Musings from the trading floor (Early Bumper Edition)
Names in play this week: £TRIG, £FGEN, £HEIT, £DRX, €SELNSW, £WHR, $GME
28th March 2025
Musings from the trading floor (Early Bumper Edition)
Names in play this week: £TRIG, £FGEN, £HEIT, £DRX, €SELNSW, £WHR, $GME
Market Recap - Heading into the US open..
Equities: UKX: +0.38%, SPX: +0.09%, EuroStoxx -1.23%, ASX 200 +0.64%.
Credit: IG & XO, +3bps and +9bps respectively. Interest Rates: UK 10Yr yield about 4bps lower and 1year 9bps lower.
Geo-Macro Mania
US: Auto tariffs..
EU: FR inflation landed softer YoY 0.9% vs 1.10%, 0.2% vs 0.4% survey.
UK: Spring statement didn’t really move the needle, OBR revision to growth downward, lower gilt sales constructive for gilt yields. CPI printing yoy at 2.8%, 20bps inside of market survey, more of note.
Gone Fishing..
Normally we don’t really get involved in Nordic securities, as there is limited liquidity; weak covenants (IMO); security (despite it being an interesting market) but this bond deal caught my eye, given its related to fish farming…
Axolo Group AS (a newly incorporated investment company) is in the market to raise €65m in secured floating rate notes in SEK and Euro (price talk Euribor + 10.5%), nothing terribly exciting there, until you realise the business was “founded by the management of Eyvi AS and Hima Seafood” to create a leading regenerative group within aquaculture” – to join the dots here, Hima is majority owned by FGEN: LN (25% according to FGEN accounts) and Foresight Group’s funds and its affiliates. Ok, now it is getting more interesting! There is a read across here re Axolo Group’s strategy to Hima, but I’ll stop short of speculating on strategy – one to watch!
Content for Now?
The mid-week news that the Board of TRIG: LN has reversed course on the proposed IMA changes should come as little surprise. Feedback from our own independent canvassing of shareholders, it became overwhelmingly clear: the proposal was unconventional, misaligned incentives, and arguably functioned as a poison pill to the detriment of shareholder value. While the revised IMA fee structure is more in line with evolving market norms, and the introduction of a continuation vote via ordinary resolution is welcome, it merely delays the underlying issues. The stock remains down approximately 26% over the past year, with a total return of -20%.
And, the core concern persists: the Board failed to conduct a formal, competitive tender for what is effectively a £15m+ management contract. As I’ve said to many investors over the last two weeks - if we routinely shop around for insurance or utility providers, why wouldn’t we expect the same level of scrutiny for significant Investment Management agreements? It reflects a culture that is too comfortable (Nota bene: We are aware of certain Board views on this matter and feel its inadequate). While these changes may temporarily appease, they do not resolve the broader governance shortcomings. In our view, investors should be seriously considering whether it is time for the Chair to step down.
Echo Chambers
A final thought. The cynic in me wonders how long it will be before we see certain boards awarding themselves “special” pay in recognition of all this recent “hard work”. Particularly concerning is how such remuneration decisions are often made in a closed echo chamber, with little to no shareholder consultation or transparency around the detail (ex post!).
Batteries Included Continued..
What a week it’s been for Harmony Energy Income Trust (HEIT:LN) shareholders. Just as it seemed the original transaction might not materialise, Foresight Group (FSG:LN) stepped in with a credible offer, only for Drax Group (DRX:LN) to re-emerge as the initial bidder, raising the stakes with a modest 5% premium to FSG’s proposal. Drax’s interest as a trade buyer is logical, particularly given its continued strategic shift toward a renewables-led, flexible generation platform. Battery assets are a natural fit alongside its existing intermittent renewables and open-cycle gas turbine infrastructure.
Private Social Real Estate
Specialist Supported Housing (“SSH”) Portfolio: Agents are marketing another SSH portfolio, let to “regulated charities or registered providers” and “subject to 10-year effective FRI leases, price talk implies NIY 7.0%.
HMO Resi Portfolio: The Yeovil HMO portfolio is on the market, price talk, offers over £4m, implying GIY of 11.53%, and expected GRY (based on ERV) of 13.22%
Student Accommodation: Two blocks on the market, 1x Nottingham, GIY of 10.8% and 1x Exeter (£100k per bed) GIY 11.4% respectively.
B17#
Selecta (SELNSW Corp) a leading European vending machine operator with over 320,000 machines across more than 16 countries and something of a canary in the coal mine when it comes to predicting economic downturns, is back on the market. But bondholders aren’t feeling optimistic, with 2026 bond maturities looming, competing restructuring proposals in play, and growing tensions between creditors and the company’s board. The company has a chequered history, in 2007 Compass Group PLC sold Selecta to Allianz Capital Partners for a reported $1.53bn. It later struggled during the European sovereign debt crisis, with KKR stepping in via a loan-to-own quasi-equity PIK facility. KKR eventually acquired the platform outright in 2015 and had to inject further capital in 2020 when the global pandemic brought transport hubs, a core revenue channel to a standstill.
As of January 2025, Selecta’s 1st lien PIK bonds were downgraded to Caa3/D (Moody’s/S&P) and now yield approximately 68%. Meanwhile, the 2nd lien notes are trading in the mid-20s (not a typo). Despite the inherent utility of vending machine ‘solutions’, a combination of regulatory pressures, including bans on paper cups and economic challenges such as surging coffee prices make it difficult to see a viable path forward for the business under its current capital structure.
MB&F Real Alts
Ok we’re back to a different segment of the “wearable” alts sector, watches. MB&F side project MAD, is back at it with a new “issue”: M.A.D. 2. The offshoot is fast becoming to MB&F what Omega x Swatch colab has done for the revenues of Swatch Group. Reportedly MAD now contributes 25% to MB&F group revenues. If they successfully open up the brand to this tier of affordable luxury, its easy to see a trade buyer coming in.
GME the Sequel
The GameStop “Dumb Money” film made for an easy 90 minutes of Roaring Kitty-style comedy, and now it seems we’re in for a sequel. The news that the company is issuing a zero-coupon bond to buy Bitcoin feels like the very definition of the American dream. Few places showcase this level of bold entrepreneurialism quite like the U.S. Let’s see how it plays out. A colleague also pointed out the existence of an ETF—the REX Bitcoin Corp Treasury Convertible Bond ETF (BMAX: US), which primarily holds convertibles issued by companies with Bitcoin in their corporate treasury. Wild stuff!
FYI: Constructive Activism..
Given our constructive engagement activities, just an FYI: We issued a follow-up letter to the Board of WHR: LN, urging serious engagement with Blackstone’s final indicative proposal. In short: “We believe the current strategy and external investment advisor are unlikely to deliver a more attractive risk-adjusted return over the medium term. Given the scale of the premium and the certainty of cash, the proposal should be taken seriously and acted upon in the interests of the wider shareholder base.”. Happy to discuss with investors.
UK Uni Wobbles in Bound?
We are a little bearish on UK student accommodation. Its well documented in the weeklys. Bloomberg ran a terminal piece on Friday 10% of UK universities have “broken, modified or received a waiver on their [debt] covenants since the beginning of the 2022 academic year”. This could be ugly.
As it was my birthday weekend, my thoughtful better half, delivered four bags of beans (opening next week). For this week, it’s a new supplier: BRIX, the definition of a daily driver. Decent, has that classic brekkie coffee taste. 6.75/10.
Had to postpone the Italy trip, so it’s a Abu Dhabi trip instead now – so that’s going to adjust the espresso consumption.
Espressos Consumed SB: 1460
P.