Do you think it would be value accretive for Eastnine shareholders to issue shares at the current valuation discount? I guess it would make sense if Baltic Horizon is trading at an even deeper discount. So then you can use the cash to cover the debts.
Also, looking at the properties, seems that some are quite old (https://www.baltichorizon.com/properties/). Well, I guess they can prune some properties after the fact, if it ever happens.
Anyhow, as always, very interesting write up! Cheers!
Yes, it depends on the relative valuation between the shares. For it to happen at good enough terms you would probably need to be in a situation where management absolutely can't kick the can further down the road AND the larger unit-holders are fully cognizant of the dire financial situation that they are in. The bondholders would also have to be willing to either take a lower interest rate or be bought out at par.
However, provided that those ifs are factual, I think that a deal here can be both mutually beneficial and economically better than any direct transactions that can be done. It's for example pretty easy to calculate a share deal which seems better than the Duetto purchases by East Capital. And then you have the administrative and financial synergies.
The retail assets seem decently good to me and can probably if desired be liquidated without stress in a few years to a buyer with lower cost of capital, which compensates somewhat for their low yields.
Overall, this logic of doing stock deals is present across the RE sector right now as they look possible in several cases where direct transactions don't make sense because the equity left would be too low for the seller, but the blended LTV and ICR in a combination is fine.
Do you think it would be value accretive for Eastnine shareholders to issue shares at the current valuation discount? I guess it would make sense if Baltic Horizon is trading at an even deeper discount. So then you can use the cash to cover the debts.
Also, looking at the properties, seems that some are quite old (https://www.baltichorizon.com/properties/). Well, I guess they can prune some properties after the fact, if it ever happens.
Anyhow, as always, very interesting write up! Cheers!
Yes, it depends on the relative valuation between the shares. For it to happen at good enough terms you would probably need to be in a situation where management absolutely can't kick the can further down the road AND the larger unit-holders are fully cognizant of the dire financial situation that they are in. The bondholders would also have to be willing to either take a lower interest rate or be bought out at par.
However, provided that those ifs are factual, I think that a deal here can be both mutually beneficial and economically better than any direct transactions that can be done. It's for example pretty easy to calculate a share deal which seems better than the Duetto purchases by East Capital. And then you have the administrative and financial synergies.
The retail assets seem decently good to me and can probably if desired be liquidated without stress in a few years to a buyer with lower cost of capital, which compensates somewhat for their low yields.
Overall, this logic of doing stock deals is present across the RE sector right now as they look possible in several cases where direct transactions don't make sense because the equity left would be too low for the seller, but the blended LTV and ICR in a combination is fine.