Post by pikestaff on Nov 10, 2013 16:07:56 GMT
I thought it was time to re-start discussion on this one.
The accounts look quite good and the owners have a long record of success at this location. Considering these factors alone, the rate of 14% for 5 years looks attractive. The downsides are:
(1) that part of the loan will be used to pay off an IVA resulting from a failed venture in Manchester,
(2) questions about the owners' judgement that got them into that fix in the first place, and
(3) the high LTV (said to be c.80% but this is somewhat dependent on the continued success of the business).
(4) the only possible exit route is a refinancing.
My personal view is that, even on these terms, the reward justifies the risk. I am prepared to forgive the owners' one mistake on the basis that they are now once again fully committed to the pub. However, the usual chicken and egg applies. I won't commit funds until the auction looks like it will fill, and it is currently stuck at 37% after a couple of extensions.
The proposal talks of possibly negotiating lower settlement figures from their existing lender (HSBC) and on the IVA, which would reduce the size of the loan and improve the LTV. I think that this should have been done before the loan was listed. However, the fact that the auction is struggling does arguably give the owners more leverage.
Andrew said on the old forum that they were trying to negotiate a haircut with the bank, and also that they were looking at the possibility of underwriting. I suspect the two go together, ie they may not be able to get (or afford) underwriting without a haircut. Will there be news on this before the latest extension expires? 4 days to go...
The accounts look quite good and the owners have a long record of success at this location. Considering these factors alone, the rate of 14% for 5 years looks attractive. The downsides are:
(1) that part of the loan will be used to pay off an IVA resulting from a failed venture in Manchester,
(2) questions about the owners' judgement that got them into that fix in the first place, and
(3) the high LTV (said to be c.80% but this is somewhat dependent on the continued success of the business).
(4) the only possible exit route is a refinancing.
My personal view is that, even on these terms, the reward justifies the risk. I am prepared to forgive the owners' one mistake on the basis that they are now once again fully committed to the pub. However, the usual chicken and egg applies. I won't commit funds until the auction looks like it will fill, and it is currently stuck at 37% after a couple of extensions.
The proposal talks of possibly negotiating lower settlement figures from their existing lender (HSBC) and on the IVA, which would reduce the size of the loan and improve the LTV. I think that this should have been done before the loan was listed. However, the fact that the auction is struggling does arguably give the owners more leverage.
Andrew said on the old forum that they were trying to negotiate a haircut with the bank, and also that they were looking at the possibility of underwriting. I suspect the two go together, ie they may not be able to get (or afford) underwriting without a haircut. Will there be news on this before the latest extension expires? 4 days to go...
