Woodford Concerns

Moe_The_Bartender

From today’s Torygraph:

Neil Woodford's Patient Capital Trust has been forced to ask its lenders for greater flexibility after a sudden deterioration in asset values left it exposed to a possible breach of borrowing rules.

The trust’s current debt arrangements allow it to borrow up to £150m, or 20pc of net asset value (NAV), which limits how much it can borrow based on the value of both the quoted and unquoted holdings in the portfolio.

As of Wednesday, it had borrowings of £113.7m. Although that is less than the debt of £117.4m reported in July, the trust was left with a higher gearing position of 17.1pc of NAV, compared to 15.95pc.

Patient Capital Trust's lender, Northern Trust, has since agreed to give it greater borrowing flexibility while it works to dispose of certain unquoted assets, but demanded a veto over any new investments and a new rate of interest on the amount already drawn down in exchange.

So now his lenders have him by the dangly bits.

AnotherJoe

Possibly but I'm reminded of the old adage, if you owe the bank a million you're in trouble, if you owe the bank a billion, they're in trouble, and if you owe Neil Woodford money, start worrying.
Would anyone here lend Woodford a pound?
I don't know anything about Northern Trust but if I had shares in them, I'd be selling on account of their "security" must be shares that Woodford selected.

bowlhead99

Moe_The_Bartender wrote: »

So now his lenders have him by the dangly bits.

Investors (or potential investors) may previously have been concerned that the trust was close to breaking banking covenants, as the amount that can be borrowed under the facility was tied to the NAV of quoted and unquoted assets and they have various commitments for follow-on investments with certain companies. If the borrowing levels exceed the bank's allowed percentages of NAV for the two asset types (even if due to a decline in NAV rather than new borrowing), the trust could have been required to dump investments to quickly pay back the excess borrowing.

That concern has now been reduced, as they have told the bank they are aiming to dispose of certain unquoted assets and renegotiated the facility so they will have more flexibility around what happens if a NAV drop makes them go over for a while. The bank has agreed they can take extra borrowing for various existing commitments and the trust has agreed they won't make other new investments without agreeing them with the bank first.

After this was announced just after noon on Friday, the bid/offer ticked up and the afternoons trades were reported at a higher price than the morning's. So the market doesn't seem disappointed with the announcement.

As I mentioned yesterday:

bowlhead99 wrote: »

I note that WPCT has announced some negotiation of new arrangements in relation to its borrowing facility today: some greater flexibility around its borrowing base and a small tick up to Libor+1.50 from Libor+1.35%

You can characterise that as the lenders 'now having them by the dangly bits' if you like - but in reality, the market was previously worried about the bank already having them by the dangly bits with a car crash coming up ahead, and now that crisis has been averted.

talexuser

Moe_The_Bartender wrote: »

From today’s Torygraph:

A slight correction - for some time now it has been the Borisgraph

talexuser

The Sunday Borisgraph reports Kent Council have lost £36 million from their investment, the cashing in of which prompted the gating, based on latest valuations.

Councillors now complain about The "quality of financial advice" and "pension funds should not be a gamble" of "capital casinos" !! (my aside: how else pensions fund increases is not explained).

However it did not stop the superannuation fund discussing the investment in secret, when council business default should be open to the public.

AnotherJoe

Looks like WPCT is starting to become an excellent share for daytrading, up and down 4-5% a day. Not that i daytrade any more but I suspect the daytraders are in on this now, its not moving up or down on fundamentals at the moment thats for sure.

bowlhead99

talexuser wrote: »

However it did not stop the superannuation fund discussing the investment in secret, when council business default should be open to the public.

I haven't worked for a council for any significant length of time but assume it's not 'default' to invite members of the public to each meeting at which strategic investment or financial transactions etc are being considered.

It would seem impractical to transcript and publish every conversation or calculation shared between members of a pension fund trustee or advisory board, notwithstanding the fact that periodic reports or minutes are made available. Without going beyond the paywall to read the article in full, the investment value was obtained by the journalist presumably without needing to engage a spy or private detective?

If people are interested they could make a freedom of information request to obtain information held by public bodies that isn't routinely published, not that most members of the public area in a position to competently evaluate the fine detail of a DB fund's investment operations.

Malthusian

talexuser wrote: »

Councillors now complain about The "quality of financial advice" and "pension funds should not be a gamble" of "capital casinos" !! (my aside: how else pensions fund increases is not explained).

Also presumably not explained is why they were gambling on star managers like Woodford if they didn't think pension funds should be a gamble.

As pension funds are underwritten by the taxpayer, it's a risk-free bet anyway.

If the council's pension fund had gone to the moon they could pay themselves large discretionary increases. Or failing that reduce the amount that the council has to pay into the pension fund, leaving more available for pork and salaries / allowances. If they'd managed to lose every penny they lose nothing, within the constraint of not doing something that would forfeit their pension due to misconduct in public office.

MaxiRobriguez

Council managed pension funds need some sort of control though. Ultimately it's provision is to meet expensive DB pensions. If that can't be met by bonds and gilts given current low interest rate environment then allocations of high quality dividend companies should have been bought until that balance is met.

What on earth is a highly speculative Woodford growth fund doing in a council pension fund? It's insane and inappropriate.

Moe_The_Bartender

And another one. From Citywire:

Long-suffering investors in the suspended Woodford Equity Income have taken a further hit to the value of their holdings after Link, administrator of all of Neil Woodford's funds, slashed the valuation of one of his major unquoted stocks.

Woodford Patient Capital (WPCT) yesterday evening reported a heavy writedown to the investment trust's net asset value (NAV) warning that Link Fund Solutions 'intends to reduce the valuation of one of the company's holdings'.

The markdown will knock around 4p off the NAV, which stood at 72.85p yesterday. That equates to a 5.5% fall, lopping around £42.5 million off the trust's gross assets.

Patient Capital would not disclose the identity of the stock subject to the writedown. 'The board is unable to comment further on this revaluation at this time due to confidentiality obligations, but it will provide a further update to the market when able to do so,' it said.

My money's on Benevolent AI.