Thread by @Richards_Karin

HMN Rights Issue: Below is a thread with a recap of some further info & thoughts. Most NB is that if you do not wish to take up your rights (the outlay is significant) then sell. And do not let your rights expire worthless.

HMN: Asset sales plus rights issue will raise £825m. Gearing will be reduced to 57% (well within covenants) and LTV to a reasonable 42%. There appears to be adequate headroom even if values decline by a futher 20% [in addition to -24% already taken at June].
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HMN: There are no significant debt maturities in 2020 & 2021, allowing some breathing space. It is anticipated that there will be further material disposals to reduce debt further. Improved balance sheet strength should allow this to happen in a planned manner.
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HMN: Rentals will be rebased by c.10-15% with a new model more flexible model. HMN says this will create the "foundation for a growing, sustainable income stream from a lower base."
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HMN: Dividends: Initially there will be scrip dividends from H2 2020 for REIT compliance. It is expected that cash dividends will only resume in 2022.
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HMN: Looking forward, if net rental income declines by a further 20% (from the Dec'19 pro forma), the earnings yield will be ± 10%. This translates roughly into a dividend yield of 8%. Even a 5% yield would be attractive in Sterling - assuming it materializes of course.
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HMN: The proposed City Quaters mixed use (residential, retail, work, leisure) development adds a layer of risk which cannot be ignored.
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HMN: Should I take up the rights offer? On balance my view is yes. You have to believe a) they won't go bust - I do not believe they will. And b) that mgmt can pull it off. Mgmt have a good track record, hence sufficient reason to trust that they can, at least largely.
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HMN: At y/day's price (R11.43; which equates to an ex rights issue price of R5.56) it does appear to present longer term value. If this is not the bottom for UK retail then I do not know what would be. But an investor would need to look through to at least 2022.
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HMN: If you do not wish to take up the rights it would be wise to sell as the dilution will be severe. New equity will comprise 96% of total equity post the rights issue. Even post the LDT date (4 Sep) you can still sell your shares and your rights (code: HMNN).
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