RE:RE:RE:RE:RE:RE:RE:The NotesWell your arbitrage idea (buy at market, sell at next tender) is quite brilliant. I had actually thought of buying more bonds when they were down around $30 but held off as I am so overweight the common share and truly believe they are going to $2.50 or higher in the medium term. I am a victim of the haircut. I still have a holding, small, of both series. but your idea is quite solid.
Oaxacan wrote: Yes sir, every single one! And the company will likely be back looking for more.
Sheritt will likely have to pay up to attract more sellers, as the fewer notes outstanding imply less risk to the balance sheet and the remaining outstanding notes. A benign EV metal environment like we are in now should allow the company to generate plenty of free cash flow. An easy use of the cash flow is to purchase back notes as the rate of return is guaranteed. "Yourfriendo" has expressed about the company's history of allocating capital, and rightfyully so. Retiring notes below par is an exellent use of capital, certainly less risky than stockpiling Cobalt IMO.
Every 10.75% note tendered to Sherritt on the most recent transaction extinguished a liability that was compounding at just below 20% per annum for the next 7 plus years. The holders of the notes largely declined to sell into the recent tender offer as 20% compounded is too good a return to give up on in this EV metals environment.
If the company wants to retire significant 10.75% notes it is going to have to pay up.