The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Jemand- to apply for an extension, it’s a legal requirement to apply no later than one month before the original administrative period ends.
I read on page 5, paragraph 1 of the Smith & Williamson report ( https://smithandwilliamson.com/media/6517/lcf-progress-report-january-2020-final.pdf )
‘ In January 2020, the joint administrators applied for and were granted by the Court, an extension to the administration period of a further 24 months, beyond the original 12 month term.’
GG- great question. I guess it depends on how confident they are in obtaining their extension! If I were them, I’d be in discussions with potential bidders and trying to extend their administrative role. They need to hedge their bets as much as we do when dabbling on AIM
I’m also thinking that due to the number of shares they hold, there very little chance of them being sold on the open market- there just isn’t enough liquidity to permit that.
Makes me think that they will either need to convince the court to extend the administrative period using this as an excuse OR sell to a single bidder.
By the way, if they want to even attempt an extension, they need to apply no later than one month before it expires otherwise they have no chance. So I make that no later than the 1st December 2021. No pressure….
Mole- I can’t see the administrators hanging around to June 2022 either. As their current extension was granted by the court until Jan 2022, any further extension would also require a courts approval. Apparently this is not a straight forward task as they will have to prove beyond doubt that it is in the clients best interests. It is also interesting to note that they themselves mused over a share price of between 30p-40p (see below):
2nd December RNS ‘Joint Administrators to LCF Bondholders’
‘ By way of illustration, if LOG were to realise its entire interest in IOG at a share price of 30p, the estimated total recoveries for LOG would be approximately £83m, before costs, while at a share price of 40p the estimated total recoveries would be approximately £106m, before costs.’
I concur- that’s a great post from GG. The board as a whole is probably one of the most hospitable and informative around. It’s a guilty pleasure to catch up on the musings and insight of others.
Hi Rhino- thanks for that. Although I think that strengthens the case for the administrators to offload before Jan 2022 as I can’t see the court extending their administrative role if the main beneficiaries ( the mini bond holders) have already been compensated?
Thanks Peak- I do agree with Mole though, the LOG overhang needs resolving sooner rather than later. The big question is how much do they think it’s worth, how much they get offered by a third party ( ?), and can they agree a sum somewhere in the middle…. Otherwise, they’re going to have to start off loading soon…..
Mole- indeed, and boy were there other losses in that holding!! It’s a large chunk to get rid of as you say- I don’t know if a further extension could be granted to the administrator or not. I note they’ve been getting abuse for racking up fees of up to £25M and that was at the start of the year….the pressure may be on them to get rid, and return monies to the mini bond holders? Either way- it looks like decisions need to be made this Q4
The value of LOG’s investment in IOG as at 17 January 2021, at a share price of 17p per share, including the proceeds from the shares which have already been sold, was £56.38 million. Any future recoveries made will be subject to Capital Gains Tax.
https://smithandwilliamson.com/media/8666/joint-administrators-progress-report-30-july-2020-to-29-jan-2021.pdf - see page 6.
Worth a lot more now, eh?
LOG sought a 24 month extension beyond their original 12 month administrative tenure…. This extension ends in January 2022….. the administrator calculated back in Jan 2020 that the total value of the IOG asset to LOG to be around £57M ( including fees etc and cash already paid back by IOG)……makes you wonder what LOG are going to do in Q4….
Source https://smithandwilliamson.com/media/6517/lcf-progress-report-january-2020-final.pdf
Check out page 7, paragraph about IOG, and page 5 first paragraph regarding the tension of the administrators tenure…
As afterthought, I took a look at the average P/E ratio of the oil and gas sector over the past 5 years. The lowest was 7.91 (March 2020 ), and the highest 35.82 ( August 2021 ). The average over the past 5 years is 19.56.
The company value is approximately £150M, with modest earnings projections hitting two thirds of that in one year. With more fields to come on line, and making a reach by comparing against the p/e average sector scenario, it makes a compelling case £100 bond / 50% ownership or not?
After a substantial increase in share price, profit taking is the sensible thing to do. However, this is the time to park emotions at the door and put the logical hat on. This company is financed, backed by one of the wealthiest fund managers in the world ( Mr.Buffet for the uninitiated), and when a placing was called last week, the share price remained solid and proceeded to climb.
The company is going to supply an energy market in a global energy supply crisis, with a long winter ahead. This supply starts in weeks, possibly days.
Furthermore- in addition to creating revenue, we have 3 further drills to be conducted, if that doesn’t add a little spice to the future looking market- then potentially a buyout will.
The share price can wobble today, but I’m adding during these dips- in terms of probability, this is one of the best investment cases on the market.
Mole- I’ve always thought of it as the ‘pecking order hierarchy’. I’m certainly no fan of ‘pump and dump’ placing but felt that the explanation was justified and made sense with the current timing.
It was good to see the intelligence behind the RNS by giving an operational update on Blyth. Dare I say it- perhaps one of the more credible placings I’ve seen in a while… (touch wood)
Can’t see the bid price staying at this level for long.
Level 2 has plenty of depth on the buying side - at a rough ratio of 2:1.
Demand is there and sellers are not wanting to sell at current bid.
And there it is- oversubscribed as we thought
26.2 currently on HL
Mole / Peak- I couldn’t agree more. Given the current share price after this placing RNS, reports that gas prices will remain high for some time, and gas will flow creating revenue - I can’t see how the placing will not be over subscribed.
Furthermore, if practical drilling of Kelham North and Central costs around £7M ( excluding survey and associated costs) at historical low rates- makes me wonder how many millions will be saved by securing the drill rig now.
So we should hear today if the placing is successful or not via RNS, and the shares will trade on the 28th Sept.
Flow test to be completed within the next week ( Sept end) - so expect this RNS in the next 10 days.
*BEFORE Q4!! Not Q1!!
Placing price is solid at 25p, it also increases much needed liquidity. Pleased to see management finally digging into their own pockets, my only gripe is why it took them so long.
Note that Blyth is completely drilled and going through clean up, dewatering kit being installed at Bacton appears to be the only hurdle left to first gas?
Given the therm spot rate, any takers on first gas BEFORE Q1 starts??