Member Info for devonplay

"He did destabilise DEB with his public comments but one cannot blame him DEB's moving from a profit of £33m in December to £720m in debt by March"

But you might be able to blame the poor Christmas trade for being the straw that broke the camel's back and pushed creditiors to loose confidence.

When that happens there's a spiral of lost confidence that pushes some companies to borrow from Peter to pay Paul.

They do that to avoid a disorderly insolvency. Director's don't like that, disorderly, because it can give them personal liabilities, so they move a company quickly to administration.

It's one their most important duties, enshrined in law, not to be running an insolvent company knowingly.

Especially if the key shareholders aren't willing to underwrite a full blown rescue that will satisfy creditors.

In this case, the major shareholder wouldn't, so the creditors responded in the most logical way. They excersised their rights to be repaid.

It happens all the time.

"how easy is it to ask for shareholders details on registrar"

Easy if you have a legitimate reason. I think it's covered in the Take Over codes, but in this circumstance I bet they would think it's a frivolous request. As they've just lost the revenue for running the register you might get lucky. Registrars usually make most of their profit on "corporate actions" so, in these circumstances I wouldn't be surprised if they asked for £10,000. What have they got to loose? Except their reputation and accreditations.
When you've got it you've got 2 potentially thorny issues to deal with:
GDPR and nominee account.
There will be some individuals with home address, but the majority will be the nominee's name and the shareholders account designation.
That means you then have to pay again for the nominee to distribute whatever information you want to send. Very unlikely and if they would, I expect costly.
The GDPR issue, and the way registars hold data, means you probably need to deal with one of the specialist city printers. Again that's costly. They have schools bills to pay you know.

"recent shorting posters keep coming on"

I'm still long Debenhams and still have a financial interest in the business.

It's some of the other posters here who sound like "shorters" to me, with all this talk of corruption and fraud.

"Frankly it stinks and I don't care what the shorters will say.. filtered"

I didn't know you could filter shorters. Thanks for tip!

"Well then perhaps company law needs looking at."
Yes, good idea, the Companies & Insolvency Acts are use by 10,000's of companies and charities everyday, but as it effected Debenhams, best get rid of.
"Otherwise what is the point of have a listed company if shareholders know they are always at the back of the queue except when a company wants more cash via equity."
Because they are at the front if there's growth, unless your saying shareholders should only get dividends? Without debt, there wont be much growth, unless you think shareholders should stick their hands in their pockets everytime a business wants money? "We need some trade credit" cash call for the shareholders? I think not. That's the space for start-up. Every time they need money they either dilute you or you get deeper in. Deeper in MIGHT be OK, but for a struggling business like this.......you'd have to ask without the secured and unsecured debt would the shareholder be willing to just pour in more money? After all, equity leverages off the debt in vibrant businesses.

Decent results today I thought. I'll be watching the York development work.

I'm interested in a long position on this one (debt), so I guess today's debarcle might work for me if it's reflcted in the unsecured debt. The YTM (on Alpha) is 7.2%, I'm going to sit on the sidelines and see what that looks like over the next few weeks.
For my money Oak North is a much better bet, if you can get access to it.

"SPD lost a packet on this investment and actually added to their stake (another bull sign at the time) a week or two before the delisting - question: WHY!!!!"

A profound misunderstanding of the mood of debt holders. No more complex than that. If you have a predominent way of doing business it will lead to outcomes like this.

I have sympathy over that issue Pearls. I've been at this game for 30 years and most of my time for last 10. This wasn't one for inexperienced investors.

I still learn something new every day and I found DEB to be a difficult trade and the final outcome I wont know for another few years.

My rule of thumb is quiet simple these days. I only invest from the natuaral yield of my portfolio and only to the value of it's daily volatiltiy in stocks like this.

I guess there will be a number of long term holders here and staff who've matured out of SAYE schemes.

For most people collective investments or ETF's make the most sense and that's the backbone of my portfolio.

I wish you good luch with whatever your next investment is. I see you have commented on SGI, I got burned by that one over it's revaluation of stock. Not sure it would be on my list now.

" But that hardly explains how the debt rose within three months so sharply"

Because they obvilously had a cash flow issue and needed more working capital, so borrowed more.

"Shareholders were not exactly getting a fair disclosure of the facts in December and January for example."

The Christmas trading update looked awful.

In the context where they were one uncooperatve creditor would be enough to destroy all ongoing confidence.

Here's a little bit of advice; when you see the words challenging, volatile or difficult in a tading updates, it might be time to jump ship.

"'I'm sorry Devon but I cannot believe DEB's credibly went from £33m profit"

But you also agree that's tiny in the context of the turnover?
There's been a massive downturn in 2018? 65%
and the statutory loss was £460m?
Christmas trading was poor?

So maybe it's possible to accept this was on a knife edge and didn't need much to push it over.

"it's not just Pearls saying it.. read the SPD RNSs!! They are questioning the BoD motives too."

I have and I'm wondering when they'll be launching that legal challenge......

Pearls are we talking about the same business?

