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Interserve open offer

Practical discussions about equity High-Yield Portfolios (HYP) for income
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88V8
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Interserve open offer

#199245

Postby 88V8 » February 6th, 2019, 10:11 am

Some of us thought Interserve a 'good idea'. An impeccable record of rising divis stretching back to the era of the dinosaurs.

Recently viewing my HYP, I see their shares were down 97%. Debt-laden and with no divi, they have not actually proven such a good idea.

Today, a preliminary sight of their debt reduction plan, which threatens to demolish a good deal of that remaining 3% of the initial investment

Interserve says it has agreed in principle with its lenders and bond holders, a plan which should reduce net debt to £275 mio. This will involve the issue of £480 mio of new equity.
Given that market cap is currently £24mio, existing shareholders face a degree of dilution, to put it mildly.
The new equity will primarily be placed with existing lenders and available to existing shareholders through an open offer.

More money down the drain? But at least they may survive. Details awaited with interest.

V8

OLTB
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Re: Interserve open offer

#199263

Postby OLTB » February 6th, 2019, 11:16 am

I dont hold (I had Carillion instead) and listened to two chaps on the R4 business news this morning who both agreed that they thought the most likely outcome would be that Interserve is delisted and taken back into private hands.

Pure guesswork at this stage of course, but worth a listen on the R4 Today podcast if you’re a holder.

Cheers, OLTB.

Arborbridge
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Re: Interserve open offer

#199268

Postby Arborbridge » February 6th, 2019, 11:44 am

OLTB wrote:I dont hold (I had Carillion instead) and listened to two chaps on the R4 business news this morning who both agreed that they thought the most likely outcome would be that Interserve is delisted and taken back into private hands.

Pure guesswork at this stage of course, but worth a listen on the R4 Today podcast if you’re a holder.

Cheers, OLTB.


They mentioned a debt for equity swap with the major creditors. I've been there before, several times! In effect the shareholders get left with next to no value and the banks take the lion's share. If you are a holder, you will receive useless paperwork for months or even years, none of which will serve any purpose except to remind you of the loss you made. Thus the various parties "earn" their fees and prolong your misery. :lol:

Arb.

jackdaww
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Re: Interserve open offer

#199272

Postby jackdaww » February 6th, 2019, 11:57 am

i held both carillion and interserve some years ago , but got out in good time when i realised that high yield alone is not good enough to avoid serious damage to capital - and hence future income.

:)

monabri
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Re: Interserve open offer

#199305

Postby monabri » February 6th, 2019, 1:28 pm

I hold IRV. Bought when I first started my HYP. Not received a single divi..nada, zilch. 97% capital loss.

I no longer care about IRV going forward. I'm pleased if the directors ( minus DW) do get the push ...no doubt with a nice handshake, though :( . The main culprit of this disaster was the now departed Mr Ringrose ( " ooh no, we're nowhere near as bad as Carillion ").


Talk of " Major Dilution "...whatever!

IanTHughes
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Re: Interserve open offer

#199307

Postby IanTHughes » February 6th, 2019, 1:43 pm

jackdaww wrote:... when i realised that high yield alone is not good enough to avoid serious damage ...

As an HYPer, I knew that already.


Ian

jackdaww
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Re: Interserve open offer

#199315

Postby jackdaww » February 6th, 2019, 2:09 pm

IanTHughes wrote:
jackdaww wrote:... when i realised that high yield alone is not good enough to avoid serious damage ...


As an HYPer, I knew that already.

Ian


=============

quite so.

but some people didnt.

and some people still dont .

:)

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Re: Interserve open offer

#199342

Postby Arborbridge » February 6th, 2019, 3:49 pm

jackdaww wrote:
IanTHughes wrote:
jackdaww wrote:... when i realised that high yield alone is not good enough to avoid serious damage ...


As an HYPer, I knew that already.

Ian


=============

quite so.

but some people didnt.

and some people still dont .

