About Peverel believes Fairhold (who mainly own Mcarthy & Stone freeholds) are in a very big financial mess, despite directors re-valuing their assets by 96 million pounds last year.
Fairhold is actually made up of around 93 companies, which makes it easier to sell off freeholds without giving the right of first refusal to leaseholders.
As they struggle to service debts, they are being forced to sell off assets. This they do by selling the individual companies who hold the freeholds, rather than sell the actual freeholds.
It is believed that the individual companies are being sold off at a price that equates to a 50% discount on the company's claimed freehold valuations.
Looking at the Fairhold companies, it can be seen that the overall company is Fairhold Finance Ltd. They are tasked with funding the Fairhold companies.
In order to be able to do this, Fairhold Finance Ltd were granted a loan by Fairhold Securitisation Ltd in the amount of 443 million pounds.
In turn Fairhold Securitisation Ltd raised this money by issuing what are known as "notes" on the Irish Stock Exchange. They also used a financial instrument known as "swaps" which basically hedges loans against interest and inflation uncertainties.
As Fairhold's financial position worsened an emergency funding package was agreed amounting to 25 million pounds at an interest rate of 12%. Thus far the interest rate has led the initial loan of 25 m to increase to 41m pounds.
The loan granted to Fairhold Finance Ltd was due for repayment in October 2015, but Fairhold was unable to pay so the loan was put into default.
The immediate effect was that penalty interest rates were imposed on Fairhold.
More significant was that due to the default long term loans became immediately repayable.
Going back to the "swaps". Due to the loan default the "swap" options were put into default as well.
There is a dispute (which may end up in court) over the amount owed to the lenders over the swap default.
If Fairhold are to be believed they state that the swap default has left them with a liability of 361 million pounds.
On the other hand, the lending institutions are claiming 592 million pounds.
The most recently pubished accounts for Firstport Finance Ltd show a loss of 384 million pounds.
Of course, if the lenders are correct, those losses increase by 231m and if you add the 96m the directors have claimed in increased asset value those losses now increase by 327m up to a staggering 711m pounds.
The auditors report makes for interesting reading.
Possible events which could result from ther group's borrowings from its principal lender and secondary lender not bein re-financed, which may have an impact on the group's ability to continue as a going concern. These events indicate the existence of a material uncertainty, which may cast significant doubt about the group's ability to continue as a going concern.
There is a potential for the above uncertanties to interact with one another, such that we have been unable to obtain sufficient appropriate audit evidence regarding the possible effect of the uncertainties taken together.
This is the company don't forget that Peverel/Firstport relies on for their management contracts.
