Intu SGS - comment

The recapitalisation of INTU SGS is due to be completed in the next 4-6 weeks, following a Scheme of Arrangement Sanction hearing on the 11th of April. In simple terms, existing lenders will receive a partial payment (from cash on the balance sheet plus a new Senior Term Loan which equates to 24.4p/£ in value. The balance will be converted into a PIK Note, structurally junior in all respects to a new CAPEX facility and the New Senior Term Loan, but senior to the shares. Tenor will be 20 yrs at 10% PIK (effectively the equity of the structure). The PIK will be stapled to the SGS Shares. 

The last valuation by Knight Frank and Cushman & Wakefield valued the estate at c. £858m, plus cash on the balance sheet of £115m, totalling £973m, implying 55% of face (adjusting for the senior debt). The current Net Equivalent Yield on the assets is c. 8.6%. However, it should be noted the business needs c.£140m of CAPEX over the next 4 years, c.16% of the estate value to meet its business plan. 

We may take the current excitement about the name to exit in the next couple of days. Happy to discuss this.