The Lemon Fool

Kenny posts on ADVFN. Look under the RAVP and RUSP threads.

Gan020 wrote:Kenny posts on ADVFN. Look under the RAVP and RUSP threads.

Comment about RAVP on ADVFN seems mostly bullish. On the surface 8% looks a decent yield but the business is not without its issues. Debt is substantial. Cash is being extracted from the business at the maximum rate permissible [what's so great about having "unredeemable" shares if there's no cash left to pay the dividends?]. Revenue has been falling, cash levels have been falling, net asset value has been falling. All worrying for investors who have no access to their capital.

How do holders wave those problems away, I wonder?

GS

Woodford owns:

RAV 80.8m shares (12.96%) £32.3m
RAVC 81.9m shares (41.34%) £92.6m
RAVP 8.2m shares (8.22%) £11.2m

Total £126m


If any of that comes on the market as a result of his redemption's on WEIF or cross contamination in his other fund, the share price is not going to hold even if his friends at Invesco take some off his hands in a direct transfer.

GoSeigen wrote:Thanks GAN, had a look. Kenny seems to be cheerleader-in-chief at ADVFN. Seems he came here to talk up his own substantial book.

If I had £2mio in one share as Kenny says he has, I'd keep a pretty close eye on it. So is he talking it up, or just talking about something dear to his heart.

Woodford's exit may indeed provide Kenny and other believers with a buying opportunity.
Won't be me; although I accept Kenny's view that the Co is not likely to engage in jiggereypokey, I also recognise GS's patiently argued point that if they wanted to do an Aviva, they could.

So I have enough RAVP and RAVC At the moment. Get thee behind me, high-yield.

V8

88V8 wrote:

GoSeigen wrote:Thanks GAN, had a look. Kenny seems to be cheerleader-in-chief at ADVFN. Seems he came here to talk up his own substantial book.

If I had £2mio in one share as Kenny says he has, I'd keep a pretty close eye on it. So is he talking it up, or just talking about something dear to his heart.

Woodford's exit may indeed provide Kenny and other believers with a buying opportunity.
Won't be me; although I accept Kenny's view that the Co is not likely to engage in jiggereypokey,

All good to here -- agreed even with the [Aviva-style] jiggery-pokery bit.

I also recognise GS's patiently argued point that if they wanted to do an Aviva, they could.

Now I haven't said this at all. Perhaps someone said that I said it! I was merely questioning the underlying assumptions and premise of the arguments. Personally I put the ability to do an Aviva at close to zero. I just don't observe that the shares are either irredeemable (according to their own description) or bond-like in any substantial way.

So I have enough RAVP and RAVC At the moment. Get thee behind me, high-yield.

Pretty much my view too: a dabble is fine, vulnerably over-weight is not.


GS

Well I would agree that holding RAVP exposes you to numerous risks, not least the whole Russia situation and the Woodford position ATM (I see that the selling price of RAVP has dropped 2p today, was that Woodford or just XD catching up ?). Anyone planning to hold RAVP needs to keep their eye on these risks I think.

Given the ownership situation personally I don’t see the company trying to “do an Aviva” as this would seem to be to the company holders and directors significant disadvantage, but nothing is impossible I guess.

I find that reading Kennys posts is an easy way to keep up with what the company is doing and provides some input on the Russia situation. He has clearly been successful through what appears to be his strategy of just holding and accumulating whatever the situation ie wars, sanctions, Russian stock market woes. But I wouldn’t like to be holding as many RAVP as he obviously has….

Pref

GoSeigen wrote:

I also recognise GS's patiently argued point that if they wanted to do an Aviva, they could.

Now I haven't said this at all. Perhaps someone said that I said it! I was merely questioning the underlying assumptions and premise of the arguments. Personally I put the ability to do an Aviva at close to zero. I just don't observe that the shares are either irredeemable (according to their own description) or bond-like in any substantial way.

Hmmm. Perhaps I put words into your errm, fingers.

But you haven't just been picking Kenny up on his woolly semantics have you, like Jim in The Archers.... so, if you pretty much discount them doing an Aviva, and given the class vote required for redemption, what do you actually see as the practical risk here.
Other than the inconvenience of them going bust. And Russia.

