Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
Share slide today probably result of this PH broker note which said an equity raise was probable and identified the likely assets for sale. I’m afraid nothing of substantial value.
The equity raise may not be a disaster for shareholders at this level since I suspect it will be conditional on bondholders taking a significant haircut. This would explain why bonds are so low yet shorters have not closed.
Say, and a wild guess, bonds take a 30% haircut, a 20% D4E (so bond debt therefore reduced by 50%) conditional on an equity raise of €150m at say 15p
Net assets will have increased by $450m but offset by the issuing of $270m new shares at 15p so current shareholders are left with 25% but New Petrofac a vastly more desirable investment.
In these situations, where an equity injection is critical, whoever coughs up the cash dictates the terms. You guys must hope it’s not the Bondholders - it’s unlikely they would want more equity if a partial D4E.
A very important point is that Petrofac must know what they need to do to free up the guarantees/upfront cash flow and it may not be as onerous as the above.
But imo it will include an equity raise and possible BH haircuts to improve the balance sheet.
DK
Normally it means the shorters expect to close out via an equity raise, especially at 8.5%.
I’ve been investing for well over 30 years and learnt that the smart money (ie quasi City insiders) always knows more than me. Any equity holder who is not very nervous about this 8.5% short position is a muppet.
It’s possible that there will be a smallish equity raise with no BH D4E equity wipe out. Hence bonds still c. 40 cents.
But until the big boy shorters start closing this reeks of an equity raise. Remember the City will have a pretty good idea about this asset sale and how much it will raise.
Bonds were up slightly today
I’m a bond holder (closed up slightly at 41 cents) and would love to see the shorters running for the door since I’d rather stick with the income and avoid a D4E.
However shorts are actually increasing, up from 8% to 8.5%?
Bonds are currently offered at 40.5 cents, that’s a firm offer. I’m trying to buy at 39.5 cents.
GJ - thanks, I get the broker research about 3 days post issue so will revert end of the week if anything interesting. They must know what’s being sold and the likely value.
Bond weakness implies this is a significant lump of money. Only other reason for bond weakness could be that funds that were short equity hedged by going long on the bonds. As they buy back equity (making a very good profit) they are closing their bond hedge albeit at a loss.
I’m not sure why some on this forum view my posts as a negative for equity? Bonds were trading strongly at 50 cents when we all expected an equity wipe out via D4E. IMO this has to now all be about the asset sale allowing equity to possibly escape whilst devaluing bond security by paying off the RCF first.
But are the shorters really closing? This is the kicker? Last night’s summary was unchanged? Someone posted it here?
Harry
I bought 200K mid morning at 45 cents, 200K at 39.9 cents at lunchtime and 200K at 39.5 cents mid afternoon. I was bidding 37 cents for another 200K but unsuccessful, I’m told they were slightly firmer at 4.30pm.
I’m bidding for another 200K at 39.5 cents this morning.
Bonds are currently offered at 39.5 cents, down 20% on the day.
Conundrum appears to be explained by the proposed asset sale. Appears that the Banks, which rank equally with the Bondholders, are somehow lined up to get paid off with this cash, probably because they are due 2024 and the bonds are 2026. Hence BH’s are being asked to amend certain clauses re their security. I assume BH’s will get some sort of a sweetener to get their consent.
Means the bonds lose part of their security, hence the sell off.
However could be good news for equity, hence the shorters are panicking in case PFC managed to escape without a massive D4E.
Equity is up 20% on the day, Bonds are down 20%. I just bought some at under 40 cents.
Makes no sense? Okay, maybe shorters are being squeezed but why are they closing if Bond holders think update that bad!
Thinking of buying but dissuaded by Thomas sales. Can anyone please advise if a non imminent doom reason, eg divorce, fab holiday…
I’ve listened to most of it but no mention of a raise and no Q&A reference! If likely then the analysts would have followed up?
Where was this mentioned?
TW had £2bn net debt and needed emergency RI, that’s why!
It’s the cheapest for sure but the risk is that it has the lowest booked forward sales, c. 30% whereas the big boys are c.60%.
Gleeson are therefore more ‘in the eye of the storm’
They claim they are the most resilient because customers will downgrade from rivals and they are cheaper than renting.
Will find out next Thursday……
Let’s hope that he is short, the alternative is that he’s a nutter. He has ruined any serious debate on ADVFN with his trolling
stt
Please don’t post such misleading nonsense! They had a very large surplus of enquiries, this has dropped 50% (so not 50% of actual sales!!!) but over a period of extreme market turmoil. We don’t yet know yet what the stabilised rate it.
They are not (yet) dropping prices! Prices fell 18.5% during the GFC and remember that new build should fall c. 5% less than old build.
Listen to the audio cast. Dividend has been stress tested down to 20% house price fall, 30% volume reduction. They will pay 7.5% of NAV down to these limits. They say it’s a cyclical business and by paying 7.5% of NAV, good times and bad, they give shareholders certainty
The worry is that sales conversions have been slipping every week since mini budget, they say that part of this is seasonal so can’t read too much into it….
Trading was to be expected, it’s not too bad so far.
Cut in dividend was an absolute given! A 17% yield cloud cuckoo land.
The increase from £75m to £350m was a shocker, especially since PSN appeared to have swerved this liability.
From memory a director bought £200K post September’s disastrous budget. Hopefully more buying this week
The Going Concern statement looks pretty bullet proof, 50% drop in sales and 20% and implies can still pay a reduced dividend.
NAV 2,720p versus 1.800p share price. On average HB’s have traded at a 1.2 x premium to NAV!
Markets always go to extreme valuations, either over bought or over sold. 1,800p is illogical because on a medium term view this will clearly be a lot higher. Buy now and be happy in a year or try to call the actual bottom and risk missing out
Manfor
Obviously interest rates will drop as UK enters recession. House builders have plenty of time to reduce production which will support prices. They are reducing land purchases to boost net cash.
Yes margins and profits will fall but this is now more than discounted in the share price. They will survive and bounce back strongly.
Bottom line, once interest rates start falling it will again be cheaper to buy than rent. This will fuel the next surge upwards, there are loads of prospective buyers looking to call the bottom
In 2008 the likes of Barratts and TW were stuffed by £2bn net debt and significantly lower NAV per share. They were highly geared. They needed highly dilutive RI’s to survive.
Today it’s the opposite.
Also totally different market dynamics. Much great undersupply and WFH is transforming the market re demand for that extra space/improved home life amenities. And less commuting means more cash saved.
And let’s not forget the lure of new build energy saving measures. If house prices fall 10% new build will be 5%
And all this talk of 6% interest rates is nonsense, the deflationary effect of this current stock market crash plus falling house prices will flatten the curve
Finally there are still a load of people desperate to buy….
What did you all get?
I tendered all my shares and buyback just under 2.5%?
They say oversubscribed but doing the maths I should have got 6%, 10m divided by 154m.
Flip side is that 154m tendered and only buying 10m? Confused