Member Info for okenia

The question about the seller is very valid to ask because there is an orderly market clause in the admission document (V, 10.8) whereby not only do WA agree to a12 month lock-in (now expired) but have an additional agreement not to sell after then except with the agreement of Cairn as Nomad and GIS. There's been no directors' dealings RNSes to date - which means that WA still held the shares until White's departure from the BOD. However, I suspect that after he left the board all agreements are void - he doesn't need to disclose any sales as a Director 'cos he isn't one any more, and WA may take the line that the agreement with Cairn/GIS was only while White was a director of LME. I'm not too bothered about White selling, it's relatively common for directors to sell up once they leave (indeed quite sensible that they make a clean break).

I may have missed this in my initial trawl thru the RNSes and documents, so if anyone can point me to it then please yell. This is an Investing Company as per AIM Rule 8. It raised the obligatory £3m and then has 18 months to "substantially implement it investment policy". (Rule 8 copied out below). Question - they've invested ~10% of that initial £3m in Chronix. Is that enough to comply with Rule 8? Usually (cf your standard David Lenigas company) there is some RNS statement that the company has substantially implemented its investment policy as per Rule 8. Has anyone seen a statement from LME to this effect? By my calculations the 18 month period runs out end of next week or thereabouts. -------- "Investing companies 8. Where the applicant is an investing company, a condition of its admission is that it raises a minimum of £3 million in cash via an equity fundraising on, or immediately before, admission. An investing company must state and follow an investing policy. An investing company must seek the prior consent of its shareholders in a general meeting for any material change to its investing policy. Where an investing company has not substantially implemented its investing policy within eighteen months of admission, it should seek the consent of its shareholders for its investing policy at its next annual general meeting and on an annual basis"

£2.7m cash as of 1/1/15 ("Limitless Earth plc is a proactive investing company that focuses on making investments in and assisting companies which exhibit the potential to generate returns through capital appreciation. As at 31 January 2015, Limitless had cash reserves of approximately £2.7 million. Limitless invests in small companies where there are clear catalysts for value appreciation and the companies are operating in sectors exhibiting long term growth linked to demographic change. Examples of such sectors include cleantech, life sciences, nanotech, medtech, recycling, and new internet opportunities.") Then knock of $500k for the investment in Chronix in Oct 2015, plus a year of plc costs (say £150k) so current cash at year end will be somewhere closer to £2.25m That is therefore 3.45p per share cash (i.e. it's trading at roughly the cash position and ignores the chronix investment).

BFS and then project finance, to be more formally correct. If you look at Ariana for example, they got to BFS and then funded the mine construction via debt finance. Usually the Capex for a project is too large to be funded by pure equity (i.e. a placing) and that is especially true at the moment when SPs in the sector are low - everyone at that point is looking for other, non-dilutive sources of funding.

40+ tonnes per hectare, sell for $1000 per tonne, cost $5000 per hectare, 150 hectares total. That's $35k net per hectare, or ~ $5m in total. OK it's shared with the man from delmonte but that's a decent chunk of revenue and not to be sniffed at!

Welcome :). That AIM rule change will change the shell dynamics won't it?

Yes, EVO and AFRI both now dual listed. I know very little about ISDX and why a stock already listed and traded on AIM would benefit from an additional listing on ISDX. DL has had a splash about AFRI now being the first dual-listed company, which seems to imply that this is not simply a precursor to AFRI leaving AIM and trading solely on IDSX. (ditto EVO). Anyone any ideas on this? I'd certainly approve of some more liquidity in both of those stocks.

Because between them the significant shareholders (Hargreave Hale Limited, Glyn Harris, Nigel Wray, Paul Roy, Amphitrite Limited (Richard Thompson), Silton Investments Limited) hold 51% of the shares. The company needed to add a bit more £££ to the balance. Bucket shops would have said 'no' to fund-raising for a suspended share. They therefore speak to the significant shareholders. They agree but provided it's a hard-nosed accountants-based valuation (total cash plus a bit of premium for BOD calibre plus it being a shell). That's a valuation of around £700k (cash + shell). 35m shares @ 2p = £700k MCap. hence the 2p.

Can't imagine he's too pleased either - he took his stake at around the 8-10p mark. Let's see whether he took place in this "mates rate" rights-issue-but-not-for-the-lumpen-proles placing.

Ouch, sorry people It's almost as if they've given up on the original plan and have started again. 2p is about right is this was a blank AIM shell (i.e. a slight premium to the net cash position for a shell). The value of Sportsdata and any premium for wunderkind Yeoman has gone out of the window.

The problem is the capital structure - you can't just re-finance it with £2m and make it a clean shell. Those pesky preference shares can't be wiped clean and they still require £30m to repay. I suppose you could do an equity swap and cancel the pref shares but it's all a big faff.

This now is game over however. Lender has seized all the assets.

