Wasps breach agreement with bondholders

Discussion in 'Wasps' started by stupot07, Nov 8, 2016.

  1. stupot07

    stupot07 Well-Known Member

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  2. chiefdave

    chiefdave Well-Known Member

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    Before this descends in to the usual circular argument this is the relevant bit from the bonds
    And from the accounts
    On the face of it he does seem to have a point as what is in the accounts isn't an independent appraisal. I assume there's an obvious answer though as I can't imagine they've made such a basic error.
     
  3. Ian1779

    Ian1779 Well-Known Member

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    *waits for Italia to turn up with the PR offensive.
     
  4. NorthernWisdom

    NorthernWisdom Well-Known Member

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    There will be,no doubt. Otherwise it'd be hiding in plain sight, and how come every other outlet would miss it?!?

    There'd be a lotof angry bond holders, after all.
     
  5. italiahorse

    italiahorse Well-Known Member

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    Doesn't seem to effect the price much. Always a good indication.
    At the end of the day thats all that matters to investors.
    I'm keeping mine for a while :angelic:
     
  6. chiefdave

    chiefdave Well-Known Member

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    I'm sure they'd be a little annoyed if they found the promised security wasn't in place and the bonds had gone into default.
     
  7. italiahorse

    italiahorse Well-Known Member

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    ..... and it will be reflected in the price.
     
  8. Rusty Trombone

    Rusty Trombone Well-Known Member

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    Could the wording of the covenant mean that it's just the guarantors and ACL2006 that are required to be provided with an independant valuation? You would think if one had been done it would have been mentioned though.

    I would also imagine the valuer from before would be prepared to keep the valuation the same anyway, it would look as though they don't know what they're doing if they reduce it materially a year later.
     
  9. chiefdave

    chiefdave Well-Known Member

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    They should have to use a different valuer, that would be interesting.
     
  10. oldfiver

    oldfiver Well-Known Member

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    Also in Principal Risks:
    Strategic Report for the Year Ended 30 June 2016

    Valuation of Arena materially lower than revaluation Impact: Asset cover reduced for Bondholders. Mitigation: Use professional valuation companies to provide accurate valuation on a regular basis. Long term contracts and income growth to support valuation

    Conflicts with Management believe that there is no impairment of this value for 2016.
     
  11. oldfiver

    oldfiver Well-Known Member

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    Not necessarily so - they can only base it on what the Directors provide at the time. 12 months later and looking forward from there may be totally different
     
  12. oldfiver

    oldfiver Well-Known Member

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    The valuation of the Arena given by Strutt & Parker for the long leasehold interest as at 23 April 2015 is £48,500,000. This is significantly higher than the valuation in the audited accounts of ACL (see Section 15 (Financial Statements – Annual report and accounts of Arena Coventry Limited for the financial years ended 31 May 2013 and 31 May 2014)) as the ACL accounts value the Arena purely at its historic cost less depreciation, whilst Strutt & Parker make assumptions as to future trading (i.e. Strutt & Parker give the market value). In addition, pursuant to the Conditions of the Bonds, Guarantors and ACL2006 have undertaken that they will together require further independent appraisals of the value of the Arena, together with the current value of the PShares, not less than once in each consecutive 24 month period, the first such valuation date to be no later than 30 June 2016.
     
  13. Rusty Trombone

    Rusty Trombone Well-Known Member

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    I don't particularly disagree, however in this case I don't see what is totally different, and if they are asking the Directors the outlook will no doubt be very good.
     
  14. chiefdave

    chiefdave Well-Known Member

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    The valuation of £48.5m has never made much sense to me. Appreciate it is the value of the lease not of ACL but given the price Wasps paid for ACL and the fact adding 200 years to the lease was only worth £1m (and the original lease was something like £24m) its never sat right.

    I can't see how that valuation can be correct and the price CCC sold both their shares in ACL and the lease extension standing up to scrutiny.
     
  15. skybluetony176

    skybluetony176 Well-Known Member

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    One question. How did Higgs sell Wasps a 250 year lease?
     
