HIBU – my read

Various posters have come up different theories about the future of Hibu. Here’s my read on the situation.

A rights issue wont happen. No-one would subscribe, at least not enough to satisfy current debt obligations.

Another idea from left field, that I discount, is that current shareholder will be given options. Why would debt-holders stand for this?

The fact that Hibu is “cash generative” doesn’t give a value case for the shareholders. The debts are massive, and covenants are in breach were they to be tested, so they are likely to seek control of the business.

There’s a disparity of opinion between the “2006 debt” and the “2009 debt”. The 2006ers want their money. Hibu is not repaying – apparently a standard practise in this situation. Covenants are being waived because, at this juncture, they will be breached if tested. No point in doing something that is a foregone conclusion – it’s better that debtholders maximise the benefit of the situation. And that is to force a debt-for-equity where current shareholders are wiped out, and the business is run as a going concern insofar as is possible. The assets are worth next-to-nothing, so the continuance of trading is basically the only option.

In fact, the recent RNS says this: “likely to result in little or no value being attributed to the Group’s ordinary shares“, and ” the lenders will achieve a higher recovery on their loans by letting the business continue to operate as a going concern rather than by any other course of action”

The whole thing about directors being in a “conspiracy” with the debt-holders or shorters is fanciful. At this stage, they have no choice, and I think they have been honest with shareholders. I don’t doubt that the RNS have been carefully worded with the help of a professional adviser. The directors wont leave themselves so exposed as to omit information that needs to be said.

Hibu is as big a sell as a sell can get.

About mcturra2000

Computer programmer living in Scotland.
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