The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
KKR are out. They won't come near this as things stand. They tend to invest in companies that are undervalued but have strong balance sheets and are cash rich.
Clermont are in the same position as the rest of us that took a gamble on this stock. That the biggest problem is governance and that the financials are largely correct.
You would have to know what a call and put option are. Probably best to ignore the technicalities of how one is constructed and simply know Shetty put one in place to reduce his downside risk with the trade-off being a cost to any upside.
Shetty did this on 7M shares which is why Goldman now hold them. Goldman should have returned the shares to Shetty but have deemed them to be worth more and so have negotiated them for a fee to Shetty. I expect that Shetty is perhaps going through a liquidity crisis which would explain why he's happy to offload the shares off-market. This is my own view only.
The Goldman RNS is simply a confirmation of the funded collar closing. They have stated GKSD on it because Goldman are involved with GKSD in relation to the takeover approach.
Big investors rapped for failing to spot problems at NMC Health
Trouble-hit company’s directors received across-the-board support from shareholders nine months ago
Some of the world’s biggest asset managers are under fire for failing to respond to governance concerns at NMC Health, an embattled FTSE-listed healthcare operator that last week sacked its CEO and suspended trading in its shares amid a potential accounting scandal.
Pirc, the shareholder advisory firm, has criticised NMC shareholders for not spotting what it described as deviations from corporate governance best practice at the company, which is now being investigated by the Financial Conduct Authority.
Tom Powdrill, head of communications at Pirc, told FN: “I find it inexplicable that people could look at this company and not think there were some things worth voting against.”
According to FN’s review of fund managers’ voting disclosures, companies including BlackRock, Vanguard, State Street Global Advisors, Capital Management & Research and Hermes Investment Management voted in line with NMC’s management at its AGM in June 2019.
Hermes declined to comment. None of the other fund managers responded to requests for comment.
Ahead of NMC’s 2019 AGM, Pirc argued that at least two board directors were not considered fully independent under the UK’s corporate governance code, and recommended voting against them. A spokesman for the directors, joint-chair Bavaguthu Shetty and non-executive Abdulrahman Basaddiq, declined to comment.
Pirc also recommended voting against the reappointment of NMC’s auditor, EY, on the grounds that its fees for non-audit work during the preceding three years amounted to more than half its audit fees, raising questions over the independence of its audit. Spokespeople for EY and NMC declined to comment.
Baroness Sharon Bowles, a director of the London Stock Exchange and a former chair of the European Parliament’s influential economic affairs committee, suggested the multiple deviations from corporate governance best practice should have raised concerns when considered together. “For example NMC might fail a ‘three strikes and out’ test… multiple departures from the code should not be allowed,” she said.
But shareholders approved all resolutions at NMC’s AGM last June with “yes” votes ranging from 93% to 99% — including approval of the auditors, and votes on the appointments of the directors concerned. Shetty and Basaddiq resigned from the company in early February.
Two weeks later, on 26 February, NMC disclosed that a review of its finances had uncovered “discrepancies” in its bank statements, and sacked its CEO. It suspended trading in its shares a day later, and notified the market it was under investigation by the FCA. The former CEO, Prasanth Manghat, could not be reached.
Powdrill said: “We have been recommending that our clients challenge this board over the level of independence for years. These are fairly basic hygiene f
Correct, we can't trust the figures until reports are out but I think we can rely on the snippets of info we've had. Fictional balance sheet? maybe not entirely so, remember the firings and suspicious activity on the balance sheet. NMC cash could have illegally been used to finance the other of Shetty's activities. If this is the case, will NMC be able to re-coup any of it? I get the feeling something illegal has happened and NMC will have re-course to claim back some money, but this will take time. Value of tangible assets I think maybe correct, that certainly has value for the balance sheet.
Just to set expectations, I don't think GKSD are a credible buyer and I think they'll drop out by/on the 9th. The reason why I think this are 2 fold. One, they will not throw their own money at this, especially without knowing the full extent of the debt obligations, and will fail to secure funding without putting up their own franchise as collateral, which I don't think they will do. Secondly, Mubadala will not join them in a joint bid, I don't thin GKSD will add any value to a bid from them, also, Shetty has close connections to GKSD.
