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Post budget, traders now predicting another 2% of UK rate rises, which I think is about £3mln of additional interest to be paid to Riverstone over the loan life.

Perfectly put Nobby. And I fear that we’ve now passed the point of likely financial recovery for equity holders. The time lag between possible far away profits and certain immediate debt servicing looks unbridgeable to me. One way or another Riverstone probably now owns whichever parts of HARL they want to keep / flog.
I am holding as I believe a government that is bringing back fracking is a govt that will push through the storage license, and that’s an asset which could be worth more than the whole of HARL today. It will likely be scraps left for us once everyone else has taken their piece, but perhaps at least more than the current SP.

Worth remembering that they have a floating rate on the 70mln of debt. So every rate rise is more value sucked out of HARL and more into the pockets of Riverstone. The listed vehicle which owns the HARL debt paid another juicy quarterly dividend today. It’s looking like a better Investment in the future of HARL than HARL itself as things stand. We better get something soon on the ML or it’s surely getting towards endgame.

Sorry to say this, but as things stand the equity value is less than zero. It is negative. What you see in the market is not a valuation of a business it is just a call option on some miraculous recovery or break-up.

This is a heavily loss-making shipbuilder facing more challenges than opportunities from rampant inflation. It has a growing debt pile that will require an extraordinary turnaround to stabilise and service, let alone pay down. This company and all its assets are owned by the creditors not the shareholders. Somebody on here had speculated that mainstream banks could step in and refinance at more tolerable rates, I am told by an experienced lender that there is “no chance” of that in a situation like this. The maths of debt service make this a race against time that I see little prospect of them winning unless there are a string of big margin projects awarded imminently. Or unless they get a great price for the gas assets; and even then, what would the shareholders be left with if JW is in charge?

Honestly, I’m starting to think we’re better off buying Riverstone Capital Credit Opportunities Investment Trust (3rd largest holding, the very attractive Harland loan, yielding 13.2% and rising).

stokey12 It is the right question to ask, and the difficulty for me is that net profits have to come after interest and capital payments on what will likely become $70mln of debt at 13.2% interest and rising. I struggle to see a path for that swelling debt pile to be cleared from gross profits. And that’s another reason for my hypothesis that JW’s stated interest in the all out sale option of the caverns is now the only route to clearing the debt. I don’t know what that will leave over for shareholders. Though clearly this is the story that’s already priced into the share.

It is just too much of a coincidence that her team works on a big deal for Riverstone in June, she leaves in July (seemingly not waiting for her year end bonus) and immediately appears as a NED at a company Riverstone now has a massive interest in. Anyway, I have done too much posting here, so will give you all a Rod Stewart fan sabbatical for a while. Time will tell.

It is the company who have disclosed it. It’s in the accounts. John Wood the CEO has rented out his own fishing boat using your and my money for hundreds of thousands of pounds, while paying himself millions and presiding over a massively loss making company. Sadly, due to the parlours state of AIM regulation it is probably within the grey zone of what is legal but that doesn’t make it any less disgusting. If you don’t like me expressing my disgust and anger and extremely low opinion of the BoD’s integrity and competence then filter me.

There is rather a lot of evidence of irregularity and that is what people are posting here as they should if they want to share their anger about it. What would you suggest? Silence and regurgitating the company’s fanciful hype and lies?

Sadly, attending the AGM and asking the board won’t achieve anything. No more than asking a politician a tough question in an interview would. There’ll be a rehearsed answer, it may be unconvincing, but then they’ll move on. What has been achieved?

And on Zotova, who as I mentioned in a previous post appears to have just finished working with Riverstone on another gas deal: her place on the remuneration committee is significant. It further puts Wood in the palm of Riverstone’s hand if they control the financial lever that Fisherman John (who will struggle to find another good job now) most cares about. To repeat myself again re Zotova, you don’t resign from being MD in energy m&a at a major bank to be a NED at a micro cap unless there is a big deal you have been tasked to work on.

