Member Info for gewillia

Sain, You've forced me to go digging in last year's accounts! The Book Value of Asturias at 31/12/18 was €321.8m and sterling closed the year at 1.14 = £282 million. The sale is for €290 m and yesterday's rate was 1.1819 = £244m. Allowing for 5% sale costs = €14.5m, or £12m.

Thus Intu's 50% interest has a net sale value of roughly £116m, to set against BV of £141m, producing a loss of £25 million, or roughly an 18% fall in the past 12 months, which seems to tie in quite well with the actual 10% write down at 30th June '19 and our estimate of at least another 10% drop at 31st December, being likely to appear in the accounts now being prepared.

PS. Right after your last comment, there's a gentleman enquiring what the problem is here. I'm reminded of a colleague's onetime description of a problem tenant, as "Having one foot in receivership and the other on a banana skin." Will you tell him the score, or shall I?

Morning Sain, I put my extra strong glasses on to re-read the RNS and the only currency sign that appears is '€', so I'm going to assume that Asturias went for €290 million. Do you have the Book value at your fingertips? Save me looking it up, please.

What's made you wonder whether the sale numbers given were in £'s?

As Friday whittles down, with poor Intu almost quoted, in the old pre-1990's jobbers parlance, at "Sweet FA to a Lampshade", meaning the bid was zero and the offer was paper share certificates, suitable for turning into lampshades. I'm watching the SP sink slowly down and thinking it might be a damn-close-run-thing between the announcement of the annual results in four weeks and the quote going to almost nothing.

Can the Board really afford to wait for the results, or will the RI flood the market then with, literally, tens of billions of shares? Perhaps a 1 for 100 Consolidation will be in order?

You're right about fairness, Vitabella, but I think it's very important to look at where the shareholders voting power lies:

John Whittaker, through himself and his private company, Peel, speaks for almost 55% of the shares. The next three largest shareholders, a South African investment house, Coronation Asset Management, a person, Rachel Blaise and a Luxembourg company, Auriga V Lux Sarl, between them speak for almost 33%. I haven't googled Rachel and would guess she might be JW's married daughter, but she could be anyone at all. With 100 million shares, she's very lucky, even at 20 pence.

These five control over 87% of the votes. Assuming that they are all connected in some way, the PI's here don't have so much as a fly swatter to protect themselves with. I'd refer you to Sain's post of 06.33 today, where he puts it much more bluntly than my "devil the the hindmost" of last evening.

I've learnt never to expect, fairness, kindness, or gentlemanliness when the chips are down and people's backs are to the wall. It reminds me of being in the office a friend who had discovered that he was being stiffed out of his correct share of the income from a joint venture. The managing shareholder was being naughty and my pal was suing him. I asked why he was suing a fairly notorious crook. My friend slammed his fist on his desk and yelled, "Because this is a matter of money. It's not a matter of principle!" with a large grin on his face.

This debacle is a matter of money. Expect no favours.

Simples, Vitabella. The board, or its' bankers, just invite someone with enormously deep pockets to subscribe for, say, half-a-billion new shares at 10 pence each and then issue them, in exchange for the cash.

I'd volunteer to do this myself. After all, what could possibly go wrong? But SWMBO says there's limited headroom on her MasterCard after Christmas.

Sain, Your observation on John Whittaker rings true. I've never come within a mile of him, or Peel, but I do know a couple of retired Hedgies who did and judge him to have the mind of a steel trap and a love of dealmaking. So, I can't see him either walking away, or rolling over in the face of the lenders. I'm guessing he regards this mess as a marvellous intellectual challenge. At 78 he's still seemingly working like a 30-year-old and he hasn't done what most men of his age have, which is to slow down considerably. Nor was he tempted to pay down the debt during good times - He must like a high-wire act and have an enormous appetite for risk.

Remember he's seen his personal equity go from £2 billion to almost Sweet FA and, having watched a few others fight to keep their ships floating over the many market collapses, my concern now would be for the non-inside shareholders - Joe Public.

If it becomes a carve-up between the lenders & Peel, then no insider will give a flying-fig if the terms are very unappealing to Joe Public. Remember too, that over 50% of the shares are in the hands of concert-parties and any plan can be voted through by them.

This is an utterly fascinating situation. Can the chestnuts be pulled out of the fire? How can profits be made by outsiders in the meantime? It's almost like watching a very slow-motion airplane crash. Can the pilot pull it out of the dive and find a safe place to land? My judgement remains, as first expressed long-ago in Springtime, - Caveat Emptor - This is a game, a very rough, tough game, for the big boys, all of whom will fight their corners fiercely and the devil take the hindmost.