:)


Referring to Carrilion...
I think we are in danger of airbrushing history. This was a case of mis-management and obfuscation on a massive scale, possibly even fraud. The figures were massaged and the ratios we normally look at did not indicate there was anything particularly amiss.

Now and again even large companies suddenly discover massive black holes in accounts, and there's not much a hyper can do about this other than fall back on the portfolio principle to spread risk.

Arb.

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Re: Interserve open offer

#199349

Postby Crazbe7 » February 6th, 2019, 4:37 pm

Referring to Carrilion...
I think we are in danger of airbrushing history. This was a case of mis-management and obfuscation on a massive scale, possibly even fraud. The figures were massaged and the ratios we normally look at did not indicate there was anything particularly amiss.


So an 8% + yield in an industry with margins of 1-2% didn't seem a tad too high for Carillion?!!

Totally out of kilter with its peer group who were putting out profit warnings and cutting dividends.

Failure of 2014 takeover of Balfour Beatty highlighted weaknesses in Carillion's business model.

Crazbe7

Arborbridge
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Re: Interserve open offer

#199518

Postby Arborbridge » February 7th, 2019, 10:40 am

Crazbe7 wrote:
So an 8% + yield in an industry with margins of 1-2% didn't seem a tad too high for Carillion?!!

Totally out of kilter with its peer group who were putting out profit warnings and cutting dividends.

Failure of 2014 takeover of Balfour Beatty highlighted weaknesses in Carillion's business model.

Crazbe7


Maybe maybe not. One would have to look in detail at your claims, and it's all water under the bridge anyway. Frankly, I am far from convinced that a significant number of warning signs were available from the standard statistics which we normally check. Anyone can make a great case in hindsight, but there were plenty of holders of Carillion both private and professional who did not see the danger, or thought that even when things started to look bad, still believed there was a goodbusiness there which could be recovered. What did for Carillion wasn't information which was not easily accessible - aggressive and extreme black work in accounting and deliberate obfuscation - designed to throw investors off the scent, and it worked.

To say now how obvious it all was then is airbrushing the picture given at the time. And when I say "at the time" I'm also including the years running up to the collapse when the dividend, for example, was not outlandish and when many of us would have bought the share. Actually, pulling out of the take over of BBY was seen as a good thing by some people - a lucky escape, perhaps a wise action - rather than a sign of weakness.

Maybe you'd like to compile a list of high yielding shares now which will collapse in the next two years - then we can see how predictable these things are without the benefit of hindsight.

Arb.

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Re: Interserve open offer

#199556

Postby Crazbe7 » February 7th, 2019, 12:07 pm

Maybe maybe not. One would have to look in detail at your claims, and it's all water under the bridge anyway. Frankly, I am far from convinced that a significant number of warning signs were available from the standard statistics which we normally check. Anyone can make a great case in hindsight, but there were plenty of holders of Carillion both private and professional who did not see the danger, or thought that even when things started to look bad, still believed there was a goodbusiness there which could be recovered. What did for Carillion wasn't information which was not easily accessible - aggressive and extreme black work in accounting and deliberate obfuscation - designed to throw investors off the scent, and it worked.

But is it water under the bridge? Should a HYPer consider 'relative' yield before purchasing a share with a dividend considerably higher than their peer group. What 'magical' business advantage gives an enhanced yield is worth considering is it not?

To say now how obvious it all was then is airbrushing the picture given at the time. And when I say "at the time" I'm also including the years running up to the collapse when the dividend, for example, was not outlandish and when many of us would have bought the share. Actually, pulling out of the take over of BBY was seen as a good thing by some people - a lucky escape, perhaps a wise action - rather than a sign of weakness.

You should re-read the press reports/analysis in August 2014. You will find that the takeover failed due to Carillion poor grasp of figures. For example "Balfour cast doubt on its prospective partner’s maths, saying the methodology used to calculate a projected £175million in annual cost savings was flawed" - slightly ironic in hindsight, but unnerved investors and then the analysis of Carillion highlighted weakness going forward.