Some thoughts on the disclosure that Riverstone have been given 10.4 mln warrants as part of their lending deal. The warrants have a price of 14.25p, far above the current offer price. But that price of 11.75p reflects small transactions in an illiquid share. To buy ten million below 14p in the open market would almost certainly be impossible. To exercise the warrants would cost Riverstone only £1.5mln - chicken feed for a major private equity firm used to dealing in billions. It would also immediately catapult them to being one of the largest shareholders, possibly the largest single shareholder if we assume the others including Killik and HL probably represent a range of different individuals. By having a controlling share as well as their own Director (Zotova) in place, they could ensure that their interests are served. What are their interests? In the short-term the repayment of $35-70mln of debt currently at 11% interest and rising with US rate hikes (notable that just six months interest payments would about cover the cost of exercising the warrants). It is hard to see how HARL is going to service this debt given the meagre and distant profits to be expected from shipping contracts. In the longer-term then it’s probably a question of getting their hands on their collateral - ie the only valuable asset, the gas caverns - which is the kind of asset that is bread and butter for their parent company’s deal machine.

Consuela - this video is hilarious. ‘It looks like a fishing boat but it says survey on the side. Is it a survey boat or a fishing boat? Don’t know”
(Answer: it’s a fishing boat, but being chartered as a survey boat for tens or hundreds of thousands of pounds. Oh and the client’s CEO happens to have just bought the fishing boat and is paying himself for its use)
The next Michael Lewis book is starting to write itself.

If you go to the companies house website you can see more. Wood set up Arrow Marine in 2018, he was sole Director, and it lay dormant until some moment after March 2019 (interesting timing considering they awarded themselves all those extra bonuses for being so extremely busy with the company) . It lists assets of around 250,000k and a slightly smaller amount of debt. So he bought the boats on tick and then suddenly they were needed at HARL. I don’t know why this isn’t illegal. The chairman and board have to ask themselves some serious question about their fiduciary duties.

Here’s an interesting story. In June this year, Riverstone (who currently have a lien on all HARL’s assets) sold Lucid Energy, a Permian basin gas processor, to Targa Energy for a handsome sum. Riverstone’s M&A advisor on the deal was Mizuho (who don’t feature that commonly in deals, being the 32nd largest deal advisor in the league tables).
And guess who was the managing director of the Energy M&A business at Mizuho until she left to join HARL as a new NED just a few weeks after this deal completed? As per her CV, Katya Zotova: ‘advised clients in strategic capital solutions involving private capital’. Awfully huge set of coincidences. Seems highly probable she has been put there by Riverstone who may intend to flip the cavern.

https://www.reuters.com/markets/deals/targa-resources-buy-natural-gas-processor-lucid-energy-355-bln-deal-2022-06-16/

John Wood charged the company £185,760 in fees for environmental consulting services and boat hire through a company he owns. The fees came on top of the £516,446 salary earned for the 17 month period the accounts covered.

They are now saying you breakeven at 100mln revenue and can start generating shareholder value at 200mln. This is a moving of the goalposts (though probably realistic). We were meant to be breakeven end of last year.
The average profit margin of an established medium sized shipbuilder is 2%-4%, so this would equate to £4-8mln of profit maybe in 2024 if no mess ups. And that’s their most optimistic dream. No mention of the caverns, their greatest asset. It’s all starting to feel like the caverns will just be a funding source for the black hole of the shipyards (and executives).

This company has made me too cynical. If I could delete original post I would.

Thanks, if not buried in the revenue line too then fair enough yes.

Page 78 of the accounts, shows a jump in company receivables from £17mln to £45mln. This suggests to me that they have probably booked the revenue from Saipem. This would mean that the £25mln loss is not about a timing mismatch as some have suggested. In fact it could be an understatement if the costs are not fully amortised and recognised to the same extent. If true, this would be an aggressive approach to accounting, and maybe therein lies some explanation behind the delay in releasing them.
So much for ‘cash breakeven on an ongoing basis’!!

JW : “whilst the economics of the [gas storage] project remain encouraging, we are equally ENTHUSED BY THE LEVEL OF INTEREST WE HAVE RECEIVED IN RELATION TO AN OUTRIGHT SALE OF THE PROJECT”
This is categorically why we have the new NED. This is the moment of truth, it can either be done in a shareholder friendly way (100%+ upside) or all recycled into loss-making businesses and executive pay (equity worthless). Make you views known.