No one, who's presently underwater, should expect to be rescued, or bailed out, by the people with deep pockets.

I spotted a 500,000 'buy' go through a few mins ago, and went to the Short Positions button, thinking that someone might be cashing out. But no! There's a new short from Monday, Toscafund, who sold roughly 7 million shares. That, imho, takes real courage, when the stock was trading down at 21.6p. There's not a lot of room for profits between that and 'null points'.

This detour also encouraged me to check how long the biggest position, Odey, has been short. He was first out of the box on 18/02/2016 - almost four years ago. Were the 2016 results particularly bad? He has to have sold at c.£2.89 and he dumped roughly 40 million shares onto some poor sucker. Now there's a smart man, because his position is still open and slightly larger at c. 44 million. He must be looking to trouser the full £120 million profits and won't settle for £100m. Cheeky!

Hang on, H-Hi, Tedmak is saying that the lender took out the Put Options to protect the capital value of the collateral he lent against. That would make sense because all the RNS's that were full of Put Options were declared by JP Morgan (and possibly other banks. I don't recall).

Which suggests that the lenders made a killing. Their loans were repaid at 100% and the Put Options made them a bonus of at least another 50% of the capital advanced. Now that's banking!

H-hi, With respect, Put Options merely protect the sale price of a shareholder's stock. They're nothing do with selling stock that you don't own, in the hope of buying it back later at a cheaper price.

They're also quite expensive. While there have been substantial option trades in the past nine months, I haven't seen any RNS that link those disposals to Mr. Whittaker, or one of his connected companies. Have you?

Remember that some 69 million shares are still sold short and with the stock at 20p there isn't an awful lot more profit to hang on for, given that some was sold short at north of £1.

There's been some six-figure-block purchases starting at the end of last week and continuing today, so I wonder if the shorts are asking the MM's to put some 100,000+ lots together, so they can cash in profits? That might explain the SP upwards move in the past hour or so.

Sain, I concluded late last week, that Intu has to announce a thumping great Rights Issue at the same time as the annual results, in about a month, otherwise the SP will simply collapse further, when investors see the extent of the write-offs and penalty LTV payments.

The Times is saying it's for £1 billion. I believe that's not enough, because right now the Debt-Equity ratio is probably above 60%, depending on just how big the upcoming write-offs are. So £1b will get it down to around 45-50%. Still way too high, imho. Ideally, a raise of £1.5 billion plus, would cure the problem, at least for the next two or three years.

But the ST article goes on to recount how Hammerson is literally dumping its' remaining Retail Parks. It says HMSN hope to raise £400 million from the sale of their six remaining Parks, having sold two, at below 06/19 valuation, for £121m last autumn. Then, it goes on to say that, all 8 parks were valued at £752m last June. My calculator says £400 plus £121 = £521. That's £231 million less than 8 months ago. This is a 30% - yes, thirty percent - fall. That's truly beyond awful, if the story is accurate. The buyers are said to be 5 US Private Equity firms. It looks like the vultures are taking to the air.

As regards the inability of a plc to price rights at less than par value, I'm sure some £1,000-an-hour lawyer from the Magic Circle will have a way round that. After all, Intu has known it's facing this problem since the shares went below par last summer. At least, I hope they have!

Unless FLTR's anticipated market update includes some proper numbers, unlike Willie Hill & GVC who mostly gave percentages only, then we're going to have to wait until the trio produce their year-end annual reports, for some detailed cash amounts.

GVC's update today knocked the SP by 2.5%, which is surprising because the fall in UK betting turnover was exactly matched by the increase in USA turnover, and the company upgraded their year-end estimated profits. We've known for two years that UK turnover was headed for double digit declines thanks to the £2 limit, but it looks if the US-NFL market has made a substantial contribution in it's very first season, for both GVC & WMH.

Given, so far, that less than a dozen states have legalised online betting, and some heavy-hitters population-wise, like New York State, are expected online within the next 18 months, I'd have expected the market to be looking ahead to major profits growth from all three in North America.

The market's reaction to William Hill is truly bizarre, imho. They actually gave a few numbers, pointing out that the UK will be above previous guidance at £50m to £70 million profit tops and added that their previous estimate of a US loss of up to $20 million for the year will now be zero. So Mr. Market duly marks the price down by 2p to £1.82.

This is one reason I make no attempt to day-trade, as SP movement is, quite regularly, counter-intuitive.

Umeed, With respect, you don't appear to understand the Derby Deal with the KIO. Intu have lost their shirt. Let me show you why: (All facts, numbers and calculations flow from Intu's 18/04/2019 RNS)

The half-share in the centre was sold on its' 31/12/19 valuation of £186.3 million, at a guaranteed yield of 6.6% pa, on its' 2019 annual income of £25.2m. The KIO is guaranteed £12.6m pa, or 50% of the net income, if greater. The sale temporarily improved Intu's Debt-Equity ratio by 1%, or roughly £85 million.

