it seems the transaction does not relate to any takeover or change of control. It does not sound like it is a capital management type of transaction. So therefore the transaction probably relates to operational assets. The most obvious issue which LLP have already highlighted, is the issue regarding the assets owned by PTN but are managed by LLP. My betting is that these parties are working on resolving the management rights. The parties seem to be in dispute regarding the terms of the lease, and particularly the flow of cash (ie terms of rental payments). I think PTN is far more desperate for the cash flow than LLP. I get the feeling that these managed villages are not all that profitable for LLP, and I suspect that, at CMV, LLP would probably be better-off owning villages rather than managing villages. They would probably be better-off buying newer villages (either at CMV or developing them with LLC) at the current low interest rates. PTN is in the process of trying to sell-off these managed villages, but LLP have L/T leaases in place. SO PTN must deal with LLP. LLP evidently paid a considerable sum to purchase these management rights, so if PTN want to sell these villages without LLP as manager, then PTN will need to cough-up $. I see that the resolution of the PTN issue as a big positive for LLP. The other issue mentioned, was the financial covenant issue. I personally do not see it as an issue at all! That's because it is a technical type issue, not an operational issue. As long as LLP keeps meeting its interest and principal payment obligations, then the banks will certainly accommodate LLP. The banks have enoough real issues elsewhere. If the CMV of the villages has slipped by 5%, so what - LLP are not selling the villages, and they are cash flow positive. So if LLP hang on to these assets, then the assets are value accretive. That's the rub. LLP are looking very good now, and I expect good news when this "transaction" is announced. Remember, we are all getting older, and we will need to have somewhere to live, so what better "hedge" to have than a share in a retirement village? cheers
LLP Price at posting:
18.0¢ Sentiment: Buy Disclosure: Held
