Member Info for sdow

No sign of GK - I found him to be the most informative poster on this board. Guessing like myself he took a bit of a bath here and doesn't feel like posting...

Any views mate? Personally, I feel slightly misled by the company regarding the bond issuance & initial reasons for pulling it - seems to be it was less about "market conditions" and more about a lack of Government Backing. Like yourself I was watching B- / CCC junk bond yields closely but that was probably a waste of time with the benefit of hindsight. Fortunately I got out of most of my holding at 10p the day before the crash (I know that sounds a likely story) - but it was only because i was boarding a flight in the avo when I noticed the suspicious -10% sell-off... I sold 650k shares on the Monday but did not sell out my SIPP holding of ~350k shares - I guess the fact I'm relatively young and have taken most of the hit in my SIPP (sold 4p and made a bit back buying in at 2.5 and selling 3.5p day of crash) makes it slightly easier to swallow than had it been my ISA accounts but I suppose money is still money.. I recently bought 150k at 3.7p (tiny size historically for me) but not willing to dip my toe in much more than that.. the only thing making me not give up entirely is the fact no major holders have sold.. I think the approach to take will most likely be to raise a smaller amount of money to navigate the aquifers but all timelines will be pushed out by 18 -24 months.. that's if it doesn't just get shut down..

I have to say CF has been worrying me slightly recently - find - he reckons he was taken out of context re: privatisation however it seems like he was still alluding to it - I also get worried when people blame short-sellers etc... having spent some time trading Italian shares where they actually banned short-selling & prices still fell (obviously).. bulletin boards and shorters is not the problem here - the stage 2 should have been revised down to smaller amount with warrants attached as soon as first attempt failed.. I think it is perfectly reasonable to argue the case that 25% of the costs will be used to derisk the project by 50-75% once aquifers are circumvented... then raise balance of finance at a lower coupon.

Got back in this morning 8.3p only because I felt the 8p level was holding relatively well.

"Brucey Bonus" was the Trump Tariff Suspension news which is a game-changer for this share! Bonds away now before Labour Day in US (2nd September)

https://www.bloomberg.com/news/articles/2019-08-11/what-to-watch-in-u-s-corporate-credit-markets-this-week

Labour Day = 2nd September 2019

"the market not agreeing" - to also put this into context.."the market" has only traded £4m notional of SXX shares today - a.k.a. nothing.. half the daily average volume - it is summer.. volumes are low and illiquid thinly traded shares like SXX can easily hit an air pocket and whip around 5% for absolutely no reason.. probably the top 10 LTH on this board couple dump £4m shares in a day if they wanted..

Agree with GK - I'm sitting back and waiting for the end of summer.. and I also agree that investor sentiment towards management is probably negative after the last dilution.. which is to be expected hence why many seem to think they are incapable of getting the bonds away, or will have to pay a "high teens" coupon.

Also, can't rule out "a left of field" scenario.. imagine if Boris , in the run up to an autumn General Election tried to curry favour "up North" by accelerating through a Govt Infrastructure Loan? Maybe Theresa didn't get involved because hubbie Phil already was??

In my opinion people are deluded if they do not believe SXX can get $500m of bonds sold for the following reasons..

1) To put it in perspective - 2 lithium companies which were not even rated by agencies recently got bonds away at 8.25%. Sirius has a B rating - there are many bond funds out there with almost unlimited amounts of capital to deploy who look at nothing more than the "label on the tin" i.e. the credit rating from S&P / Moodies in order to invest. The ECB has NEGATIVE INTEREST RATES for goodness sake - investors have to deploy capital to assets such as SXX in order to avoid PAYING to hold their cash in a bank.

2) Urban Exposure are raising 500M via a 10 year bond at 6.5% - I think those of you believing our coupon will be "well into double digits" are absolutely deluded.. the junk bond market is currently screwed up... yields are ridiculously low and do not reflect risk..

3) Greece just sold EUR2.5bn of 7 year bonds with a coupon of 1.9% (below the 2.1% expected) and was oversubscribed by EUR 10bn!!!

4) Are you honestly telling me investors such as Norway, Qatar, Gina, Capital Group et al would not have a "double dip" and buy $50-100m of bonds each in order to grease the wheels and unlock the JPM RCF so they enjoy both 6-8% yield from the coupon as well as the instant upside on their equity? They could easily pay for the bonds out of the share price probably doubling as soon as the issue is done!! Free money?!?!

5) JPM are selling the bonds - they are the #1 Investment Bank at the moment with "full service banking" across IBD, Equities, Fixed Income, Commodities and Private Wealth.. they could probably punt these bonds to their high net worth private wealth clients alone..

6) I think some people on this bond don't even understand "finance terminology" - junk bonds do not mean they are "rubbish" - it is simply industry speak for "bonds that carry a higher risk of default than most bonds issued by corporations and governments.... this is perfectly understandable.. we are not BP or Astra Zeneca are we..

Hi GK,
What do you make of the Qatari & Pelham Capital disclosures? Almost 10% between them.. no news articles published (yet)? They appear to be new holders i.e. not existing increase..

Very reassuring in my opinion, the more Institutions involved the easier the bond sale will go.

Cheers

2 hrs since the RNS and not a single news article (yet).. enjoy the trading edge afforded by the "information time lag" while it lasts - you just won't get this sort of delay between news and price movement once the share is properly on the professional's radar!

Wow - so Qataris and Pelham on board along with Gina, Jupiter, Norway. That is serious backing and in my opinion means there is virtually no chance we will not get the bonds away in October!

Along with the fact I think short interest is down to long CB holders (Och Ziff and Citadel) hedges I think all this news is incredibly bullish - I notice nothing has hit the newswires yet so don't think it is reflected in the share price yet, probably will take the evening/morning papers for the average investor to learn about this great news.

Well done all LTH!

Good explanation of convertible bond arbitrage here: https://www.investopedia.com/terms/c/convertible-hedge.asp

I think the supposed “shorters” (Citadel, Och Ziff et al) are in fact our convertible bonds holders. To remain market neutral they have hedged their long CB position by selling the number of shares equivalent to their CB exposure while they collect their “enhanced” yield).

So, like the example in link shows, not only do they collect the yield on the CB’s but by borrowing the shares and then selling them they receive a positive cash flow, reducing the outlay for the CB’s which enhances the yield further.

If the stock goes up the loss on their short position is offset by the long stock position from exercising the CB’s & vice versa if stock drops they win on their short stock position. Clever!

Why is this important? I think because a naked short position is entirely different to a short leg of a multilegged trading (arbitrage) strategy. My prediction is the shorts will disappear in unison with CB conversions.. like in June 2017??

Citadel founder (Ken G) started out trading CB’s from his Harvard dorm let’s not forget..

Well, yes, but my point is merely that there is a world of difference between naked shorts and shorts as a consequence of an (arbitrage) trading strategy. If there was 10% naked shorts I’d be concerned but I’m fairly sure the shorts are just hedging CB’s - keeps a lid on price, sure but one of the few/only edges we (PI’s) have over Pros is time - they can’t get involved here (yet): FTSE 250 off limits for a lot of pro risk managers, too hard to make short term plays if a trader (evaluated quarterly/annually)... no listed SXX options/futures.. straight equity play for a pro would be niche..

Guys,
I wouldn't read too much into the shorts - more than likely the hedge funds (Och Ziff, Citadel) etc are holders / will be holders of the convertible bonds. They are therefore simply hedging their long convertible bond positions by shorting the shares - this keeps them market neutral. In my opinion they are not market short SXX - merely neutral whilst collecting convertible yields.