V8

Whilst it's normal for Property Companies to borrow, what's unusual is that they chose to do so by means of Preference Shares. With the Russian angle, does that have work better in terms of tax? Or was it that being undated if set up that way, Preference Shares don't need periodic refinancing? But they could have achieved this in bond form as well. Most other Preference Shares are in the financial sector, insurers and banks.

British Land Corporate Bonds
https://www.britishland.com/investors/d ... ling-bonds
Perpetual Bonds
https://www.investopedia.com/articles/i ... erview.asp

88V8 wrote:

GoSeigen wrote:

I also recognise GS's patiently argued point that if they wanted to do an Aviva, they could.

Now I haven't said this at all. Perhaps someone said that I said it! I was merely questioning the underlying assumptions and premise of the arguments. Personally I put the ability to do an Aviva at close to zero. I just don't observe that the shares are either irredeemable (according to their own description) or bond-like in any substantial way.

Hmmm. Perhaps I put words into your errm, fingers.

But you haven't just been picking Kenny up on his woolly semantics have you, like Jim in The Archers.... so, if you pretty much discount them doing an Aviva, and given the class vote required for redemption, what do you actually see as the practical risk here.
Other than the inconvenience of them going bust. And Russia.

The incentives are skewed, this is all I need to know. Preferred holders get 12% cumulative, prior payment, liquidation preference AND cannot be paid off. In fact no capital reductions whatsoever in any of the company's capital can be made without a veto of 25% of pref holders. So as a shareholder how do you get your money back?

First you make your distributions as fast as you can. You mask this by issuing new preference capital and debt. Second you use whatever means possible to accelerate removal of cash e.g. buy back shares at a premium to market. Key shareholders can load up in the market, then tender at a premium to the company making a quick, neat profit. Third, you use whatever other back-door methods possible to extract value.

That's what I'd be doing as a shareholder in this situation. Whether that matches what is going on in Raven is for holders to investigate. I know enough that I don't want to touch this in anything but the smallest quantities until I have looked at it thoroughly. There's too much dodgy for my liking.

If you think I should put my finger exactly what is going to happen else I am a loser then your expectation of me is overblown. I can only see what others can see, and rely on my limited and narrow experience. Shares of any kind are very complicated, far more than bonds and frankly far beyond my pay grade. But I can read a contract and understand its meaning so you're welcome to hold me to what I have said in that respect...

GS

GoSeigen wrote: So as a shareholder how do you get your money back?

Ordinary or Preference?

Either way you just sell it on the Stock Market for what someone else will pay for it. It helps if the Company is a going concern. If it isn't and you are an Ordinary shareholder you may well be stuffed. If a Preference Shareholder, you may have some hope of getting back up to the nominal par value of your holding.

Alaric wrote:

GoSeigen wrote: So as a shareholder how do you get your money back?

Ordinary or Preference?

Either way you just sell it on the Stock Market for what someone else will pay for it. I

I meant ords of course.

Your method doesn't work. Selling in the market doesn't erase the shareholding or associated liabilities. It just installs a new natural person in the position of beneficiary who has the same problem.


GS

GoSeigen wrote: It just installs a new natural person in the position of beneficiary who has the same problem.

So what? Controlling ordinary shareholders are in a position to liquidate the Company if they so wish. If done on a voluntary basis, paying off all the creditors and minority shareholders , they keep the profits.

In a recent article in Questor (The Telegraph) - which reviewed the position for numerous preference shares a year after the Aviva debacle - it stated:

"Although National Westminster Bank has been part of RBS for many years it still has its own 9pc prefs (NWBD) in issue. The articles of association state that “the capital paid up on the preference shares cannot be reduced unless the holders of the preference shares have approved this by passing an extraordinary resolution at a separate meeting”.
In other words, the prefs cannot be cancelled without consent from holders."

As the terms relating to RAVP are identical to the class vote terms set out above, if anyone believes that RAVP can be redeemed at the company's choice despite the company's Articles, perhaps they should take it up with Questor and The Daily Telegraph.

The chances of RAVP doing an Aviva are not "close to zero" rather they are zero - as stated in the above quote.