Maybe you'd like to compile a list of high yielding shares now which will collapse in the next two years - then we can see how predictable these things are without the benefit of hindsight.

I'll pass. The only industry I would claim to have any significant knowledge is construction. Not exactly full of HYP shares at the moment and a cyclical sector I would n't have in a HYP.

Arborbridge
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Re: Interserve open offer

#199559

Postby Arborbridge » February 7th, 2019, 12:16 pm

Crazbe7 wrote:I'll pass.


Exactly. For me, that says it all. 20/20 hindsight, anyone can do.


Arb.

Alaric
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Re: Interserve open offer

#199567

Postby Alaric » February 7th, 2019, 12:35 pm

Arborbridge wrote: no HYPer ever believes that capital doesn't matter .


I rather had the impression that a share with a dividend yield of 10%, but a year on year price drop of 8% would be preferred to one with a dividend yield of 2% but a price growth of 4%.

tjh290633
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Re: Interserve open offer

#199573

Postby tjh290633 » February 7th, 2019, 12:46 pm

Moderator Message:
I have just deleted several off topic posts. This is not the place to discuss the HYP Strategy. The next board up exists for that purpose.

TJH

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Re: Interserve open offer

#199579

Postby Crazbe7 » February 7th, 2019, 12:59 pm

Exactly. For me, that says it all. 20/20 hindsight, anyone can do.

Possibly, but I didn't buy into Interserve or Carillion at exorbitant yields.

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Re: Interserve open offer

#199611

Postby Arborbridge » February 7th, 2019, 2:50 pm

Crazbe7 wrote:Exactly. For me, that says it all. 20/20 hindsight, anyone can do.

Possibly, but I didn't buy into Interserve or Carillion at exorbitant yields.


Well done - you got those right, then. Thousands of shareholders didn't. But your observations now cannot help but be by hindsight and are therefore unremarkable.

Still, enough said from me.

Arb.

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Re: Interserve open offer

#199619

Postby Crazbe7 » February 7th, 2019, 3:11 pm

Well done - you got those right, then. Thousands of shareholders didn't. But your observations now cannot help but be by hindsight and are therefore unremarkable.

Then you miss the point about 'relative yields'

As a note I probably know far more of Carillons shareholders than you. if anything is to be learnt from a conspiracy of ineptness between company and auditor it is to diversify your share portfolio - too many of my colleagues now have reduced Carillion pensions and a large worthless shareholding in Carillion.

Arborbridge
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Re: Interserve open offer

#199658

Postby Arborbridge » February 7th, 2019, 5:49 pm

Crazbe7 wrote: if anything is to be learnt from a conspiracy of ineptness between company and auditor it is to diversify your share portfolio - too many of my colleagues now have reduced Carillion pensions and a large worthless shareholding in Carillion.


We can all second that! The reduced risk afforded by a well diversified portfolio is at the heart of HYP - or indeed any investment strategy that would interest me. But then, I'm pretty pathological about not putting my eggs all one basket.



Arb.

kempiejon
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Re: Interserve open offer

#199660

Postby kempiejon » February 7th, 2019, 6:02 pm

I think a number of large fails have adversely affected employees participating in the pension and amployee Sharesave schemes, theses people wouldn't normally diversify as they'd not think of themselves as stocks investors. Though I also know someone who thought the Apple employee shares she was offered in the 80s weren't worth it to her at the time.
IRV was one I never even looked at.

tjh290633
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Re: Interserve open offer

#199663

Postby tjh290633 » February 7th, 2019, 6:16 pm

Crazbe7 wrote:As a note I probably know far more of Carillons shareholders than you. if anything is to be learnt from a conspiracy of ineptness between company and auditor it is to diversify your share portfolio - too many of my colleagues now have reduced Carillion pensions and a large worthless shareholding in Carillion.

Going back 20 years, I knew a lot of GEC employees who suffered as a result of the Marconi collapse.

Fortunately I took profits twice while it was buoyant, but mistakenly bought back as it fell, until the dividend was stopped. Just about broke even.

TJH


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