corpse and the small retinue of private investors got the same? I guess we'll know in 7 years time.

"now makes them investment grade to institutions?"
I'm presuming you mean institution - and that's the nub of the issue.
The 'sales" are so wild, they're talking about "after seven years of the agreement, 20 per cent. or more of the consideration owed to Phoenix SG remains outstanding". That hardly gives the impression that anyone is expecting it to happen "forceably".
I'd be happy to try and shift them for them, but rather than "negotiate in good faith the repayment" in 7 years time I'd want them to pay for the storage...;)

"it ain't good."
That's what the market appears to think, maybe trading hasn't been that good over the winter period....or the existing stock isn't moving.
Either way, these "related party transaction" are difficult to interpret. You can only rely on the share price action.

"I hear that their winter trading has been good," - is that an admission of insider information? I hope you haven't being trading on that inside info? ;)

"what you would expect as a good return"
Existing creditors to accept a haricut, shareholders to provide a substantial amount of additional capital, at least 12% and if interest isn't being paid then a PiK (payment in kind) that would allow me first call on all assets - Seniority and if the agreed tems weren't achieved some toggle that gave me a greater portion of the future earnings ahead of the shareholders.

"I envisage a share issue (dilution) to raise the $600mil to derisk the project. Then with a gov guarantee raise the funds to finish the build via a bond issue, "
All of that within 6 weeks....HMG doesn't need to offer guarantees when there's an offer on the table. I can't see HMG offer to secure a 12% yield when it get it's own debt away at less than 1% , can you?
To it's a higly discounted cash call, high yield junk bonds and a HMG guarantee...OK. Good luck with that.

"Compounded not so bad compared to alternatives remember many just want the company to survive in it present form "
Yeah, that's why I described it as looking as if it's been desinged by the shareholders. Compounding doesn't de-risk it for the debt investor. It's nice for the shareholders, but as a fixed interest investor I start from the position that they, shareholders, are there to provide the first line of losses and first line of pain. This doesn't do that, it just offer security for the risk capital, shared. Have it along side an emergency rights or open offer, then it might offer something. Give me upside in the future cash flow maybe, but just de-risk if for equity holder. No thanks.

There is £billions of low yield debt in the world looking for a fairly safe return above net zero (gov bonds etc)

Yes, but it's low yield becuase people are paying for security, this is anything but secure, so you'd expect the yiled to be in at least double digit and being payed at least every 6 months. That why it's called fixed income. This looks like it's been designed by shareholders to deal with de-risking the project, but that's their role. They are the "risk" capital. It's hardly an attractive issue and what's been described look more like seculative equity risk rather than a secure asset. It's not looking likely to get off the starting blocks.

"8% bond issue"
I had a look at the proposed bond today, doesn't look at all appealing. Equity type risk, low yield for a Junk issue. On top of that it's not paying a coupon (it's compounded), it's not a PiK (so you don't get any upside above the low yield) and there's no information on how Senior ir would be in the capital table.
I can't imagine it will be liquid, listed or available in a tax efficient wrapper.
The last high yield I bought had a YTM of 24%, a coupon over 8% that's paid 6 monthly and was backe by a business that had been around since 1993 and comes along with c£3 billion of sales.
It will never get through ORB/LSE in the time available and I can't see who's issuing the debt, the trustee or anything else. Looks like a pipe dream.
Even junk has to come along with some attraction, at 8% I'd avoid it.

It's that liquidity trap, small buys push the price up, the 15% spread kills you, then as you say the "slow drift back down" incinerates your corpse.

It's very possible looking at how this is developing.....

"the only ones celebrating are going to be the bondholders." it's a welcome development. I'm up on my bond purchase and happy to keep taking the income.

Hi John, not sure it will help, but I think as time goes by retail shareholder opportunities, I believe will, have increasing opportunities for investing across the capital table.
There's already in the US & UK the use of "fractional notes".
In the US you are seeing that in equities. One of the most traded shares last week was Tesla and a new class on participants are doing that using "fractional notes" that gives them the chance to participate when the share price is very high, $900 for instance. They buy fractional notes that represent the equity. At a fraction of the cost.
In the UK I use WiseAlpha (which isn't without risk) do the same in "notes" for Sterling & Euro bonds. Where in the past you needed to buy tranches of £100,000-200,000 (similar amounts in Euros) WiseAlpha sell frational "notes". So the inital investment is £100, after that it can be in pence.
Not a perfect solution at the moment, but it's only early days. 2020 could be the year. Fraction equity notes are OK, but fractional fixed interest notes might be game changing.