Member Info for Hounddog10

LTI Market cap does have relevance in the sense that it gives context to the size of the issue. If the market cap was £100bn the pension deficit would be probably completely irrelevant. Acquirers do not like uncertainty and the deficit could get worse (although the scheme hedges most of its major risks). In a takeover of a listed company you don’t get indemnities. I agree it is not an insuperable problem but combines rather unhappily with other well known issues that BT has at the moment and which will take time to work through. As you say the sue gradually disappears.

Pokerchips. The Boots scheme had a £590m surplus (accounting basis) in its last set of published accounts. In addition, Boots agreed to put in an extra £670m prior to the scheme being transferred to L&G. Scheme liabilities of £4.8bn. So basically a surplus of around 25% needed. I think the likes of L&G, together with the regulator, are very cautious that any transferred scheme will have enough assets to fully pay out liabilities as a bought out scheme loses the employer covenant and the protection of the pension lifeboat.

I agree with another poster that these schemes may well go into strong surplus at some stage. The actuaries are generally very cautious in their assumptions and as these schemes mature with people passing away and less time for remaining pensioners to be paid that actuarial caution progressively gets removed. However, there is a 25% tax at the moment on realising any surplus and the schemes are an absolute pain in the neck administratively for companies. However, if I was BT’s CFO I would be inclined to run with the scheme.

LTI. Yes, certainly, the pension deficit has come down significantly (although I think some expected a greater reduction). However, the deficit is still £3.7bn on about £40bn of liabilities. And BT’s market cap is only £11bn! So I would suggest it would still remain a significant factor in a takeover.

The pension scheme is still in significant deficit. For an insurance provider to take it over it would need to be in significant surplus as the buyout basis is done on cautious assumptions. BT would probably have to lob in £10bn to get someone to take the scheme off their hands. BT don’t have the money.

Hardly a surprise. But look at their logic as shown in the abstract of the judgment:

In dismissing one point they say:

“According to the scientific studies available when the directive was adopted, the level of biodegradation of that plastic is low to non-existent in an open environment, in landfill or in the marine environment.”

In dismissing another point they say:

“The more rapid fragmentation of plastic containing a pro-oxidant additive can have an increased negative impact on the environment since its biodegradation is concentrated over a shorter period.”

27 Feb (Midday roughly) but better not to leave it to the last minute even if you want to wait it out for a bit to see how things go,

Anyone else with them? Having a bit of battle with their Corporate Actions department over voting. That part of my holding is in a SIPP. They are saying the bid is “mandatory” and there is nothing to do.

Yes, they have taken into account potential revenue losses. Page 36 of Annex 7 to the report. (They have presented the revenue losses in a strange way (or more probably screwed up) such that to get to the net cost savings number you have to reverse the order).

One of the RM people on Campbell’s phone in remarked that RM has a pretty good handle on how price rises affect volume. I suspect they do but are entering unknown territory with very big price hikes.

Yes they can put 10p on the price of each letter but that will impact volume and the difficulty they face is that letters are dropping by volume 8% each year. So they are constantly battling that headwind.

https://www.ofcom.org.uk/__data/assets/pdf_file/0026/275822/A7-Our-approach-to-the-net-cost-calculation.pdf

Find the Scheme document on the two websites we are directed to on the RNS? Can’t see it myself.

The three options boil down to:

(1). Ditching Saturday. Cost savings £150-200m; net cost savings £100-200m. Best for CWU. Not enough savings for RM. Government opposed;

(2). Alternate 3 day delivery. Cost savings £550-700m; net cost savings £400-650m. Best for RM. Highest impact on jobs and CWU. Assume government opposed;

(3). Moving delivery times out to D+3. Cost savings £300-700m; net cost savings £150-650m. Goodish for RM (but note wide range of net cost savings as impact on revenue uncertain). Not particularly good for CWU. Presumably government in favour as keeps all six delivery days.

OFCOM says after consultation process will “update” in Summer. Seems very unlikely there will be any agreement prior to autumn sitting of Parliament. So cannot get the necessary legislation into the parliamentary timetable. Then in October Parliament probably dissolved ahead of election. So first time legislation to be considered by Parliament will be January 2025. Unlikely to be top of the agenda for a new government. Sunak obviously wants to kick issue into the long grass for Starmer & Co (?) to deal with.

Those are net savings. They are assuming certain revenues will be lost with a reduced service. The cost savings are a good deal higher - which will please the CWU.

I think legally the way it works is that the finance provider is entirely responsible for the deal the consumer is offered through the dealer. It is similar to when someone uses a credit card to buy something. The credit card provider is on the hook if goods are faulty or there is fraud. I am not entirely sure how it has got to this situation but that is the direction consumer law has gone.

The whole thing is really a nonsense. People don’t look at breakdown of fees and hardly understand the APR. They look to the monthly payment and decide if they can afford it.

It is all rather dispiriting. Same sort of issue as BT phone boxes. I never see anyone using them but there is always one hell of a fuss over their removal. My council for a previous address refused to let BT remove all the phone boxes it wanted to even though most only were used for about ten calls a year and some almost none. They did allow some of the modern ones to be removed but very traditional red phone box removal was refused on the grounds of being in an area where there were “elderly people and renters”.

