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Sain_Vision: Even if there are breaches, bank could only ask Receivers to recover their debt from sale of property on which INTU breached the debt agreement. Obviously, it would be ridiculous for bank to send Receiver if LTV is 60% as even after breach, property has 40% value above the loan. In this case, bank may ask to renegotiate the loan at higher interest rate, but then, INTU is already paying much higher interest than interest rate in the market.
Sain_Vision: Normally: If LTV covenant is breached than (if agreement between INTU and Bank allows), bank can ask to renegotiate loan terms, could increase interest or could ask for their loan back (all depends on conditions negotiated when loan was taken).
But with INTU, they have many assets that has LTV much below the agreed value, and that means, INTU could take loan on those assets to cover loan breaches. ... again, all depends on terms and condition agreed when INTU took loan.
Sain_Vision: I do not know why u r so concerned about breaching LTVs? … Maybe, u r confused regarding LTVs. What I understand is:
LTVs have 4 elements.
1: Mortgage with respect to valuation of property.
2: Interest rate
3: Time period
4: Interest rate is fixed for the period
1: When company (INTU) takes loan, they (company) decides LTV they want. Higher LTV means higher interest rate.
2: Depending on market situation, if loan period is longer than interest is higher (at present) or could be lower (if market believes that in long run, interest rate would decrease).
If LTV is breached, most of the time nothing happens and debt stays as it is, till time period ends.
One should remember that LTV is decided by the company when loan is taken, and it is not in the hand of company if LTV breaches. That is the reason, once loan is taken and period agreed, debt stays till period ends, without any problem. But, even if debt is called, company can take another loan at higher LTV to cover debt called.
Anyhow, once debt matures, company take another loan and that loan would depends on new market valuation. Obviously, if LTV breach has happened than company would not get loan at previous valuation.
Example: Let say, property value is £100000 and required loan is £60000, that means, LTV is 60%. Depending on market, with required LTV 60% and loan period 5 years, interest could be 2% (presently, interest is very low). But if company requires loan period 10 years with LTV 60% than interest would be 3%.
So, one can see that LTV value, required loan period and market condition determines interest on loan.
As for INTU, I doubt anything will happen if company breaches LTV … or if there is agreement that company should not breach LTV than maybe loan period would end, and company would need another loan with new term.
IMO it would be good for INTU if loan period ends, as in present UK situation, banks are giving loan 100% on commercial property value and interest rate is very low.
So, in theory INTU could get further £ 3.8 bn loan from banks at very low interest rate (that would be LTV 100%). Obviously, INTU would not want that, as higher the value of LTV, higher the interest cost of loan and arrangement fees.
On the other hand, INTU is not forced to keep LTV below 50%, rather, to keep LTV below 50% is company own requirement/decision.
Thus, most important is not LTV but INTU rental income. If they could not service debt, they would be in big trouble. A company (like INTU) would go bankrupt only if they could not service debt.
Second reason COULD BE but UNLIKELY is that the value of their property reduces so low (or below their debt) that banks start thinking that they may not be able to get their money back and thus take the company to Receiver to recover the loan. But this usually happens if value of assets go below loan and income from properties cannot service debt.
Sain@vision: There is no such thing as ‘market evidence’. Any real figures are from company itself that they release for shareholders or public. But then, people in the market have their own agenda speculating information on shares, with little ‘Evidence’ or ‘Reason’.
‘Valuers sweat by it’: Valuers value the company assets taking account market or their whims, but again, their valuation is just an estimate at best and BS most of the time. On the other hand, when they estimate value (as official surveyors), it is duty of company that tells the valuation to share-holders and public, no one else.
Fact is that, no asset surveyor has given value to INTU assets other than what INTU themselves declared in their reports.
Spanish assets: It is lies that Spanish assets were sold 18 % below book value. It is obvious that if seller wants to sell an asset quickly, price would be at lower range. So, lets see what price INTU got for their Spanish assets.
