RE:RE:Better debenture proposal, like this, might follow "No" voteIn short, I don't know for certain the answer to your question. It is an important one, though. Seem to me that it should have been more clearly addressed in management's information circular, if it was at all. According to my understanding, there are two options:
- Accrued interest trading--when you buy in the market, you pay the market price of the debenture plus the calculated interest owing given the interest calculated to be owning since the last time interest was paid.
- Interest flat trading--you pay just the market price and nothing for the accrued interest. In this case, in theory, if and when the interest is paid, it all goes to whoever is holding it at the final record date (regardless of any other record dates that might happen in the interim).
If it trades accrued interest, my bet is that it will eventually becomes impossible to sell the debentures for any value because no one will be willing to pay the large amount of accrued interest given the uncertainty of ever collecting it.
If it trades on an interest flat basis, that might make it easier to trade, but
good luck when it comes time to collect the interest when it is finally paid. To give yourself an idea of how difficult this might be, if you have a full service broker, try asking them to explain the difference between debentures trading accrued interest and interest flat with a focus on how interest will be paid in both cases and who gets the interest (with reference to the record dates). It looks good on paper, but is poor in execution
(because of the confusion of market professionals, at least in my small experience). If it trades interest flat, I would not be surprised if many or most of holders will not get the correct interest payment and, worse, that they won't even know enough to question it. In conclusion: What will happen? Who really knows? I'm waiting for a better deal. I'm voting "No". Important disclaimer: All the above is intended to express my opinion only. The reader is cautioned that it may contain figurative language including hyperbole. I am not an expert on anything discussed, and it is possible and perhaps likely that I am ill informed on certain aspects. All content is presented for fair comment and discussion purposes only. None of it is intended to be taken as fact. As such, it is all not reliable. So do not use any of it to make decisions or judgements or to form opinions, and do not use it as the basis of any action. If you do plan to form decisions, judgements, or opinions or to take action on anything discussed, first seek your own independent, expert advice.