Lynton and Barnstaple - Operations and Development

According to the statement of capital filed at Companies House in July, neither director is a shareholder. A prospective investor might not find that encouraging.

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It is interesting that this is currently being promoted via email - there is (so far as I could see - and I did look) no mention of LBBC shares on the L&BRT website, although there is a downloadable CIC Share Application Form.

 

It is there Martyn!
Open https://www.lynton-rail.co.uk/ Underneath the photo you will see the text
Support the acquisition of the Old Station House Inn - CLICK HERE FOR DETAILS.
Clicking there will take you to the relevant page.
Please note that I am not permitted to advise or to encourage anyone to invest in this business. However, I am permitted to tell people of the existence of the share offer.
Mike

 

Ahh! Oops! - Mea Culpa. I can see it now - I was looking through the top menu links rather than the link below the image, which leads to the archive site!

 

Another way you can help reduce the debt is to visit the inn, and splash out on a good meal.
Bring the wife! Two good meals....

 

No worries Martyn - it has given us the opportunity to tell or to remind people of the existence of the share offer!

 

I haven't read the follow up email yet, as I am away.
If you are an existing shareholder, what size can a top up be?

 

Not really - my wife is a bit stringy with little meat on her bones :-(

 

As a matter of interest, would you see that as an investment to generate a return or as a donation?

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It would be a donation, as are most of such share investments.
I recall that there was a minimum amount for the first purchase, but for a subsequent one?

I can imagine that once you are a shareholder a subsequent amount of any size should be welcome, in order to help pay off the bank debt that they are likely to have.

 

The original share offer documentation said :-

"...The minimum number is 500. Thereafter, applications may be made for multiples in increments of 100...."

So you are talking about £100 minimum for a 'top up'.

 

I've got £100.
My plumber says my 10 year old boiler is dangerous (!) and I'll wait and see what remains after I have to buy a new one
But I will try and help some more.

 

That might cost a wee bit more than 100 quid
Dear, oh dear Jo- talk about it never rains but it pours- after all that aggro you hadwith the Blogmobile, as well.
My commiserations.

 

I really expected a longer life from such a critical part of the house infrastructure

Amazingly, the blogmobile was repaired and returned to me a week ago. After being told it was a write off 48hrs earlier...

I have to say that I got very fair treatment from the at fault insurers. So much so that I decided to insure the wife's car with them.

As to the claims management company appointed by my own insurers, I am going to look into reporting them to the FCA for try to entice me into a ruinous hire contract at FIVE times the going rate! Jeeez! ' Don't worry, the other company will pay '
Oh no they won't!

 

Apparently no bank debt but a significant loan from a private individual and also a smaller one from the trust itself with 6% and 5% interest respectively

 

Maybe, @Breva - in which case I won't be investing. I've put the following analysis to the Trust and have received no response worth repeating, so I await Mr Cowling's response with interest.

Based on the publicly available records and multiple sources, the following picture for the financing of OSHI is emerging:

LBBC Shares: £1,110,983:
The Trust invested £253,000, comprising £50,000 of A shares and £203,000 of B shares, for a 22.8% stake

Loans:
£580,000 at 6% fully secured on the OSHI properties
Apparently an unsecured £250,000 loan at 5% from the Trust repayable over 10 years.

So: total lending of £830,000?

For a total purchase price of around £2m

If this is correct, in order not to default in April, OSHI has to make a minimum of profit after tax this year of £72,300 :

£34,800 to pay the secured loan annual interest bill.
£12,500 to pay the Trust's interest bill in year 1
£25,000 to pay the Trust's first principal repayment

And that's before OSHI repays a penny of principal on the secured loan. If you wanted to repay the secured loan like the reported deal with the Trust, the required profit would rise to £130,300 this year. And that’s after tax, and before the shareholders – including the Trust – see a penny on their investment.

This puts @RailWest comment into context:

"Sensitive to the level of borrowing" is doing a lot of work in this sentence. If pubs are producing an average net margin of 10%, this suggests that OSHI needs to be turning over more than £1.3m this year to simply service its debts – that’s just over £3500 a day, every day, all year – easier in the summer, rather harder on a wet Tuesday in February.

A more reasonable characterisation would be “LBBC has an unsustainable debt load, and so we need to sell many more shares to reduce it”.

Beyond these bare numbers, a couple of other points are important for L&BRT members:.

- First, any loan that the Trust makes must be on commercial terms. How is possible to for an unsecured loan to be cheaper than a fully secured one? It isn’t, and unsecured rates for this sort of proposition in April 2023 when the transaction closed would indicatively have started at 9% or 10%. If the Trust has indeed made an unsecured loan to LBBC at 5%, then Mr Miles and Mr Cowling need to explain why this is.