All valuation according to surveyors at the end of 30 June 2019.
Puertu Venecia: Total Valuation (inc debt): Euro 266 million INTU share.
Debt Euro 112.5 million
Sold for Euro 475.3 million (INTU share: 237.7 million or 90 % of valuation)
Puertu Venecia was sold 10 % below its 30 June 2019 valuation.
Asturias: Total Value (inc debt): Euro 159 million (INTU share.
Debt Euro 60.5 million
Sold for Euro 290 million (INTU share: 145 million … or 91 % of valuation).
Asturias was sold 9 % below its 30 June 2019 valuation.
So, where are u getting spanish assets sold at 18% below book value?
Sprucefield Retail park: Total Value (inc debt): £40 million.
Debt £ 25.2 million
Sold for: £ 40 million
Sold at same value as valuation on 30 June 2019.
Note: These 3 sales alone reduced INTU debt £ ~ £173 million … plus gave INTU approx £286 million cash. If all cash from these 3 sales were used to reduce debt than debt should get reduced by £460 million or 10 percent of total debt.
INTU Derby: sale was also not bad. INTU do not expect that rental income would go down. Actually, what I know, INTU Derby income has gone up after sale. INTU share would be half of INTU Derby rental income, plus management charges. On top of that, INTU reduced some of their debt from sale proceed, and that is saving of approx. 5% on whatever debt INTU retired.
u will be happy to get 40 pence, but Whittaker bought those 27 % shares in compnay at on average more than £2.5 a share, so, why he would accept such offer?
You claimed that u know INTU certainly do not have £2.5 bn worth of assets ... and has dropped 18 % from book value ... SO ... Where u got these information? ... Speculation, Propaganda or dream? If u r telling truth than please quote RNS of the company or any INTU report to shareholders, mentioning that.
Obviously, INTU reports do not say that and it is only INTU report that public and shareholders know. If there was any material information out there but unknown to public, then directors had duty to tell shareholders and make it public, as not doing that would be crime. They can be sued and could go to jail, so why they would report lies?
Regardless, what u mentioned is true than u should have quotation from INTU own sources to public ... or ... confess that it is ur inside information that u used to buy/sell or short the share (something illegal) ... or ... as I beleive, u r fabricating such information to misguide others.
And why u think present major shareholders would accept 40 pence a share when they know their shares has over £2.5 worth assets and company is worth over £3 billion after debt? ... Why Whittaker would throw his wealth away knowing that assets are there, rents are there, but market sentiment rotating around 18 percent shares in market are having their trousers wet and some shorter are playing with their sentiments and shares, pulling share price down.
Remember, one can pull share price up or down using propaganda, fake news, or talks, but reality remains and whatever true picture of a compnay that comes to public is what compnay directors issue as statements and reports to public.
When INTU talks about equity raise and also talks about bringing in new shareholders, then rights issue and dilution of present shareholders equity is out of question, because any new shares has to be given (at a price) to existing shareholders in proportion to their existing shares and thus has no place for new shareholder in equity raise. To be ordinary shareholder in equity raise, new shareholder needs to buy shares from existing shareholders, without ifs and buts.
So, when INTU talks about bringing new equity holder, it cannot be dilution of INTU ordinary shares, but it must be issue of preferential shares, that company can issue in the market and anyone can subscribe.
Money raised by issuing Preferential shares are considered as equity, not loan. There is fixed rate of return as dividend on preferential shares, that cannot be passed (but, it gets accumulated if not paid) unlike what happened recently with dividend on INTU ordinary shares is stopped.
So, if INTU is going to raise equity using preferential shares, I believe ordinary shares price would rise substantially, as value of each ordinary shares is over £2.5 (according to shareholders information company gave).
One should also remember (contrary to some propagating on this forum) Is that, INTU management cannot report lies or hide truth from shareholders through public information, as that is illegal, and directors could go to jail.