"On 1 May 2014 the Board announced that it had entered into a new senior loan facility (the "New Loan") with Blackstone Real Estate Debt Strategies ("BREDS", or the "Mezzanine Lender"), an affiliate of the Blackstone Group LP ("Blackstone"). On 6th August 2014 the Board announced that the New Loan was refinanced with an additional €100 million of senior debt provided by Bank of America Merrill Lynch International Limited ("BAML") while BREDS retained the remaining balance as a mezzanine facility." "The new loan facilities entered into during the financial year with BAML and BREDS have a flexible structure that will enable the Group to reduce its borrowing costs from an interest rate margin of 770 bps above 3M EURIBOR to 470bps over 3M EURIBOR (the "Step-Down" event) in the event that the Group succeeds in paying down enough of the mezzanine facility that its outstanding BREDS indebtedness is reduced to €35m or below, among other conditions." I read that as saying they are pushing thru with asset sales to benefit BREDS, and thus there is the risk that if they are too aggressive in the sales (and accept lowball prices) then it could potentially start to eat into BAML. Of course, for that to happened BREDS would first face a wipeout of that €35m ...

They then passed on the senior debt to BAML though. BREDS just maintain the mezzanine debt. Under normal circumstances (windup) BAML get the first €100m and then BREDS get the next chunk. If there is a shortfall, it lands on BREDS desk. However, as you say the refinancing deal has a quirk whereby this targeted disposal programme repays BREDS, not BAML. Let's do an extreme example. Let's say BREDS take control and force thru a rapid firesale of the entire €200m p/f. And that it only generates €150m in revenue. Do BREDS take their agreed €85m first (leaving insufficient to repay BAML) in this circumstance? In which case BAML are facing a loss they may not have expected as a senior lender. I need to go back and look in more detail at the terms of this refinancing and whether its possible BREDS might be able to force an asset sale that then would potentially trigger a loss for BAML. It's all part of working out who might be opposing BREDS and any forced windup.

We don't know. 'control' is not the same as ownership. They are a junior lender so don't have rights over the assets, but rather they could take control of the company and run it so as to force sales and get their debt re-paid. That's a helluva lot of work and they'd need to be sure that if they ran it they could do a better job that the current investment manager. [No reason to think they could] Clause a) basically allows BREDS to force sales if IERE aren't doing them - however there is already an agreed asset disposal plan in action so seems a moot point to push on a), since that's already in swing. Also, pushing TOO hard on this means you get firesales and poor prices for the sales - if you're known as a distressed seller your bargaining position is weaker and you are tempted to accept lowball offers. If breds push for faster sales then the only people they will hurt are themselves. Oh hang on, I've just realised something quite important about the order of capital payback that's taking place (#facepalm) ...

Well it's not going up soon since it's not trading :) You have to remember what you have here. Massive gearing: ~ €200m of assets and a tad shy of €200m of debt. That makes it all about the balance. Debt more than assets, the bust. But it works in the other direction as well. Provided the rental income meets the opex (e.g. interest) then look at the effect of what would happen if the value of the assets grew - not unreasonable if you look at the trajectory of German commercial real estate at the moment. It's been beaten down and is now ticking up nicely. Let's say it grows 20% over the next couple of years. You now have €240m assets and €200m debt. You've gone from net zero assets to net €40m assets. Current the SP priced IERE as having next ~ zero assets (MCap was << £1m). If it grew to have a MCap of €20m so as to be a 50% discount to NAV then you'd be talking of a SP of around 5p. Because of this balance between two very very big numbers it's not really possible for it to 'just survive' - it will go bust OR it will grow back into being stable, in which case it will have a MCap measured in tens of £m. Give me a lever and I will move the world...

As Nuke999 says, I'm unravelling this. The more we can learn from this the better - since there may be similar situations in the future. I certainly know more about REITs and mezzanine debt than I did a week or so ago. Mentally I expected I wrote this off from day one. The overwhelming chance was that it would wipe out ordinary shareholders. I'll follow this to the bitter end so I get something from it. And hey, it may still surprise us. Remember, there are a lot of big shareholders sitting on big losses who won't be pleased at BREDS swimming in and making shark-like profits. One thing - it's suspended not delisted, so they still continue the business and still have to issue RNSs. I expect at least one RNS next week regarding the standstill letter, as an extension or not is material. And I have a sneaking suspicion we'll see one or two more.

iaintgotaclu - feel free to paste away. The more we all learn the better

Ie a negotiating tactic? By suspending and saying ords/prefs have no value, what they are in fact saying is that "BREDS, you do realise that you are now solely on the hook for any shortfalls?" IERE need the extension letters so they can try sorting something. So they are pushing back on BREDS and pointing out that if they force a rapid sale then BREDS will be the ones that are damaged. The suspension acts to reinforce that negotiating position.

At the moment (and after the sale of the recent German and Spanish properties) there is: €100m of senior debt to BAML €80m of mezzanine subordinated debt to BREDS The Step Down will be triggered once an additional ~ €47m has been re-paid to BREDS. But there is a key thing here - BAML get their €100m first. Thus, if there is any shortfall on the overall debt repayment BREDS take it all, on the chin. In the extreme examples, if there is a €80m shortfall BAML walk away fully-repaid and BREDS walk away with total wipeout. Hence why BREDS are possibly in a bit of a "febrile" state at the moment. Trouble is, if they force accelerated asset sales they'll take losses - and the losses are in effect 2x amplified for them. So it's really not in their interest to pull the plug on this because it is now their necks on the line.