Thoughts on April Data + COI Mtg + Return Estimates
Hi There Folks,
Cover Note to go with thoughts on April 2011 Figures + COI Meeting Minutes of 29.3.2011
As said last time I was most impressed by the cash back from loan book returns in January 2011 and then gob smacked at the February returns. Returns from later years also doing well in % terms. The returns in March fell back sharply as you had to expect, but still sufficient for the JLs to pay out 12.5p/£. Thus Giving us a total so far of 73.6p/£ and well on par to hit their 18% for the year and my hoped for 20% on the year. The April figures show a net return of £15.522m which is way ahead of par to meet the net monthly requirements needed to meet the 19/20% payout over the year. I now think 81% is feasible by Dec 2011 and 91% by Dec 2012.
I think it looks even better for the 6th dividend from the JLs later in the year, as obviously this last dividend in April did not include the dividend due back this month from E&Y (KSFUK) of at least 5p/£ = £12.305m and I think E&Y will pay out the same again, at least, later in the year also. So that should give a total of at least £24.610m. And who knows E&Y might pay out more than 10% this year. So I think with the April cash intake plus the hoped for E&Y contributions around 24.5.2011 (plus a second dividend later in the year) that the JLs would give a payout of around 8p/£ by December 2011. The JLs need £45.2m net, to pay out 5% later in the year. The fact that both our JLs and E&Y are giving returns before June also augurs well for second dividends from both prior to December 2011.
So, if we need £45.2m and we hope for at least £24.610m from E&Y, that now, after the April figures, would leave a net £4.0m from KSFIOM loan book inc interest to meet a further 5% from the JLs this year (after allowing for balance of Liquidation costs and cash retained to payout the continuing unresolved/unclaimed creditors). Or in monthly terms from May to Nov it would mean a net £0.571m per month. Even allowing for a massive downfall in returns over the remainder of this year, I think the £0.571m per month is a target that will be exceeded. I now think a 20% return highly possible for this year.
E&Y's (KSFUK) 6 monthly report issued for the reporting period ending 7.4.2011 did increase estimates from 75-84p/£ to 78-86p/£. Did not give definite info on their next return (now due around the 24.5.2011) but I feel it will be at least 5/6p/£. And no info looking ahead to their 2nd return this year.
- Again re our dependence so far on ‘pulling in cash’ from later years to subsidise shortfalls as occurred in 2009 and 2010.
· In 2009 approx £23.6m was ‘pushed back’ from loans due into 2010 and a figure of approx £48m was brought in early from later years I.e. 2010/2016.This meant out of a total for these later years of £358m the JLs brought in £48m = £13.33%
· In 2010 we have ‘pushed back’ circa £22m into 2011. JLs did a fantastic job and brought £53.029m in early from later years I.e. 2011/2016. This meant out of a total for those years of £279.047 they brought in £53.029m or 19.003%.
· So for 2011 the picture regarding bringing in cash from later years looks like this – Cash due back 2012/2016 is £113.704m and at 13.33% = £15.157m, the JLs have already brought back £15.959m by April, thus equating the percentage of that achieved in 2009. And well on their way to reaching that achieved in 2010 of 19.003% = £21.607m. In cash terms very much smaller totals than last two years, and I have said previously we could not depend on later years on an ongoing basis to help poorer returns in any one year as the cash was not there in those later years from now on.
As said last time 2011 has a very high total on it’s own and we could now get the £114.735m to meet the 84.95% lower estimate of the JLs) from 2011 without undue help from 2012/2016 (although that is doing very well also at present). The JLs have brought back in overall £92.228m in 4 months inc £15.959m from later years so the £100 - £114.467m (84.95%) appears to be well within reach this year. Although keep saying we cannot continue with the high figures received up to April over the rest of the year unless we get full recovery on more big loans.
- In respect of the 10 large original loans and the 10 ‘new set’ large loans we can see the following, based on the JLs info in the March figures update;
· We now know the new current 10 large loans are split; 3(2011), 4 (2012), 2 (2013) and 1 (2014).