So, when INTU management says that valuation of INTU assets plus cash (in cash form or in derivatives) was around £8.5 bn on 30 June 2019 and debt was 4.7 bn on 30 June 2019 than it must be true. If it was not true than that would be misinformation and illegal.
All other so-called information some posters are giving, has no real meaning other than lies full of propaganda for misguiding shareholders.
Well, shorters can make people lose their wealth but they could make no difference to a company. Most important thing to remember is that, it is illegal for Directors and management to lie in their reporting and could go to jail, so obviously, they would not lie or misguide anyone.
On the other hand, fearmongers (many on this forum) would lie to create fear and havoc.
Here are figures given by Intu Management on 26th Nov 2019 (~2.5 months ago) regarding health of INTU. Read and think:
https://www.intugroup.co.uk/media/6624/investor-presentation-q3-2019-update.pdf
Page 20: If valuation of INTU properties reduces by 15 percent from their valuation on 30 June 2019, then INTU would need £82.6 million to correct the covenant. It also mentions that 15 % write down of property value would correspond to 33 percent write down from the value INTU properties had on 31 Dec 2017.
On page 21, they mention that even if rent decreases, their rent income would be comfortably above the requirement.
https://www.intugroup.co.uk/media/6597/q3-2019-trading-update-pdfdocx.pdf
On 6th Nov (above), INTU mentions that their occupancy is 95.1 % on 30 Sept 2019, compared to 10.3 % vacancy in general (or occupancy of around 89.7 %).
Further, INTU reports
— initiated a review of options for disposal or part-disposal of certain UK assets
— disposed of a further £21 million of sundry assets, 13 per cent ahead of their December 2018 valuation. Year to date, proceeds amount to £33 million from sundry asset disposals
[Shows that they have disposed assets 13 % more than their Dec 2018 value].
— net external debt reduced by £210 million in the quarter as a result of the part disposal of intu Derby, with loan to value of 57.7 per cent, based on June 2019 property valuations
[They have reduced debt by £210 million and on Nov 2019, debt was 57.7 % of June 2019 valuations.]
Further, remember: INTU is not using all cash they are generating to reduce debt, but are accumulating part of cash (that they have invested) generated from selling assets, plus whatever they are getting in rents over the cost (that presently is around £20 million a month).
Further, INTU do not have to pay debt this year (2020) and they would need around a billion pounds next year. I believe, they already have over £500 million in cash or investment.
Now, they have 2 choices for next year.
1: Refinance the debt (what most companies in their situation would do).
2: Raise equity, issuing Preferential shares, worth £500 million to £1 billion. Even though preferential shares would be more expensive than refinancing debt from banks, they are equity and thus, LTV reduces.
One should remember that what is happening is not an exception. It happened many times in past and would keep happing in future. One bad news can reduce SP to almost zero and good news could raise SP many folds. Anyhow, no one can take responsibility of other persons decisions. All risk own money so
What is happening to INTU share price is understandable. It is worrying but one needs patient.
Reason for drop in share price:
1: Less than 18 percent floating shares (around 82 % is held by 10 or fewer shareholders, who bought their shares at above £3 each).
With this % of shares in market, little activity can cause huge price fall or rise.
2: Short sellers, expecting fall in share price started shorting and since share kept falling, they kept shorting. They also hired fearmongers to bark fear, that also effect share price due to spreading uncertainty and false news all around.
3: No doubt, INTU has huge debt but than every business has such debt and most important is that, if business can service that debt and INTU can easily service twice the debt they have. But, when fearmongers spread fear and fall news, those who hold 18% of floating shares get scared too, making share price go down.
4: One other cause is stupid statements by INTU management. Their statement on intention to raise equity along with fearmongers propa-ganda has hammered share price the most, as it created fear amongst shareholders that management want to issue rights diluting their shares and could make their share value zero, so they started running out of INTU shareholding, and since they are only 18%, their selling amplified downward movement of share.