Hi Kenny, How do you see the 2p price drop in the RAVP price this last couple of days. Is it just a post XD effect (noting that it didnt drop on the day) or could it be anything to do with the Woodford situation ?. Given the size of his RAV holdings some selling is surely likely ?. Whats your view ?.

ATB

Pref

PrefInvestor wrote:Hi Kenny, How do you see the 2p price drop in the RAVP price this last couple of days. Is it just a post XD effect (noting that it didnt drop on the day) or could it be anything to do with the Woodford situation ?. Given the size of his RAV holdings some selling is surely likely ?. Whats your view ?.

Pref

Woodford does not own any RAVP in WEIF which is under suspension. Only RAV and RAVC. He does of course own RAVP elsewhere.

All the prefs have been marked down the last 10 days or so for reasons I'm not entirely clear on. There does seem to have been some flow out of bonds into equities so maybe prefs are the same. Perhaps some of it is flowing out of prefs to buy what may be perceived as Woodford bargains such as IMB which give a fixed income flow in a HYP type of way.

Under Woodford's new guise of making WEIF mostly FTSE100 and a bit of FTSE350 then his RAV and RAVC have to go at some point, in which case the price of RAVP will come under pressure by association. I suggest Woodford will not want to sell his RAVs despite his new commitment and will try desperately to hang on to them, which of course the fundamental reason for his undoing in that he's not very good at compliance and risk management.


The issue with moving such large percentages of RAV on is that what discount will he have to offer and will others view the risk in the same way he does. I've read the accounts and I struggle to understand them. That's a reflection on me of course but they seem unnecessarily complicated but perhaps that reflects the nature of the debt and share structure. I am left with a question of how they pay off RAVC in 2026 unless they roll them as I can't see the cash flow providing for repayment. 2026 is a long way away of course. They could sell some assets by then.

I do not own any RAVP directly as they risk/reward does not add up to me, but I perceive myself as fairly risk adverse. I do own some indirectly through NCYF.

Kenny wrote:...(NWBD) ...the prefs cannot be cancelled without consent from holders.

As the terms relating to RAVP are identical to the class vote terms set out above.....

On Mark's late site there was a thread, now lost, where the various Prefs were analysed in terms of their anti-Aviva moat, and BWRA and NWBD were deemed safe. Also ELLA but for reasons of attitude rather than contract.

I cannot recall whether RAVP was considered at that time.

V8

Hi 88v8, Well the RAVP articles of association were deliberately updated by the company post the Aviva debacle with the objective of making preference shareholders feel safer I think. So any previous analysis would likely not have factored that in.

ATB

Pref

Hi GAN020, I have held RAVP on and off for years. When the company was clearly profitable then I was pretty happy with it - except perhaps for the whole russia situation which as always been worrisome. I sold and re-bought a few times when events like the syria missile strike were taking place and russian sanctions applied for fear of what would happen to the price. Those who are less risk averse just held throughout.

My current concerns are mainly focused on the woodford situation, which I think could well extend further than just the one fund that is currently suspended. Should he start to force sell his RAV holdings (ordinaries, prefs & convertibles) then that might be a problem given the size of his holdings, I have therefore reduced my exposure in recent days - just in case. No idea if this is justified or necessary - but its just me being risk averse. If you wait to discover if it IS a problem then often you are too late, the price will have already moved or you just wont be able to sell.

The state of the 2018 accounts is another concern. But I think that this mainly comes down to the big property revaluation in GBP and the fact that the Ruble lost so much against the GBP in the relevant accounting period. On that score things seem to have been better YTD with the Ruble actually up a bit against the GBP, so maybe that situation will have improved ? - but I cant guarantee it.

I am still holding but at a reduced level.

ATB

Pref

PrefInvestor wrote:The state of the 2018 accounts is another concern. But I think that this mainly comes down to the big property revaluation in GBP and the fact that the Ruble lost so much against the GBP in the relevant accounting period.

In my understanding the revaluation was not a cash item. So how do you explain the fall in cash levels?


GS

a company’s accounts are normally quite good in providing information, especially such basic information.

During 2018 they purchased properties whose cost totaled £77.9m (that is the Sterling figure!). They also purchased properties during 2017.