There used to be around 100,000 BT pay phones. Now there are 18,000 of which, at 31 March 2023 a quarter were out of service. No one seems to notice that. BT in the year to 31 March 2023 had to do over 30,000 maintenance visits to the phone boxes.

https://business.bt.com/help/article/phone-line-and-services/payphones/payphones-service-levels-closures/

It will be the same with Saturday delivery. People won’t worry about it once it is gone. Personally, however, I think they need to go to alternate day deliveries. The savings by a ditching just Saturday aren’t big enough. It will take about two years to get any change in. Consultation, decision, legislation, arguments with CWU, revisions etc., by which time letters will have fallen even further.

They have to hand over the same information to any bidder or bona fide potential bidder as they have given to Saturn. That won’t be the reason. In fact from a due diligence perspective Shanta is quite simple. Clean balance sheet (except for the $23m VAT) and detailed quarterly information. The extra info that any bidder would be after is on the drill results and relationship with government. I think really you could do an opening bid on the public information.

It is unlikely that there is a general problem impacting Shanta as otherwise Saturn would not be bidding for the whole company. The concern must be that Patel has some sort of leverage (probably in relation to his relationship with the government) he can apply if his bid for the company is rejected.

So the FT thinks that UBS’s negative goodwill of $29bn is distributable! Hmmm.

They have 28 days from the takeover announcement to get a Scheme document out. This is essentially the offer document. It is, I think, business days and by my reckoning that gives them until the end of the month. It is then three weeks from the date of the Scheme document to the Court hearing to approve the Scheme with voting a bit before.

My guess is that any potential counter bidders will wait for the Scheme document before making a move. It won’t say too much more than the announcement but there will be some more detail.

Hardup. Yes, I think the car exposure is only in Black Horse. I would assume any exposure on Tusker would be covered by indemnities on acquisition.

The linked Times article is the best I have seen. It says analysts reckon up to £10 billion exposure for the industry and up to £1.5 billion for Lloyds. Seems that the relevant period for this “discretionary commission” was only 2013 to 2016 and only 40% of car loans in this period sold in that way. FCA to do an investigation which will take 37 weeks and then decide on next steps.

It is big enough that they will have to say something in the group accounts coming out next month. I doubt they will provide until the FCA comes to a conclusion. So possibly could catch the 2024 accounts in the last quarter but could equally be a 2025 item. I suspect the banks will have to pay up. There will also be some admin costs on the payouts but I think all the costs (payouts and admin) are tax deductible so knocks off 25%.

Personally, I am a bit more worried about their £1bn tax case and whether PPI will reignite re Plevin (two adverse Supreme Court judgments last year. They are rather more immediate - but no one seems to talk about this.

https://www.thetimes.co.uk/article/lenders-could-face-10bn-compensation-bill-over-car-financing-6ckj73xln

The 3Q results were much better than expected. Certainly I had feared worse. However there are a couple of things to note:

- They say that full year is going to be group breakeven at the adjusted profit/loss level. At the half year they made a group £169m adjusted loss - split between a £319m RM loss and a £150m GLS profit. Presumably GLS is slated to do at least £150m profit for the second half so that leaves RM making £19m profit for the second half. Overall therefore for the year RM will lose £300m - and that is before VR and financing costs. So still probably still be losing £1m a day.

- For the nine months RM parcel volume was up 3% but revenue only went up £30m. Where, rather bizarrely, RM did well was on letters with revenue up by £150m despite volume falling 8%. Nearly all of the extra revenue seems to come through in Q3 so seemingly the price rises did not affect Xmas card traffic.

The problem is that with letter volumes continually declining it is difficult to see that further large price hikes to maintain letter revenue will not significantly impact volumes. I suspect the effect of the last price hikes have yet to really hit volumes. Letters are expensive now.

Sorry, can’t do my maths. Typing too quick after an earlier note was wiped half way through.

Jammin. No, it is about those that DO vote. Only those that vote count. So 18% for yes (in the initial RNS) represents about 180m shares. However they can be defeated by 60m + 1 share voting no. That is the maths. So even if the yes side gets 4 extra votes, one vote on the no side is enough to counteract them.

By my very rough calculation based on opening position disclosures about 65 - 70% of shareholdings we don’t know about and are widely dispersed. I would imagine many of these are institutions holding under 1%. A lot depends on how they vote.

However, Lombard which is on a letter of intent to vote yes bought up an extra 6% of votes last week.

As this is a Scheme Patel et al are not allowed to buy up shares or for others to do it for them (concert party). However, of course, that does not mean it is not happening, but anyone doing that would probably be wise to keep each holding under the 1% disclosure level. I would assume, but do not know, that there are, at least, some basic checks done by the Company Registrar and/or the Court on voting to ensure that there are no obvious signs of malpractice.

The proposed takeover is being regulated by the Takeover Panel and its rules. Yes, there are some very general FCA and AIM rules that impact but really this is something dealt with by the Panel.

AIM Regulation is utterly useless so nothing can be expected of them.