Trinity Capital (LON:TRC) has just announced a 5.0p cash distribution per share:
Trinity Capital plc announces a distribution to shareholders of 5.0 pence per share, equivalent to approximately £10.5 million (the “Distribution”). The Distribution will be financed from the distributable reserve created by the cancellation of share premium account that took place shortly after the Company was admitted to AIM in 2006. The Distribution will be paid on 16 December 2016 to shareholders recorded on the register on 2 December 2016. The shares will be marked ex on 1 December 2016.
In my update from past Wednesday I said:
All in all this still looks like an attractive special situation to me, even today. Perhaps more attractive, because the cash has been received and the biggest risk is now off the table. Shareholders could find themselves receiving cash totaling something close to the current market cap (£9.5m, based on a 4.50p price) in the next distribution (which should take place “in due course”), while still holding an interest in the remaining assets. Trinity would then still hold £2m in cash and the remaining interest in TC10. Maybe I’m missing something though.
It turns out it was still a very attractive situation, even after the disposal of TC1 & TC5 was announced. The distribution of 5.0p is a bit larger than I expected. And again I was surprised how quickly things went, I did not expect the distribution to be paid within a month.
I think this should leave Trinity with around £1m in cash and the remaining investment in TC10. I think there are liabilities of around £0.3m. We now know that TC10 was on the books for £3.2m on March 31. This value might be understated, because all three investments (TC1, TC5 and TC10) were written down at that time, based on management’s best estimates of their realizable value. There was no agreement with Immobilien Funds then, so it was very uncertain if and when these investments could be realized for shareholders. Trinity was able to get £8.7m for TC1 and TC5, while these two investments were on the books for just £5.1m.
The agreement has also provided a path to realize the remaining investment in TC10. Trinity holds a 12% minority interest. They also reported there was a final draft of a sales agreement for this investment, but it was not yet binding. We’ll see if Trinity is also able to realize the value of the final investment and if there is a final positive surprise in store regarding the proceeds and the speed of the completion of the sale.
This special situation investment is working out far better than I expected. Of course it’s easy to say that I now wish I’d bought a lot more, but the situation was uncertain and there was a real risk of the agreement between Trinity and Immobilien Funds collapsing. I think it is impossible to accurately price in that risk, we were simply not in the room when the negotiations took place and have no idea how tense the relations between the two parties really were and how long it would have taken Trinity to realize their investments if things had gone south. The fact that basically the dream scenario unfolded here, does not automatically mean I should have made a much bigger bet. I do know I would have never touched a situation like this just a few years ago: “A micro-cap in liquidation? Indian investments? A legal dispute? Ok, I think I’ll pass.”
Disclosure: long Trinity Capital (LON:TRC)