This one had a decline of 65% in earnings per share last year and similar decline in underlying profit before tax.

It's statutory loss was £460 million, and that underlying profit you mentioned was £33 million on nearly £3 billion of sales.

As some one else decribed it "wafer thin'.

That was all before terrible Christmas trading.

What about a 65% decline and a terrible Chrismas shouts recovery?

This wasn't a growth, momentum or income stock, this was business on it's knees surrounded by hostile agents, a complex recovery play with enourmous forward going liabilities that reached out decades.

You only have to look at the other market participants:

Hedge funds who drove it to be one of the most shorted stocks

Specialists in distressed debt who have a history of taking listed businesses private

Bond holders who ranked much, much more senior in the capital table

SPD, who wanted it on the cheap without the liabilities

and a decliining equity valuation that meant it just got more and more difficlut to raise any equity funding as the dilution or capital requirement would have been in massive multiples of the share price.

I just don't understand against that background how you see that's fraud?

This business was surviving on was goodwill and confidence, on that basis the Directors have little option, but to be positive and present accurate figures.

When that last bit of confidences edges away, the goodwill evaporates, and the consequences of that we know don't we?

So where is the fraud?

"Is it possible to short a bond" I'm sure there is, but for spread betters the issue is liquidity and the need to buy in tranches of £100,000.
"I also wouldn't be surprised if a few posters on here started pontificating the wonders of double digit yield paying debt with 100% gains on maturity"
Maybe, but there's a more serious question about using bonds in a portfolio and looking past always using equity to make money.
"What is the definition of junk bonds?"
That's easy, Debenhams.
Seriously, there's guide on Moody's site https://www.moodys.com/Pages/amr002002.aspx
Create an account and you'll be able to see Debenhams rating in more detail, some of it's free. But, for now:

DEBENHAMS PLC £225,000,000
5.25% Senior Notes due 2021
Moody's latest rating Ca - negative outlook
(Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest)

There's never a free lunch is there?

"BTW who were the insiders Devon?"

I didn't say any one was an insider, just the possibility someone might be and have useful insight. Even if they didn't recognize it. You can often get real insite from someone who's actually on the tools rather than in the Boardroom.

I actually said "No such luck".

"BTW the former CEO did buy £100k worth of shares not that long ago... he obviously got it wrong too!"

It appears he did, but it's also not a substantial amount in comparison to his salary. I did look at the RNS.

Doesn't that prove the fallibility of Directors?

Pearls did appear bullish, and I wanted to understand why. In the end, I thought the counter arguement was stronger.

I didn't say he/she told anyone to buy, but I wanted to understand what the bullishness was based on. For all I knew, it could have been someone working on the floor, tills or distribution. I didn't form that impression.

I guess you can say I read the posts, both for and against, and make my choice.

Something may have changed quickly, that could have been the Christmas trading or the confidence of the lenders.

Both would have a significant negative impact on the business.

But, there wasn't a rights issue, and that, as I tried to explain looked more and more impossible as the ratio between the debt and the equity deteriated. The offer from SPD, confirmed that feeling for me. It wasn't going to be enough and increased the chance of a negative income. In my opinion.

For the record, I would have liked the certainty of SPD underwriting the bonds, but it just wasn't apparent that would happen. I wish they had bought the business. But, on the balance of risk v reward, and that I'm not over exposed, I'm willing to take that chance.

You are right I set up an account to join in the discussions, unless I've missed the point, that's what these sites are for.

I could have drawn attention to the nature of the hedge funds playing in the debt, but would it have made any difference? Their track record.

"some other posters also on the negative side seem to post on the same threads - maybe three separate individuals - or part of a fund - or just shorters - who cares now but be honest about it."

I'm certainly not in a fund, don't know Daniel, and have been clear that I've been short on the equity and long on the debt. i see Daniel has posted on the AA board and would be interested in his views. I don't seem to be able to see those comments.

Daniel is worth listening to.

My point in previous posts was the equity isn't the only horse in a race, and shareholders need to consider the creditiors and who's buying the bonds. If SPD had opted for bonds over equity, they would have been in control now, and probably for less money.

You can blame the Directors for getting it wrong, but aren't they also a key part of an investment decision?

It looks like the shareholders had more confidence than the bondholders in the Board. Obviously not SPD.

"100% agree with Devon here."

Everyone should Daniel, all of the time :)

I came here initially because users on the BB I use most were discussing DEB and mentioned a poster, Pearls, who was very bullish.

I thought I'd check it out.

You sometimes get "insiders" who don't understand market abuse rules and will tell you a lot about the trading that the formal stuff doesn't.

No such luck, but when it does happen, it can be very helpful. It doesn't happen often.

What I did value was the comments about the level of debt. Thank you for that guys.

It's not complicated: highly shorted companies, not benefiting from high levels of Director buying, and with a negative ratio between debt and equity should ring alarm bells.

In this case the debt holders were interesting because of their track record. It's not the first time they've got control and taken a buisness private.

That suggested there was an opportunity to go short the equity and long the debt.

