I'd be happier if they kept paying out scrip divs for the foreseeable future and used the extra cash to pay down debt/ reposition their current estate. Commercial Real Estate is going to be horrible for a while, but the cycle will turn. HMSO trades at a significant discount to its EPRA NAV bevause it is retail focussed and the balance sheet isn't the strongest. Retail has been out of favour for a while (Covid & Amazon effects) so it's probably bottomed. They'll be some more turbulence as overleveraged VCs go pop and dump their holdings over the next year or so, but Rita-Rose strikes me as someone who knows what she is doing and is under no illusion that they have to make the diffcult decisons unlike the last management.
@email Not my words but the words of the CFO, hence the "".
I guess he means that Net debt to EBITDA of 10.4x will reduce to 9.9x.
The results were bang in line with consensus so not sure why the SP has reacted lke this unless people were hoping for a cash dividend.
https://www.vuma.com/public/consensus/hmso
This is a solid slow burner in a difficult sector (interest rates going up, possible recession on the way).
However, this might be the end of the outward shift of yields for these type of assets if rates don't go much above 4%.
25p is a good entry point for a long term investor as the balance sheet looks a heck of a lot better than two years ago.
Highcross was dealt wth in the earning call. It will be writte down to zero at the half year and will improve LTV by 1% and EBITDA to Debt by "half a turn".
BTW that FT article was 2 September 2020
@RI - Mooky covered his back in Sept 2020.
At below 60p a share he doesn't care what happens to the equity - he's already effectively sold it to Sand Grove at that price.
If it went back to over a £1 a share he would have refinanced again paying a part of the upside to Sand Grove.
Now he is focussed on getting a nice deal with the lenders quickly:
They take the whole thing for a haircut on the debt, they get to get rid of bad leases and renegotiate the other ones.
Mooky & Co run it for the new owners for a year to 18 months in return for significant incentives to hit the right targets.
They all ride the recovery and then the creditors sell when the world is back to normal.
Mooky & Co probably gear up again buy more shares and try to be #1.
The only people who get hurt are the other shareholders and the unsecured creditors.
Only question is whether or not Cineplex and Sand Grove will stand by and get shafted or do something about it.
So if you were taking comfort by being in the same boat as Mooky, don't, because you're not.
He's only interested in looking after himself.
There is some comfort that Sand Grove or Cineplex might intervene as they both have something to lose.
Cineplex is a natural buyer of the business (that's why they were nearly merged together) plus they can use the tax losses and acquiring the PLC vehicle isn't a problem to them because the poison pill can be removed (it is owed to them)
Sand Grove don't actually become owners of Mooky's shares until September, so they are in a tricky position.
Cineworld Group plc ("Cineworld")
Refinancing by major shareholder of Cineworld
Cineworld announces that it has been informed by Global City Theatres B.V. ("GCT") that GCT has agreed the terms of a refinancing of the financial arrangements relating to its holding of c.275 million ordinary shares in Cineworld (representing 20.0% of Cineworld's issued share capital).
As part of this refinancing, Sand Grove Capital Management LLP ("Sand Grove") will refinance the secured corporate loan facility previously provided to GCT by Barclays Bank PLC and HSBC Bank PLC, and GCT has agreed to provide a security package to Sand Grove which includes a charge over its holding of Cineworld shares. This grant of security will constitute a technical dealing by GCT and will be notified in accordance with the DTRs in due course. Following the refinancing, GCT is not required to make any debt service or amortisation payments for three years (absent customary specified events), nor is there any margining requirement.
THEO: There's the city engineers...they're going into the street circuits...But who are these guys in the suits?
HANS : That's the FBI...ordering them to cut the building's power. They're as regular as clockwork...or a time lock...
...the circuits that cannot be cut...are cut automatically in reponse to a terrorist incident...You ask for miracles, Theo...I give you the FBI...
This, but Chapter 11, Cineplex and a strategic investor.
Well, we are in the film business....
It's always darkest before dawn.
@LTHamigo - you are getting Puss In Boots and The *****cat Dolls mixed up. ;-)
@Tegop
Wolf is right. RoW is in the mix. It is not formally a "Debtor" but it might as well be as it is owned by Cineworld PLC which is a debtor.
I was relying on what someone else who I respect told me about the situation but RoW isn't a lifeboat.
That DYOR is a truism!
@WaffenBurret
Glad you found it useful. I could be completely wrong but even a stopped clock tells the right time twice a day!
It occurred to me after pressing "Post Message" is that the other way of settling it and ensuring goal congruence is to offer some equity to Cineplex, given that cash is in short supply.