While the precise fall in Derby's income during 2020 is not presently known, but will probably be disclosed in the annual report, let's take two possible scenarios;

1. Assume the income fell by 10% to £22.68m. The first £12.6m goes to KIO in 2020, leaving Intu with £10.08m. That's drop of £2.52m, or 20%, in Intu's cash-flow.

2. The income fell by 20% to £20.16m. The first £12.6m goes to KIO in 2020, leaving Intu with £7.5m. That's a drop of £5m, or 40%!!

As you can see, if the income ever falls by 50%, Intu will have no income whatever. That's the problem with this guarantee. So what's today's value of Intu's rapidly shrinking income? I've been given rough, suggested numbers by West End investment agents of anything between 11% (at worst) to 8.5% (at best). If remotely accurate, these yields suggest that a 10% rental fall would cause Intu's half-share to be worth between £92m and £119m today. Remember this interest was valued at £186.3m in 2019? So, in return for a quick 1% reduction in their Debt-Equity ratio in mid-2019, Intu may well be going to take a year-end write off of between £67m and £94m. With the almost-certain guarantee of further seven figure write-offs at 30th June and 31st December 2020. That's why Sain and I have been loudly criticising this truly dreadful deal, since the date it was announced. I'm not going to calculate what the write offs will be today, based on a 20% income fall - my already white hair would stand on end.

Thus, not only is Intu's cash income from it's 50% falling like a stone, the capital value of this onerous interest is collapsing and producing balance-sheet write-offs. If that's a good deal for Intu, I'd hate to see what a bad one looks like.

As regards earning some management fees and cutting interest charges on previously expensive debt, those would have to be truly gigantic to outweigh six-figure cash losses and seven figure asset write-offs continuing into the foreseeable future. They are/were neither.

And, like Sain wrote last summer, the sting in the tail is there's now only one buyer left for Intu's interest and that's the KIO. So if things get really desperate for Intu, expect the KIO to come up with a new definition of "Very Low-Ball Offer". Probably including a few spavined camels and a large pile of what they left in the stables.

You have my undying admiration, 2reincarnated. Did you really go long those 4 dogs, just when they looked headed for the crematorium? I get the shivers just knowing that at least 2 of them did eventually go bust.

As for plunging into Intu at 4p, why not wait for the Rights Issue? There's some lovely properties in Intu's portfolio. If they can float enough equity to pay the debt down to, say, 30%, then if you bought 100,000 new shares for 10 to 15p each, wouldn't you feel rather clever and very pleased if they ever hit two quid again? Might well take 10 years+, but you never know . . .

Yes, VitaBella. Very probably cash negative on an accrued-income basis. It does, of course, depend on when the LTV penalties actually have to be paid over. I imagine there's a grace period, possibly of several months.

Property sales, like the completion of the Spanish asset will put cash in the bank, but I've no idea of the net cash due in, after fees and repaying any finance. Have you worked that out?

Umeed, as a numbers man, I'm happy to answer your questions 1 through 5, timed at 18.01 last night:

1. The company's own forecast rental income for the 1/2 year just ended, made last July, was £187.3 million.
2. The interest paid in the 1/2 year to 30/06/19 was £134.3 million.
3. The G&A expense for that half-year was £20.8 million.
4. This nets to a positive number, which is . . .
5. £32.2 million for the half-year, or £64.4 million pa, which is rather less than the "Intu is several hundred million pounds in positive every year (sic)" which you wrote last night.

Numbers can become more meaningful for me when you knock off lots of zeros & reduce them to the amounts that we play with in our daily lives. Taking Intu's gross assets of £8,389.5m & knocking off four zeros, reduces it to £838,950. The size of a decent personal 'buy-to-let' portfolio. Now taking four zeros off £64.4 million, equals £6,400. My question to you now is: How comfortable would you feel going into this year, knowing that your net income, from this portfolio, is just £123 per week and you've got to fund any capital expenses for the entire year, out of that?

