After suggesting both February and March that a deal was ‘imminent’, RNY has finally resolved its one remaining legacy debt issue. Today’s announcement suggests it was hardly worth the wait.
RNY got lenders to take a big haircut on the loans outstanding on the much larger Pool A assets (refinanced more than a year ago), and we had high hopes for this tranche too. But the lenders did what you would expect them to do and kept most of the assets. The US$43.8m worth of assets in Pool B have been refinanced, including an extension to the senior debt facility for another two years.
But the subordinated (B-Note) lender has taken most of the equity, leaving RNY with just a 7.8% interest in the assets (down from 100%, and for which they had to tip in an additional US$500,000). Using the 31 December valuation, that is worth less than US$1m.
RNY’s reported NTA was US$0.45 per unit at year-end and this pool was detracting roughly $US0.02 from the total. No longer consolidating the debt will increase NTA to at least $US0.47 and the depreciation of the AUD means that is worth more than $0.50 to us Australians. Not bad compared to today’s $0.29 unit price. The assets are not partcularly significant relative to RNY's overall size (less than 10% of gross asset value) but the deal is mildy disappointing.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.