  16. Astute

    Astute Well-Known Member

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    About as interesting as sticking pins into your own nut sack :arghh:
     
  17. chiefdave

    chiefdave Well-Known Member

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    They didn't CCC sold their 50% of ACL to Wasps, Higgs sold their 50% of ACL to Wasps and CCC sold a 200 (or probably about 210 given its back up to 250) year lease extension for £1m.

    In what I imagine will be the focus of a future thrilling JR the sale of the lease extension was agreed in the same meeting as the sale of the ACL shares. I suspect SISU will argue this means CCC have effectively sold the freehold as the lease is now longer than the stadium lifespan. Think they will argue this was done specifically to avoid regulations around disposal of assets. Regulations which would cover selling a freehold but not selling shares in a company.
     
  18. Astute

    Astute Well-Known Member

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    Yeah OK Grendel ;)
     
  19. skybluetony176

    skybluetony176 Well-Known Member

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  20. singers_pore

    singers_pore Active Member

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    Wasps are going to hit financial problems very soon as I predicted last year. Their losses this year are even bigger than last year. Realistically I don't see any way they can meet the EBITDA covenant which takes effect next year. The ticket revenue figures show that the boost in attendances is largely due to the free ticket giveaways.

    I tried to short them already but it's not possible unfortunately. However I would urge any bond holders on here to sell before the price drops. I am confident the price will fall and given the lack of liquidity the drop could be quite large when it happens.
     
  21. rupert_bear

    rupert_bear Well-Known Member

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    But have sisu cancelled their legals yet ? And Donald Trump is nudging his way to be American President
     
  22. oldfiver

    oldfiver Well-Known Member

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    Dropped 4 points last week ?
     
  23. oldskyblue58

    oldskyblue58 CCFC Finance Director

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    Have to say I was expecting to see a formal valuation, which leads me to a couple of questions

    - The directors know the bond terms and I assume would take professional advice as to what/when valuation is required annually
    - the auditors surely have to consider the value of the Groups largest asset, the assumptions used, and how the principle risk of going concern is affected. Yet there is no mention of the risk in their audit certificate or for that matter a breach of the bond covenants.

    That said I am not sure how or what causes the value to drop in 1 year to affect the overall value of the long lease materially, nor that using similar assumptions why a new firm of valuers would not arrive at similar values or why Wasps would not use the same valuers again.

    Strutt & Parker are no corner street valuers, https://beta.companieshouse.gov.uk/company/OC334522/filing-history we might not understand the valuation, I don't, but to state it is wrong, over valued, etc on the basis of the little knowledge we have of valuations is in itself incorrect. I am sure SISU will argue the things that CD suggests above, doesn't mean they will win, and is going to depend on the timeline of events and when things were actually created and negotiated to signing rather than an intention that will decide it

    I would like the non valuation of the lease explained clearly, and confirmation given as to when a formal valuation will be done. I suspect that Mr Reid will not get direct replies to his questions though, does he have any professional relationship with those in charge at Wasps to be able to get them?.

    The bond price has dropped yes but seems to have levelled out over the last couple days. Still trades at a premium of 7% though

    Think many agreed on another thread that we wont see where this is heading for another year or so. Will wait and see I think, we do not know what is in the pipeline in terms of income streams and potential cost savings. I would think the recent release of share premium on IEC Experience Limited has something to do with hitting bond covenant targets. There are some costs to save but equally it would seem additional costs to add in on the wages side (however it seems the playing squad has been trimmed in numbers from 57 in the accounts to a suggested 40 according to the wasps director of rugby)

    Not sure how they hit the EBITAD - but not my problem really. If Wasps, with two major sports teams there, cant make it work at the Ricoh could anyone else given current circumstances with only one sports team?