That way they get to share in the upside rather than making it a zero sum game where they get one chance to take as much cash out the business as possible.
Anyhow, more than one way to skin a cat.
I'm amazed that Wolf has engaged with Elvis for so long - I certainly don't have that kind of patience (or masochistic tendencies)
Anyway, I value Wolf's contributions because they are rooted in fact and well thought through.
I like to think that we may have a happier outcome that his posts imply, but that is because the level of complexity and number of moving parts here mean that unusual solutions not reflected in the share price are possible.
But to be clear, his is the base investment thesis that most finance porfessional would use.
Elvis's version is some kind of weird crack dream.
@Wolf
Agreed. The Cineplex claim is the poison pill in all of this.
It can only be settled by Negotiation, Litigation or a Chaper 11 cram down.
Personally I would have thought that litigation (i.e. the appeal) would have been the best course, but obviously there are many more people at Cineworld with better information than me.
So it would seem that they decided to go the negotiation route and play chicken with Cineplex:
- Pursue your claim in full and get nothing as after the secured D4E there will be nothing left for you (or equity); or
- Take $X now, in cash and we close the matter down and move on, presumably with new money from another party investing in the PLC vehicle for a better dilution level than was what was available from the Ch11 process.
This was a voluntary filing and so if the BoD can show that there is a way out with new capital where none of the secured creditors gets impaired, then they can come out and keep trading.
There may be more negotiations with current lenders to extend their tenor in return for a higher interest rate, which would be a win all round.
So my guess is that they have someone lined up with deep pockets who will step in for 25%, 50%, 75% or whatever of the business *if* the Cineplex issue can be dealt with, and then we carry on as before, with the new equity paying down some of the debts in return for their stake.
@Bonkers0801
RetailInvestor is a low information, high engagement troll.
Endless views not backed up with sources and unpleasant ramping.
Just filter the fool and have done with it.
*Elvis has left the building.*
(Into a green box)
@Wolf
"Suppose that would depend on how he ranks the CP claim’s importance against the other unsecured creditors ."
That, as they say, is the 6.4bn dollar question!
My limted research suggests that he may have pretty wide discretion, although without much clear precedent, and a different jurisdiction involved, unless they come to a negotiated settlement, it could still run & run.
IIRC when Covid hit they sold down from 27% to 20% to restructure the debt from a margin call to something else, presumably something akin to a secured loan.
Understandably most people have been fixated on the bids as that is close to coming to a head, but that is only because the BoD are obligated to run a sales process in tandem with the 'substantial deleveraging transaction' which is what we have been told is what is happening.
I think that although there could be a knockout bid incoming which the creditors will jump at, the most likely scenario is that the sales process is a valuation exercise and will inform the process for how the spoils are divided up in the D4E swap.
Clearly Cineworld post C11 will still have some debt, as that's an efficient way to fund it, and the lenders won't want to swap all their debt for equity as they are funds that are set up to hold debt.
So the question is how much debt will be swapped for how much equity, and then how much cash gets injected to provide working capital and a runway until Cineworld is cash generative again, and how much is left for current stockholders.
The Cineplex claim is odd in that it is a contingent liability but listed in creditors. Under the bankruptcy code this might be treated as "unmatured interest" and so is up to the judge at how to value it - in full, at zero or so many cents on the dollar.
Another option would be to structure the D4E in such a way that the new equity is a different share class - B Shares or Preferred Stock or whatever, and then leave the contigent liability with the current common stockholders.
The lawyers would have been preparing to delist the company in the event that the D4E went ahead and the creditors ended up with 90%, 99% or 100% of the company. That may or may not happen but they would have to do contingency planning anyway. I wouldn't read too much in to it.
@Wolf
You are right, I am wrong.
Thanks for putting me straight.
@Wolf
You may be right.
I was pretty sure that they had tried to be registered but that they failed. After all anyone can send in a claim form and it was just the 123456 BC Company and Cineworld PLC named on the S&PA.
But then someone mentioned the appeal and I remembered that Cineplex had asked for leave to proceed with the appeal and the judge refused. How could he do that if the matter was not subject to the Ch11?
This could be crucial because *if* Cineplex's claim can be dealt with here, via a cram down if necessary, then that leave the PLC in the clear with just the head office and RoW. Worth 25p plus (say)
Would need to see the original S&P Agreement to see how Cineworld was defined and whether or not they were joint and severally liable with other group companies. It was on the Ontario Court site, but I don't have a copy.
Don't suppose anyone here does?
@Hexam
Sharebel reminds me of Poorinvester - great examples of the Dunning-Kruger effect.