Debenture holders better off if shares vote No If shareholders vote down the deal, Debenture holders will be better off. Let me explain:
If shareholders vote down the deals, the deals won't break. They will just have a new vote after the debenture matures. When the debentures mature, holders will be issued shares for $150mm principal at 95% of VWAP. Using the current price, this will result in debenture holders being issued 1,127mm shares, or ~83% of the total 1,365mm shares. Once debenture holders take over the equity, FIU will propose another vote and it will pass (remember debenture holders have 52% locked-up already, and no doubt all other former debenture holders will want cash, not FIU paper). Once the deals close (and they will), there will be $211mm to be paid to the 1,365mm shares once the noteholders get paid off in full. Of this $211mm, former debenture holders will get 83%, or $174mm, giving them a pre-conversion price of 116 cents on the dollar per debenture (significantly higher than the 100 cents currently considered). Unfortunately, current shareholders will only get $37mm (15 cents per share), down from the current consideration of $61mm (26 cents per share). Also, if we assume the entire $30mm escrow is eaten, former debenture holders get ~100 cents on the dollar and current shareholders get about zero. Note that I didn't include additional interest payments, but this will further take from current shareholders and put in debt holders pockets. Cheers,