Just read the full prospectus on the debentures offerHere are my thoughts about the offer to extend the debentures:
- The offer wasn't evaluated by a third party, so it likely doesn't represent fair value on the market.
- Each debenture holder would received $223 out of $1000 in cash, with the other $777 being extended for three years at conditions that are slightly better than the "V" debentures but with a later repayment date (where holders could get jerked around again). Based on the current value of $750 per $1000 of the "V" series and considering a bit favorable conditions but later due date, I expect the "U" debentures to hold a similar value if extended, which would mean around $583 of market value. Combined with the $223 in cash, that equals to a value of $806 per $1000.
- In the prospectus, they allude that if the offer is rejected, they could partly pay with shares instead of cash. Considering they could pay $223 per $1000 in cash with their offer, let's assume that they would pay the other $777 per $1000 in shares. The payment would be made at 95% of the market value at the time of conversion. So, let's say the price of the shares (in $US) is $2, then each debenture holder would receive roughly 409 shares + $223 per $1000 held. In that scenario, the market value for each debenture holder would be higher than with the management offer as long as the shares would be stay above $1.425. The shares would have to tank by 28.8% from the conversion date to make this less appealing than prolonging the debentures. Selling the shares above that level and investing the money in the "V" series would almost in all cases leave the debenture holders in a better position than accepting the offer by the management. Plus, if you believe, like the management, that the shares are undervalued, then receiving cash and shares instead of their offer is even better.
Considering this, "U" debenture holders should vote against the management proposal, since it offers very little value for the holders compared to the other solutions. I still can't figure out why they set the conversion price at $6 USD at a 300%+... At a $3 USD conversion price, this reduces the dilution should the debentures be converted into shares (compared to issuing shares to pay for the debenture) and makes a longer term with a lackluster interest rate (compared to current "V" series real interest return) much more palatable.