I'm not out of the woods with this one yet, they could could still default on the 5.25%, but if they don't, I'm looking at 12% yield per anum income and 100% profit on redemption of the bond.

The trading profit went into DNA3, for the 10% yield. Also risky.

Not sure where I'm going yet, but "moving on" is the name of the game.

I just to choose to do that from income, rather than capital (in most cases), so I guess my search is as difficult as ever. Something high yiled, with potential of capital appreciation and allows me to phase in.

That helps me keep my risk down.

Boy, could that be any more of a challenge.

"This is a breach of fiduciary duty"

Directors also have a fiduciary duty towards creditors. In this case they, the creditors, were the largest stakeholders.

Recognising the Board's resposibilities towards creditiors was the point of administration. Their "fiduciary duty".

A situation exasperated by the low ball offer of SPD. When that offer came in, it became obvious that shareholders weren't willing to meet to their obligation of providing "risk capital", be the liquidity providers of last resort.

They, Debenhams executives, simply wouldn't have got an emergency rights issue away that would satisfy the concerns of the Directors and lenders.

Rather that being the white knight for shareholders, it became the SPD offer that sealed their doom.

Ultimately shareholders get called on to bail a business out, if they are unwilling to provide the cash to deleverage lenders it can be game over.

Ask yourself this, would you have increased your shareholdering by a factor of 12 to save the business and buy the debt out?

If the answer isn't "yes" why wouldn't you expect the secured and unsecured lenders to take over the role of shareholders. They will just excersise their rights to protect their capital.

At the end of the day Directors have fudiciary duties towards a range of shareholders, and have an absolute responsibilty towards not knowingly running an insolvent company.

Their action suggest they believed the company was morving towards insolvency and shareholders wouldn't stump up enough cash to relieve that situation and satisfy lenders.

That's almost always a judgement.

Every Director worth their salts is going to acutely aware of the risks of running an insolvent business and should, and will, take actions to avoid the personal consequences of that.

The only alternative is making shareholders responsible for the debts of companies on a personal basis. If not, we have to accept that Directors take actions to protect themselves against personal liabilities.

Unless you believe the rights of shareholders are so enshrined they shouldn't have to concerm themselves with the obligations towards creditors?

If that was the case, good luck to any company seeking credit, and shareholders, expect to always be putting your hand in your pocket...

So, i'm guessing you mean the administrators sell the shares of Debenhams PLC, but without any of the assets?

Alongside everthing else going to Celine UK Newco 1 don't you expect the brand name went as well?

I can't possible see how that could ever happen. Sell the equity of Debenhams plc wihout any assets or use of the brend name.

"As regards the shares, completely understand they are delisted, not suspended, but they formed part of the assets taken over by the administrators"

It's true they are delisted, but they aren't an asset of the new buisness. It's been touched on before, how the assets were transferred via the sale of a subsidary. The parent still exists, for the moment, alongside it's now almost valueless equity.

From the Administrators:

Immediately following our appointment, we sold the Company’s shares in Debenhams Group Holdings Limited, the top holding company for the Group’s principal operating companies, as well as certain dormant entities, together constituting the Company’s entire interest in the Debenhams group companies (“the Group”) to Celine UK Newco 1 Limited (“Newco”), an entity owned by certain of the Company’s secured lenders (the “Transaction”).

Debenhams Group Holdings Limited v Debemhams PLC

"Our strongest hope in this direction is probably the staff themselves."

True, motivating them with equity might be a good idea over the long term, but it will be equity in the new business not Debenhams PLC. The main hedge funds behind this transaction are sepecialists in distressed debt and securitization, they would have travelled this path many times before...and the issue of dealing with staff in periods of anxiety.

In the case OK Coop Banking, it's a multi year journey, I cant expect it will be any different for DEB, but the repayment of the 5.25% principal in a few years time might have an impact.

One of articles I read this morning was a highly rated US fund manager who described the process she takes, the articles on CNBC, in making an investment. Amongst the factors was deciding if to invest in the debt or equity (or both). That might be a useful thing for UK retail investors to think about, we seem addicted to equity, but as DEB shows, it's not the only horse in the race....

You mean like MA's mate that made £30m? In theory return the equity they borrowed, but as it's now delisted. Nothing at all.

"Board working actively to frustrate MA on doing a deal"

It's more likely they were under pressure from the lenders. As discussed, the debt holders were obviously in control of the business. You can see that in relation to the amout of debt v the capitalistion of the company.

Now if you are saying that a rights issue was to held with a value to adjust that difference it would be good to hear.

But at what price?

Would you need to strike the difference betweem say £620 million and the market value of say £40 million. Would you have been willing to pour that much more money into the business...........another £580,000,000?

I can't be bothered to look up the number of shares. Let's for ease say an emergency recap at an issue of 50p, against your purchase price of 2p.

Another 600,000 @50p.

Now would you have backed that to "rescue" the business from lenders.

If not, you might be see why lenders were worried and excersised their rights to put pressure on the company.

It's been a long day £580,000,000 of debt /1,286,828,853 shares