RE:RE:RE:RE:RE:RE:Value of U debentures2young2invest wrote: I understand your point of view, and I'm not implying that you were unfair.
I'm 100% on your side as a debentureholder.
But there is just another side of the story.
If IVQ offer is voted down, what are the consequencies for shareholders?
- Being diluted
- Taking on more expensive debt to paydown debentures.
- Using all the cash
- Dumping properties at fire prices
- Combination of those above
None of them are good.
Managment could do many things different, but we are dealing here with the options we have.
Let's consider what has happened in the last three years:
- Management loaded up debt to a high level while maintaining a really high dividend on the common shares
- Management made loans to different parties which they were unable to recover (over $30M USD)
- When covid hit, they still maintained that they wanted to make acquisitions (and made a few early on)
This is precisely what put them in the current position regarding the debt load.
They also divested properties recently at decent prices.
As I've said multiple times, they could have offered a conversion premium that's more in line with what is offered on the market. These have "forced" conversion at certain prices. Convertible debentures are by nature aimed to be dilutive, although at a premium to what the shares trade at the moment. This insures that if there is dilution, shareholders at the moment of the issue will have made a nice appreciation on their share value and when converted, it lowers the interests they pay and boosts their equity, giving them extra cash (that they never have to reimburse) to use for acquisitions. Otherwise, the conversion price doesn't change the interest paid by Invesque.
The $7.50 to $8.00 CAD conversion price is unreasonable imo, out of line with what is offered on the market. Why should the debentures carry out the risk (represented by a loss of fair value of 20%) but likely no reward, while the commons would have a reward of a 200% gain before the convertible debenture holders could participate?
If the deal gets rejected because the management couldn't offer better value (in terms of conversion price), then the shareholders should be unhappy with the management. They could have offered a better conversion price which would have shared risks more adequately for the debenture holders (around $4 CAD for conversion).