It's no wonder that Intu ditched the dividend & is slashing the capex programme, but, (and it's a horribly BIG BUT), all this £64.4 million of apparently 'free-cash-flow' is ignoring the very nasty loan-to-value covenants on some of the properties. My friend, Sain, has rightly been yelling his head off about these potential (and by now probably very real) cash liabilities for over six months. If I direct your attention to the June19 half-year results & a paragraph headed, "Debt structure and covenants". The CEO writes, "A 15% fall in capital value, from the June 2019 valuations . . . . would create a covenant shortfall of £83 million" and "A 10% fall in income would create a covenant shortfall of £26 million"

In the annual results to 31/12/2018, the then CEO, David Fischel, concluded his opening remarks, under the heading 'Financial Strength' (An oxymoron, if ever there was one, with the benefit of 12 months hindsight) with a schedule showing the cash penalties payable in the event of future reductions in capital value. A 20% fall from 31/12/18 would cost £43 m & a 25% fall would cost £123 million. He also suggests that these would be paid from "our available facilities" This is horsefeathers, because, right now, I believe you or I have more facilities than Intu. Borrowing facilities always have "Notwithstanding" clauses, allowing the bank to withdraw them at will, depending on the markets. That means this kind of market!

A 20% fall is a racing certainty, imho. Will it be over 25%, or greater? Fischel's schedule doesn't go beyond that. But, we can be certain Intu is on the hook for £43m cash and possibly as much as £123m, maybe greater. So much for having any 'free-cash-flow', or any borrowing facilities to pay it with.

A 35% rental fall would kill this plc like a bullet throu

Thanks for the link, Malinky and my response to whoever wrote that piece is the old proverb, "Fine Words Butter No Parsnips".

Without a major capital injection, this ship will sink, possibly before the end of this year. For sure before 31/12/2021.

BlahBlah, my man at the Lombard Street Coal-Face says that 'blowback' is just a $50 word for Pru shareholders adjusting their holdings in M&G. The two companies, as any fule kno, are very different animals. People who want a far-eastern life insurance company with high growth prospects, are unlikely to want to hold a mature fund-managing cash-cow, so they dump the shares. Plus many UK PI's regarded the issuance of M&G stock as a partial capital return, from what has been a very profitable stock over the past 30 years, so they sell their holdings too, to trouser some profits. A 700% gain since 1990.

Meantime, no head of steam has had a chance to build up on the buy side, so keeping a dampener on the SP. As a long-time Pru holder, I was tempted to trouser profits until it was pointed out that M&G is the surest of cash-cows. Once it was clear that the dividend would be a very secure 6%+ pa and growing, I decided to take a much larger M&G holding. We shall see what happens.

So, for what its' worth, which isn't much, I reckon it'll be throwing off 8% pa within 3 years, based on the current 220 to 240p price and once a couple of sets of results and dividends are all over the papers and on the websites during the next year, then PI's looking for a good yield will start to pay it some serious attention and bid the price up to c. 300p, maybe higher.

MehMeh, I suggested some months ago, once Intu went below 40p, that any rights issue, which needed to halve the existing debt, would be about 14 billion new shares (at 15p to 20p) and this would utterly swamp the existing PI's, because it would be 10 new for one old. Your maths is right - any 1 new for 1 old rights issue just won't cut it.

The only way that Whittaker can keep control is by raising at least a billion pounds himself, to maintain his holdings, and find very deep-pocketed outside investors to underwrite the rights issue and take up all the shares that most of the PI's will refuse to subscribe for. I'm also wondering how much the banks have already got involved in any refinancing discussions, because they'll want to see a once-and-for-all cure. Not just problem being kicked 3 to 5 years down the road.

I wonder too whether we'll really have to wait until February 20th for news. The silence from the Board is deafening.

Morning Sain, Thanks for the promotion to 3rd senior partner! What are my points now? I sit here shuddering, reading the sales agent's partics for the Canterbury sale - just 2 years ago - while taking a serious boo at the layout.

It was let at £13 per ft2 overall, but over 50% of the space is non-ground floor. North 60's website says its' "suitable for repositioning", which has to be an early nomination for "Understatement of the Year". Yes, it can be carved up into standard 1,200 ft2 units, with a good amount of Zone A space, but at what cost? Will the planners want to see residential on upper levels? Parking in the basement? Reconfiguring could be a bit of an expensive nightmare. Might it be cheaper, in the long run, to knock it down and start again? What rents can be achieved then? Today's Times quotes Savills as saying that retail rents fell 26% in 2019. Must be the Lord Wolfson effect. Either way, the poor so&so's who invested here back in 2018 are looking at zero rent for between 2 to 5 years. Reminds me of the old joke: How do you make a small fortune? Start with a large one and invest it in restaurants and football clubs.

Savills also say that shopping centre capital values fell by 27% in the year, which suggests the second-half results will see even more bloodletting than the 30th June results.

Another quick quote: Colliers have done a study of all the large CVA's agreed since 2015. 23 large companies did them, but 13 still went whoopee anyway within four years, leading them to question whether a CVA merely delays in inevitable? We live in Interesting Times!