Anyhow, for me, I do not think that there is any real problem. Every day, INTU debt is decreasing in many ways.
1: Selling assets reduce debt in two ways. Debt on sold assets reduces, plus whatever INTU receives as net sale price (that they are holding for 2021 debt payment).
2: Every year INTU is making around £250 million after all costs (Includ-ing management and interest on their debt), that INTU is accumulating again to retire debt maturing in 2021.
3: INTU working to reduce management and other costs, plus reduced debt servicing costs as sale is reducing debt too and in consequence, cost of servicing that debt.
Just imagine: If retail property valuation stops going down, rather goes up even 0.5 percent from last valuation price, what would happen? … I believe, INTU share price would jump to over £3.00 in no time.
Even if retail property valuation goes down by 20% and it gets stagnant, then also INTU share price could go up more than £2.00 without doubt and then would start increasing with time.
Remember, nothing is permanent, and anything can happen in future, maybe a huge jump in INTU retail property value.
I think, after briexit, many international, especially retailers would come to UK, and that would boost retail property value.
If UK govt start relaxing monetary situation, then also, availability of cheap credit would increase and companies like INTU would benefit most.
If inflation in UK would increase than retail profit and retail property rent would increase too, plus real value of debt would go down, and that would also help company like INTU.
I do not believe that situation of INTU has deteriorated, rather it has improved during last one year when INTU share price was over £2.00 … and thus, I think, £ 0.15 is ridiculous price.
So … overall, I think that INTU share price has gone down a lot but once dust would settle, it would go up faster than it has come down. I think, in present situation, INTU share price should be over £2.00
Further, it is very funny to know that INTU share price has decreased substantially, while almost all other REITs share prices has increased or was stagnant … where it is obvious to assume that if INTU retail proper-ty valuation has gone down, than it should not be any different than re-tail property value of other similar companies, and that means, INTU share price crash while others holding is nothing to do with reality, but it is result of 18 % floating shares and propaganda of fearmongers.
Recent progress on the balance sheet includes:
- in December, announced exchanged contracts to dispose of intu Puerto Venecia for €475 million (intu share: €238 million). The net proceeds of the transaction will be used to repay debt and is expected to reduce loan to value by around 1 per cent
- nearly £500 million of disposals in 2019, with the negotiations for the disposal of intu Asturias at advanced stages
Matthew Roberts, intu Chief Executive, commented:
"We have delivered a robust operational performance for 2019 finishing with a busy Christmas trading period. Total footfall in 2019 was 0.3 per cent ahead of 2018, flat in the UK which significantly outperformed the Springboard footfall monitor for shopping centres.
Occupancy was stable at 95 per cent and to date 97 per cent of rent has been collected for the first quarter of 2020 demonstrating the lower risk of our existing customer base.
We are making good progress with fixing the balance sheet, our number one priority, and are confident we have the right strategy in place to enable us to prosper as we see continued polarisation between the best destinations and the rest."
2reincarnated: What I am saying is that, if u believe on propaganda and lies, u could lose ur underwear ... even socks. So, be careful. ;)
I do not think INTU is going bankrupt neither they would dilute shares. They may not even need refinancing, but if they would do (unlikely) than I believe, it would be issue of preferential shares.
One should remember, insider trading in listed company is illegal. Leave newspapers or reporters, even directors would not have figures to quote. Any material information regarding listed company comes out through RNS and made public.
So, any so-called information that is not declared by company to public and quoted are propaganda, speculation, guesses, or simply lies.
Here is RNS figures according to Intu last report given on 26 November 2019 (No RNS came on Metrocentre after that report for anyone to speculate):
INTU Metrocentre (referring to valuation dated 30 June 2019, as INTU themselves would not have any other valuation figures):
https://www.intugroup.co.uk/media/6624/investor-presentation-q3-2019-update.pdf
[Page 20 and 21]
Valuation of INTU Metrocentre on 30 June 2019 = £766 million
LTV (loan to value) covenant:
Debt: £485 million = 64 % of valuation.