· Still need to be careful re returns from the ‘new set’ of 10 large loans, as defaulting is still a worry.
· The capital due on this new list is £113m (66% of loan book)
· The capital due on the original 10 last July was £189.5m (61% of loan book)
· The capital due on the original 10 at October 2008 was £216m (52% of loan book)
· 66% is high and appears worrying, but each loan is on average worth £11.3m as against the average £18.95m last July and the £21.6m in October 2008.
· So yes % is higher but the overall total due is far less, so less worrying to me if one or two fail as against one or two as at last July.
My thoughts on the April figures and updates on estimates are all contained in the attachment with this cover note – again to try and retain the format of the layout. My Table 11 has been updated to allow for the April data, the 5th dividend and the estimated final dividend is based on the updated Table 11. I now get 95.339p/£ return overall, another slight increase on my last lower estimate (probably due to the increase to 78% from 75% lower estimated return from E&Y (KSFUK). But I have revamped my Table 11 to take full account of all cash received so far up to 30.4.2011 and down dated what is still due in 2011 (based on 84.95%) on receipts so far. Also revamped down what is still due in value from following years based on early recoveries so far this year. Also revamped interest downward that is still due in 2011 based on receipts so far in 2011. And have also increased recoveries from E&Y (KSFUK) to their lower 78%. (£7.383m to us).
So if we say we will get two returns this year, already had one of 12.5p (8.4.2011) giving an overall total of 73.60% hopefully followed by another 8.00p/£ = 81.60p/£ by Dec 2011. Plus the possibility of another 5p/£ in June 2012 and 5p/£ in Dec 2012 = 10p/£ giving a grand total by Dec 2012 of 91.60p/£ (73.6 + 8.0 + 5.0 + 5.0 = 91.6). As said previously I’m currently staying with the 84.95% all the way through and also the 78% (from E&Y - KSFUK) all the way through until any changes are notified by the JLs or E&Y.
- Re the COI Minutes – I have no new questions to ask the JLs based on these Minutes, but would make two comments + one from E&Y (KSFUK) 6 months Report;
· Interesting to note the JLs anticipate that the decision by the Supreme Court in Iceland re the validity of our ‘Parental Guarantee’ against Kaupthing hf could be made known within 2 months (I.e. 31.5.2011?).
· The ‘Winding Up Committee’ of Kaupthing hf have stated that they think it is likely that KSFUK have a valid claim against Kaupthing hf. Although they formally rejected the majority of the claim as submitted. E&Y are attempting to arrange meetings to clarify the situation. E&Y also state that the ‘Winding Up Committee’ understand that the value of Kaupthing hf assets now exceed the level of priority claims agreed by the Winding Up Committee’ or subject to dispute, and that options are being considered to enable a return to creditors – good news for KSFUK and therefore us in the level of returns we might get back from E&Y (KSFUK). Worth noting E&Y submitted a net figure after ‘set off’ of c£695m as their claim. That would increase dividends from them to all unsecured creditors including us, even if it was a return of 25% on say £695m.
The but is – recovery estimates and timeline are not yet known, until E&Y (KSFUK) understand how the ‘Winding Up Committee’ intend to value all elements of the KSFUK claim.
· The JLs have given figures stating as at 8.10.2008 according to contractual terms on loans a total of £335m should still be outstanding from these loans at present. Whereas in reality, loan book recoveries are currently running at £163m ahead of this, as a result of active management of the Portfolio – and I think it is fair to say that is why we are currently at 73.6% in dividends and now certainly heading for 80% by December this year. So the JLs in my opinion are doing something right re strategy with our loan book returns and also the recoveries from E&Y (KSFUK) – long may it continue.
But again re our current figures and estimates the probability of being way off beam as against the JLs assumptions, is continuing to lessen in my view, as long as the majority of the 10 ‘new’ remaining large loans come through for us – but who knows.
Take Care, and God Bless,
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