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About 11%
The above is based on the LTV for Metrocentre loan reaching 71% and breaching one stage of debt covenant for that asset.
Yes, Sain, you are right. The further devaluation was and is expected but .... it is still very painful and SP shows that.
I am asking myself whether it’s worth buying any further shares in the forthcoming RI.
Intu is the weakest listed REIT in the country and if there are any further devaluations we may be throwing good money after bad.
Sain, but there was also similar discount for Puerto Venecia sale in December 2019. Hammerson also sold their European shopping centers with significant discount recently.
So , the devaluation of Asturias was expected
Pearls, looks like you want to drive price further down.
I would expect that at this time, more than one loan covenant is breached.
Yes, there was an article in FT about intu MetroCenter breaching loan covenant by reaching 71% . Loan is for 485 mln. It doesn’t mean going bankrupt. Intu can add some cash to bring LTV on that particular loan to below 70%.
However these figures mean that MetroCentre valuation dropped by about 11% in H2-2019 from 766mln to about 683mkn. Similar devaluations of 10-11% can be expected across whole Intu portfolio.
That all was expected to be fair
At this time, intu must sell at least 1bln pounds more of assets to make difference to their balance sheet, in addition to rights issue.
Intu declared balance sheet fixing as number one priority. I hope they will do it and do it in fair manner to all shareholders.
It would be nice if they can sell now all the assets at current market prices :)
Umeed, the reasons why intu share price collapsed while SP of other REITs didn’t are the following:
1. Intu and Hammerson are concentrated on retail properties. Others are more balanced. Other commercial properties are holding value okay. The market is very difficult now only for retail properties.
2. Intu is the most leveraged by quite far. That means that drop in valuations reduce net assets of intu much more .
3. Intu is in danger in breaching debt covenants and not being able to refinance on any decent terms
4. Intu has the highest cost of debt
Generally when the market is difficult, the weakest and most leveraged companies are punished much more.
The Mr Market is not stupid, it prices the intu correctly based on current risks
Pearls, was Lakeside busy? Is it a good shopping center?
Umeed, I am a shareholder and I wish I could be as optimistic as you. This my brief take on the intu current position:
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.
2. With such difficult market, dropping valuations and very high LTV, banks may refuse to lend money or refinance. That would be bankruptcy
3. With net revenue and net income shrinking, committed capex, existing loan covenants breaches intu will be cash flow negative in 2019.
4. Starting from beginning next year, we will need to return between 700mln and 1bln every year for 4 years to our lenders. There is no way we can do that. We can only ask for extending loans, refinancing. If our LTV is high, I would say >50%, if anybody lends in this market ( big assumption) it will be at high interest rate, cost of debt. Please remember that intu now pays about 4.3% cost of debt, which is highest of any listed REIT I know. Anything higher will be also killing intu.
So far, management did very little to have good LTV. They took on a lot of debts in the wrong time and were very slow in selling assets. If they sold some big assets 2 years ago, we would be happy now.
Instead, our window for survival is narrow now.
We absolutely desperately need 1bn new equity money, probably rights issue AND we also need about further minimum 1bn of disposals of assets AND we must hope that the bottom of the market is close. If these three elements happen and are executed well, intu will be slimmer but share price will at least triple.
Gewillia, intu BoD giving a lot of new shares to external parties at only 10p each (just example) would be unfair to existing shareholders. It wouldn’t be approved by existing shareholders.
External party can underwrite new shares, that is fine.
With JW as a shareholder, I hope that all shareholders will be treated fairly and equally.
That would be the best outcome if intu sells individual centers at current market prices or find partners for a number of centers.
As per recent RNS, Intu is also talking to NEW investors. Any ideas how new investors may participate in equity raising?
Rights issue is not dilutive if shareholders take their rights. So, JW will not be diluted if RI are to go ahead. RI is a fair way to raise money to all shareholders.
But RI maybe only part of the solution. My concern is how the other part of money will be raised. Selling properties would be good but looks like it is difficult at this time.
I am concerned that there maybe some insider job and a big chunk of company will be given to new company for cheap. That would be unfair for all other shareholders.
Everybody knew that rights issue and equity raise is coming soon. It was highlighted by intu few times over last half a year. Still the share price dropped from 34p to 20p when equity raise was speculated and later confirmed over last 2-3 weeks.
I just logically cannot understand that
It also happened few times before. Something was very anticipated and predictable but as soon as it is officially confirmed the share price falls
Price did drop below 20p
It’s obvious but still unbelievable that SP can drop by >80% in one year on more or less similar information in the retail industry, similar debt of intu and falling retail property valuations.
If we take H1-2019 valuations as a base , by how many % will shopping centers valuations drop before hitting the bottom? Any estimates?
If the valuations drop by further 30% , I think intu shares can be written off as equity NAV will be close to zero. If, however, further devaluation is 20% or less, the current share price is low.
The grey area is the debt covenant penalties, refinancing and future cost of debt
I could hardly believe that the SP is so low considering that intu has real, tangible properties. Selling now seems crazy. However, Mr Market is often right in pricing the shares. Maybe the small shareholders will be treated unfairly in the coming equity raise. I am not sure what to do.
Where are you taking this information (JW shorting intu shares) from? He is not listed in short positions register.
Selling assets reduce LTV by smaller amount than raising equity and keeping the assets.
I assume that all Spanish assets will be sold this year and 1 billion equity will be raised. That would imply around 6.3 billion valuation of the remaining UK assets at the bottom with debt about half of 6.3 billion.
I hope that new investors will be brought in by a way of selling some UK assets, bringing partners in big centers.