Covenant: 100 percent = £766 million
Headroom: £281 million =36 % of valuation.
That means: Valuation to go down by 36 % before any covenant breach could happen.
IC (interest cover from Metrocentre income) covenant:
IC: 208 %.
IC covenant: 125 %
Headroom: 40 %
That means: INTU IC covenant is 125 % or income should be 25 % more than interest on INTU metrocentre debt. INTU income is 208 % of what INTU pays as interest (more than twice) and that comes to 40 percent plus headroom … It means, if 40 % income from INTU Metrocentre gets reduced, income would be 165 % of interest (when covenant is 125 %) and that is 40% more than covenant.
tedmax: be logical. Why top 10 shareholders holding more than 82 percent shares, subscribe for £1 billion RI with their over £820 million and still stay owner of around 82 percent of company, when they can buy entire company not in their control (around 18 percent shares) for less than 50 million ... and then deal with debt issue?
Think, are these top shareholders mentally ******?
Vitabella: Do not worry. I have seen such situation many times before and I believe I know the problem why INTU share price is low and it is nothing to do with ground reality.
Just remember few things.
INTU assets per share is over £3.00 ... but most important is that, they are earning over £150 million more than all expenses and cost of servicing their debt. [Interest on their debt is ~ £200 million a year]
Like for like, they might earn around 10 percent less this year (due to CVAs), but that is not permanent thing.
They would start having new incomes this year too, that would probably push their earning above past earnings and would compensate loss of earnings sue to CVAs.
INTU are planning 1200 residential property, hotels with 700 beds and other cash generating investments, that would bring them huge income in near future. [Just residential property might bring them around £10 million a year additional income]. INTU have around 500 acres land, that is doing nothing and need development.
INTU has completed restructuring to reduce admin and management cost by £5 million, that would start in 2020 and onward.
After recent sales and sale of Xanadu plus few secondary asset sales, they would have enough cash to retire their 2021 debt without borrowing ... and reducing their gearing to below 50 percent, that would allow them to start paying dividend.
U should also remember that nothing has happened in last one year that INTU lost over £2.5 billion of their market capitalisation. All is to do with sentiments and the way sometime market reacts, especially when 2 bids do not materialises, especially when one bid was from major shareholder.
Correction: ... Actually, debt figures I posted earlier is not in pounds but EURO.
INTU debt on Asturias was Euro 60.5 million, that is ~ £50.4 million).
Further debt on
Venecia was Euro 112.5 million
and
Xanadu is Euro 131.5 million
INTU Xunadu (spainish property) value is almost as more than Venecia (that INTU already sold) and almost double of Asturias (spain). Once sold, INTU would get more than £250 million from Xunadu (if not more).
Actually, INTU debt on Asturias was £60.5 million.
(Since, INTU only paid £52 as cost, it means, before sale, INTU must have got the debt reduced)
Further:
Venecia was £112.5 million
and
Xanadu is £131.5 million
Once all 3 gets sold, debt reduction would be over £300 million (over 6 percent of total debt), plus whatever INTU received and would receive to increase their cash pile.
Asturias shopping centre sold for 290 million Euro. INTU share was 145 million Euros (£123 million). After cost and debt payment, INTU received 85 million EURO (~ £72 million) ... It means, debt and other expenses on INTU share of Asturias was approx 60 million Euros (or ~52 million) ... It also means, just by paying debt from the sale (excluding what INTU got in cash) was approx 1 percent of INTU debt (~£470 million).
Overall, after reducing debt by 1 percent (debt related to Asturias shopping centre, that was ~ 1 percent of INTU total debt), INTU cash pile must have increased by approx £72 million.