Having said that, I think a sole bid from Mubadala is wholly on the table but will depend on no more surprises with the size of the debt obligations. At current levels Mubadala could make a cash for equity offer, buying themselves a seat at the table and allowing NMC enough liquidity for continuing operations. The most pressing issue are call triggers on the current debt obligations and if they can agree an informal suspension, which I think will be agreed to, then NMC seem like they can service the debt on an ongoing basis.
What does this mean for valuations? certainly we'll see a dilution in the value but it would also mean the company has cleaned up it's governance issues and the financials will be more transparent than they've ever been. If net income is close to what has been stated then we should find that the share price rebounds, how quickly I couldn't say. One thing is clear though, NMC do not have any/much cash reserves, so MW was correct in their assessment of this. The questions is are they correct on Income being overstated too?
I have my doubts with GKSD, I suspect if they mount a takeover it would have to be a leveraged buyout and we already know NMC is highly levered. A leveraged buyout may make it financial unviable unless GKSD can find opperational efficiencies somewhere and they'll know that. The best chance is with Mubadala and a debt restructure.
Rasmala are small fry. I can't imagine they have the financial backing for a takeover. A minority stake perhaps.
Ithmar is not looking at taking over. They've been instructed to look after the share ownership of the Bhuttis, so that they can take a passive approach to their holdings.
Doesn't appear to be much new information here apart from some technical clarifications around majority owners' positions and just underlining the governance mess, but we already knew this. Certainly nothing around the operational viability of the business. Don't think there's much to be gleamed.
Don't really agree with the NMC vs Marconi comparison regarding debt restructure. Marconi made some seriously bad operational business decisions before they had to re-finance as they weren't gererating enough income to service the debt. Reading between the lines I'm guessing NMC can service their debt payments so business is profitable, they can't however clear the debt should it be called due to breaching debt covenants, one of which is around the overal holdings of majority owners falling below a threshold. I won't know the full picture about NMC until the Freeh report and updated financials so will refrain from saying much else.
New RNS about the Ithmar Capital investment. looks like the Bhuttis are going to take passive role in NMC and have passed shares to Ithmar to manage on their behalf.
Bit of a gamble from Ithmar but I can see their rationale. If the shares were still trading then they would have probably spiked, can't sai how much, off the news that Mubadala were interested in getting involved, and I suspect another positive uptick on the news of the informal standstill, purely beacuse it means they can still service their debt in the absence of any fincial shocks.
Moody's have downgraded credity again though and have said they're going to drop NMC from coverage until the financials are more clear.....again this makes sense to me. Also, perhaps, priced in with the drop in cost of debt.
Looks like GKSD have approached Mubadala to become equity partners. GKSD have to make an offer by 9 March. Also, Mubadala is still investigating its own potential investment. Nothing concrete on this. For info only and not to be treated as good or bad news.
Mrd, take your advice, sign off and come back at end of April. No-one knows what's happening and all is speculation. Also, the media are'nt helping by printing sensationlist stories.
The steps the management team are taking appear sensible and they also seem to be controlling the news flow right now. Hopefully they're competent and after all is done can preserve some shareholder value.
But.....you will drive yourseilf round the bend trying to read into everything that is happening.
Correct but it's clear NMC are trying to manage the situation. They've inherited a mess from Bhuttis and Shetty and everything they've done so far seems sensible/logical. The RNS didn't say that the company is folding. Saying the company is going one way or the other right now is still too early and an over reaction to the news at hand.
There are diffinately debt covenant issues, possibly more than the one we know of. But it seems to me the main concern is the loan trigers on the debt covenants, rather than the debt cannot be serviced.....they can make the monthky payments but they can't pay of the debt early.
In this case what they're doing is the right thing, by asking for the informal freeze and retructuring the debt. If the informal freeze is agreed to then we should be able to assume that lenders also think the business can continue.
With my most companies, yes. With the new board of this company, perhaps.