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PG73, it is refreshing for an old-fashioned chap to read a post which does not contain extreme language surrounding the certainty of the imminent demise of RGL. Do you remember the embarrassing exchange here on whether RGL could continue as a going concern? There is no realistic likelihood of any such catastrophe. There are certain short term challenges to be dealt with. In particular, the retail bond situation needs to be addressed. It needs to be clearly understood that RGL is not looking for new money but replacement of existing financing. This can be readily achieved in a number of ways. The worst outcome here is a higher interest rate for the entire £50 million. Clearly, this would be regrettable (implying a small reduction in income available for dividends) but far from catastrophic. One should not forget that as at the year end 2023, there was £30.2 million unrestricted cash.
Concerning the LTV target of 40%, this is only a target. Nothing happens if this is exceeded. Loan covenant LTVs are more consequential, in particular the Santander financing where there is the real possibility of breaching the 50% LTV limit when the limit is reduced to this level in June. However, there is no significant likelihood of draconian action by any lender, providing the business continues to generate significant cash to make interest payments.
Call me old-fashioned, but I consider the RNS to be very encouraging (leasing of additional 30,000 sq ft, even if it is in Glasgow?). I do not share the view that RGL property values are over-stated (what evidence is there of this?), nor do I consider that RGL is a desperate seller.
I do not believe there is any vaguely significant likelihood the business cannot continue as a going concern. The retail bond concern is a minor irritation for which there exists a wide range of alternative solutions. In 2023 the business had an operating profit of £43.1 million. As at the year end there was £30.2 million unrestricted cash.
MTB,
Once again, I am with you. This business generates a lot of cash, easily covering interest costs and its viability should not be in question.
There is much exaggerated talk about the potentially calamitous consequences associated with need for replacement of the retail bond. It is only £50 million and it is a replacement of existing financing. There are many perfectly satisfactory options available for dealing with this.
MTB,
I am with you. Surely, aren’t people forgetting that this business generates a lot of cash (as you describe) and its viability should not be in question.
However, having said that, the crass nature of that RNS is quite extraordinary and utterly counter-productive. Instead of providing a calming message containing details of a viable, well considered plan to deal with the situation, it has intensified concerns that the company may be facing insurmountable financial difficulties.
404x,
“If they have nothing to hide on their hugely bullish valuations”
These are not valuations that are in any way controlled or influenced by RGL. See extract from last (2022) Annual Report:
The Company’s external valuer, Cushman & Wakefield, provide independent valuations for all properties on a six-monthly basis in accordance with the RICS Red Book.
The Company’s Auditor engages an independent third party to evaluate the Cushman & Wakefield valuation.
In fact, there have been many instances (see Inglis interviews) where RGL have complained about the valuations, stating that the values provided and reported are significantly lower than the RGL view.
Pangloss,
I’m with you on the valuations issue. I believe it is absurd to suggest that the valuations are in any way controlled or influenced by RGL. See extract from last (2022) Annual Report:
The Company’s external valuer, Cushman & Wakefield, provide independent valuations for all properties on a six-monthly basis in accordance with the RICS Red Book.
The Company’s Auditor engages an independent third party to evaluate the Cushman & Wakefield valuation.
In fact, there have been many instances (see Inglis interviews) where RGL have complained about the valuations, stating that the values provided and reported are significantly lower than the RGL view.
LOTM-13
I am especially struggling with your recommendation concerning share consolidation. How does a share consolidation affect anything else apart from the number of shares and price per new share? We have just had a share consolidation and the number of shares was divided by 20 and the share price per new share was 20 times the old share price. Total dividends payable remained the same.
It was my understanding that the reasons for share consolidations are very specific and very few (e.g. to meet minimum price listing requirements, to make shares more marketable when share price is excessive).
Why do you want a share consolidation? What will it achieve?
I regret that I do not see the purpose of the Tender Offer. If DEC wants to reduce the number of shares, this can be readily achieved by the normal buyback process, at known prices. If shareholders want to sell, they can do that in the normal way in the market by selling the shares prior to the ex div date (thereby receiving the dividend in that way).
LOTM-13
I think you must be very Intelligent, because I have no idea what you are talking about.
“I was actually thinking about DEC paying the ordinary dividend not as an ordinary dividend but as a special dividend followed by a corresponding share consolidation. Because that would be in the best interests of the company shareholders as it reduces the amount of shares in issue by a large amount all at once & thus reduces the amount the company pays out in dividends going forward, without cutting the dividend per share to anyone.”
How does changing the name of an ordinary dividend to a special dividend achieve anything? All that changes is the name; there is no financial consequence, as far as I can see.
How does a share consolidation affect the dividends payable? We have just had a share consolidation and the dividends payable remained the same.
Coolbeans, you are incorrect. A drilling rig is not used to plug a well. This would almost always be done using a workover rig, the sort of equipment used for remediation operations. This is much smaller than a drilling rig and cannot be used for drilling operations. Another thing, there are no drill bits left in wells, unless (rarely) a drill bit gets stuck during drilling and cannot be recovered. When this happens, the well is deviated. There is no question of recovering drill bits during plugging operations.
I share the concerns of BeanCounting; I find the DEC response very bland. In the Letter from Congress, there are questions under nine separate headings, most of which contain several separate questions, many of which request specific, detailed and quantified responses. An example (as per BeanCounting) is question 7, regarding why the CNX Resources asset package retirement obligation was decreased when DEC bought them. There is no attempt to address this. There is no attempt to address many of the specific concerns that were raised in the Letter from Congress. It is possible that the requested detailed responses are in a separate document. If that is the case, it would be nice to see it.
Ticketi,
I was unaware that the "credit facility is based on the SP". How is the credit facility (which one?) based on the share price?
Could you please clarify that comment and explain how that works? What has been the effect on the credit facility of the recent collapse in the SP?
MrG,
Bravo!!!
I fully agree. I am fed up with this conspiracy theory infused nonsense about lies and failures to fulfil promises which continues to fill this bulletin board. There have been no lies or failures to fulfil promises.
The undertaking was:
Under the Programme, the Company, at its discretion and on occasion, may (subject to applicable law) purchase its Shares in open market transactions depending on market conditions, share price, trading volume and other factors. The Board believes that the Programme, if and when implemented, will represent an appropriate use of the Company's cash resources relative to its net asset value.
The Company intends to conduct the Programme concurrent with the following parameters:
• The maximum number of Shares repurchased shall not exceed 85,004,655 Shares
• The total consideration of Shares repurchased under the Programme shall not exceed an aggregate market value of £108 million
That is what they said they would do and that is what they have done and are continuing to do.