Sain@Vision: ''The whole of the sector has devalued .Intu arent in a class of their own. When the corporate valuers shave another 10%of values they wont be doing that out of spite''
If that is the case than all REITs company share price would have collapsed. So, give me share price collapse of any other REITs company?
For INTU ... Share price gone down from 80 pence to 18 pence in 6 months, that is more than 75 percent.
Actually, share price of most other REITs comany has gone up rather than gone down, so, if their property values has gone down than why their Share price has gone up, rather, should have gone down as What INTU share price had done?
For instance:
Land securities SP has gone up from ~ 750 pence 6 months ago to 950 pence today.
British Land ... from below 500 pence 6 months ago to 576 pence today
Great Portland Estates ... from 650 pence 6 months ago to 926 pence today
Hammerson ... From 210 pence 6 months ago to 252 today (was over 310 in December)
Hansteen Holdings ... From 90 pence 6 months ago to 116 pence today
Shaftesbury ... From 750 pence 6 months ago to 930 pence
And son on. Almost all REIT company share price has gone up in last 6 months but ... :)
Well, what is the mystery? ... Is it only INTU properties got down valued and so much that share of INTU today is selling at below 8 percent of their book value? ...
VitaBella:
26 Nov 2019: Many things u wrote is not true and I have logical reasons to dispute that. Regardless, let assume what u wrote is true. INTU or any REIT companies do not do valuation themselves. Whatever valuation, one should accept that as true value (rather, in most cases, they are un-dervalued).
1. As of H1-19 , total assets =8.3bln, total net debt =5.3 bln, net assets 3 bln. By now value of total assets has reduced, hopefully by not more than 10%. With LTV highest than anybody else, net assets value are shrinking very fast. We do not know where the bottom is. But if the values drop by 30% , no net value left.
In their November statement, referring to period from 1 July to 1 Sept, INTU sold a chunk of their UK assets 13% above their Dec 2018 valua-tion.
https://www.intugroup.co.uk/media/6597/q3-2019-trading-update-pdfdocx.pdf
Page: 3
— disposed of a further £21 million of sundry assets, 13 per cent ahead of their December 2018 valuation. Year to date, proceeds amount to £33 million from sundry asset disposals
Thus, u cannot say that real valuation of INTU properties has decreased, rather, it is possible that they may have recovered.
Secondly, and most important is that, other than INTU, share prices of most REIT companies holding retail properties has gone up over last 6 months … so, why INTU has gone down? If INTU is losing value of their investment, other REIT companies should lose value of their assets too. … Seems mysterious. ??
Now, lets talk about Right Issue:
10 top shareholders hold more than 80 percent shares, right?
If there would be rights issue, it is they who would foot the bill, right?
As u mentioned, we may not have seen the bottom yet. It means, what-ever amount INTU raises as Rights Issue, it may not bring INTU out of trouble. So, more rights issue or going to receiver.
In present situation, INTU needs £1 billion to bring debt below 50 per-cent. INTU in 2021 and 2022 combined, needs £2 billion to pay debt.
INTU has 2 choices (now ponder):
1: Reschedule debt, what every company would do and in normal cir-cumstances, INTU would have done that (I believe, instead of raising equity, INTU would do that anyhow).
2: If INTU do not want to get debt rescheduled than they would raise equity. For that, they would need £1 billion to £2 billion. Let say, £1 bil-lion.
2a: Rights issue means, big shareholders buy over £800 million worth shares … and would still be in same position what they are now. If fur-ther write down of properties happen, there £800 million would go in thin air. So, why they would risk their capital if there is chance that fur-ther write down of properties could happen?
2b: No rights issue, but issue of Preferential Shares worth £1 billion. IN-TU can ask Shareholders as well as outsiders to subscribe for Preferen-tial shares. INTU raises £1 billion or £2 billion, would not matter. Obvi-ously, big shareholders can subscribe for these shares with less risk t