- Second, where did the Trust find £450,000 from to invest in LBBC this year? From the accounts, it isn’t obvious that there was this amount of money available – unless it came from unrestricted funds already counted towards the £700,000 in the “Return to Parracombe Fund”.

It appears from correspondence with Mr Miles that this is exactly what has happened. This makes the current claim on the website that “the Return to Parracombe appeal has reached £700k and, therefore, we have sufficient funds to reconstruct the railway to Bridge 64”, simply untrue. This is a screenshot from this morning, and. it is still there as I post this, despite begging the Trustees to take it down as Mr Miles has admitted that it isn't accurate:



All of the evidence suggests that the Trust has:

(i) Now got a direct, unsecured, exposure to LBBC of more than half a million pounds (£250k loan and £253,000 in LBBC shares);

(ii) That the Trust has made a £250k loan without any security;

(iii) That the reported interest rate on the Trust’s loan to LBBC of 5% is illegal as it is below any reasonable commercial rate;

(iv) Taken the money to pay for this investment in LBBC from unrestricted funds publicly committed to the ‘Return to Parracombe Fund’

(v) That the ‘Return to Parracombe Fund’ does not have the £700,000 in it, and that the Trust does not have £700,000 in cash that it continues to claim it does, raising serious questions about the Trust leadership’s honesty and integrity.

I really hope this is wrong, but the evidence all points in this direction.

 

I am hoping @Tobbes is wrong, but he probably isn’t,

For me the key takeaways are:
1. that the OSHI a needs to take £3500 a day, every day or fail. The likelihood of it doing this is zero isn’t it? Few if any pubs outside of town centres do this do they?

2. That the trust has granted a director a more secure loan than they ensured for themselves. Or to put it another way, they have failed in their duty of care to the trust, because they ought to have ensured at least as good a set of terms for them.

3. If there is a shortfall, the trust may have to fill it

The OSHI is clearly worth more to the Land B than most other buyers, but there is a real prospect that the trust has “paid” way over the odds for this asset.

 

AIUI the trust has separately purchased the land needed for the railway so OSHI could have been seen as a means to an end, one would like to think the directors have a responsibility to look after the investors interests as best as they can and not play loose with others money especially as they haven't invested themselves, 4 other supposed directors still haven't been listed on companies house yet, if OSHI fails the consequences could be dire for the railway in a big way

 

A few different things to respond to here:

1. If the OSHI is a means to an end. You would want to ensure that you bought at a price that meant you could afford to peel off the land you wanted and sell the rest at a value that left you having expended only what you would have been prepared to pay for the land up wanted (or less). To do that you’d have to be also sure of being able to make a sale when you wanted to do that. If rumours about the purchase cost turn out to be accurate then I suspect that the difference between any likely valuation in a future sale and the price paid is too big a gap to achieve this. In other words the land was overvalued.

2. It is most unlikely that shares in a pub will yield any return at all for the foreseeable future and in any case the investors are all being diluted by the current push for more share sales. Asking people to buy shares for a charitable type or non profit organisation is fine (as long as it is made clear that is what it is upfront). I am not really certain that selling shares in OHSI is squeaky clean in this respect. There is something that doesn’t feel quite right and that may be the risk inherent in running a pub in the current climate.

3. The trust has made a loan and done so without securing a charge on the property. It isn’t clear to me that this is a lawful use of trust funds.
4. If the OSHI defaults then the trust is probably protected but the loan would possibly never be repaid and one would hope that the land that the railway actually wants is already on a separate title in the trust’s name (?)
5. If the loan is not repaid, it is possible that the trustees would become liable for its repayment personally.
6. There is a lot that is unclear even allowing for normal commercial confidentiality. What is known begs more questions, and I guess that is the point, that the trust needs to find the right language to communicate what is the reality. It may find that rather hard.

 

As an 'average member' of the Trust - and, perhaps fortunately, not an investor in the OSHI - all I can say is that:-

1. at the moment the whole Blackmoor/OSHI situation seems 'as clear as mud' to me
2. what I read, even if only half-way true, makes me very worried about the future for Blackmoor in particular and the railway in general
3. it will take a lot to reassure me that (a) we will ever get the full unadulterated facts from the Board and (b) the information will be forthcoming sooner rather than later
4. I hope that those elected as 'new' Trustees since the various financial decisions were made do not find themselves left liable for matters over which they never had any control.