    Ticket incomes. Undoubtedly there are free tickets, yes the rise in ticket income does not match the rise in numbers. However in 2015 accounts ticket income was £2,639,738 an increase of 19% takes that figure up to £3.14m in 2016 (CCFC 2015 matchday income was £1.797m). Per head it was 2015 approx. £15.40 in 2016 £12.40 (CCFC in 2015 £8.40)

    Important year ahead for Wasps Group and they cant miss the targets. Personally not going to lose much sleep over it and wait to see what happens. In the mean time fingers crossed CCFC's fortunes improve during that time
     
    Last edited: Nov 9, 2016
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  24. Nick

    Nick Administrator

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    It reads to me that further independent appraisals aren't the same as the original one?

    Why set a deadline for one they had done already?

    Can anybody clear that bit up?
     
  25. chiefdave

    chiefdave Well-Known Member

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    Think the key to that would be debt. ACL starting from zero is an easier proposition to make work that loading huge debts against it, in part to pay Wasps owner back.
     
  26. oldskyblue58

    oldskyblue58 CCFC Finance Director

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    Why would it be zero, would the new owner not have to buy the assets? how would that be funded and where would the interest be charged?

    If the new owner was CCFC or some SISU entity would they not have to start paying interest on new and existing debt ?

    Would an entertainment venue not be of interest to other entities other than CCFC/SISU? Is it the Rugby wage bill that drags the Wasps Group results down as well as transition and interest costs?

    Its not straight forward
     
  27. Nick

    Nick Administrator

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    What do you make of the valuation agreement date?
     
  28. chiefdave

    chiefdave Well-Known Member

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    Maybe I have misunderstood you. I thought you were saying if Wasps couldn't make it work with 2 teams playing there then nobody could but isn't the problem that as soon as Wasps got through the door they took out £35m of debt? Doesn't that mean they now need to generate much more in order to repay the debt and also have to meet certain targets to avoid defaulting?

    Surely if Wasps fail, and the company goes bust, the new owner won't have to pay off their bonds?
     
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  29. Nick

    Nick Administrator

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    Isn't it secured on the least though? Or whatever it is secured on?
     
  30. oldskyblue58

    oldskyblue58 CCFC Finance Director

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    If Wasps went bust the administrators would have to sell the assets to repay the creditors. The lease reverts to the outstanding time on the original term. That means the lease has some value and could be sold to the highest bidder (not necessarily CCFC/SISU). That means financing a purchase of assets and that will surely lead to interest charges on loans which would become debt burden so ACL not starting from zero

    Wasps didn't create 35m in debt when they came in £24m of debt already existed in either the Wasps figures or ACL's. They swapped £24m around. Of the 11m left that actually increased the debt burden they spent at least £6m on fixed assets that enhanced the lease

    No the new owner wont have to pay the bonds unless they choose to in the deal with administrators
     
  31. Nick

    Nick Administrator

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    Are there any risks in not doing the valuation? Or is just down to the bond owners to judge for themselves?
     
  32. oldskyblue58

    oldskyblue58 CCFC Finance Director

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    Just to muddy the waters a little more. Wasps Finance PLC accounts for 2016 are here

    https://beta.companieshouse.gov.uk/company/09435073/filing-history

    Wasps Finance are the company that issued the bonds then lent the proceeds to Wasps Holdings. Wasps Finance PLC are not part of Wasps Holdings, it is owned directly by Moonstone Holdings

    The prospectus was issued by Wasps Finance PLC

    From the directors report

    upload_2016-11-9_13-49-8.png
     
    Last edited: Nov 9, 2016
  33. oldskyblue58

    oldskyblue58 CCFC Finance Director

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    Failing to meet the covenants could be serious Nick.

    The bondholders make their own individual minds up as to value of the bonds they hold and sell or retain accordingly

    I expected a valuation 30-06-2016 it seems that from my last post it might not be the case
     
  34. Captain Dart

    Captain Dart Well-Known Member

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    And in English?
     
  35. Nick

    Nick Administrator

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    Surely the one on the prospectus to the bond buyers would be the one needed? Unless there is a date mixup on one of them?

    No use them putting it on a director's report it's 2017 if they have 2016 on the prospectus. That doesn't specifically mention valuations being done for that though, like the prospectus does? It just says it has to be at that value.

    Whereas the other says a valuation would be done by a specific date.
     
    Last edited: Nov 9, 2016

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