TSX:STB.DB.A - Post by User
Post by
goldsternpon Oct 18, 2012 6:29pm
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Post# 20500592
Debenture Redemption
Debenture Redemption I have sent this message to the company so they can explain how the redemption is actually a good deal for the company:
I own 20,000 STB and enjoy the favorable dividends of close to 9% on my capital and of course am hopeful that this will continue without any loss of capital.
I am however puzzled by the CEO's claim that redemption of the 7.5% debentures will improve the company's cash flow. As the conversion rate to common stock until November 1 is $5.15, it seems to me that the company's dividend payments of approximately US$6.00/yr will in fact be almost 12%/yr on the redeemed stock while currently it is only 7.5% on the debentures or in other words almost 60% more expensive than now. What am I missing in this equation?
Indeed, as long as the stock price is above $5.15 I can't think of any reason why any holders of the Debentures would want to wait to receive $1000 face value when conversion to common stock now is worth $1450. It seems unlikely to me that the lower interest rate available on your credit line will be of any benefit to the company for this redemption. Again I would be grateful for your clarification of this issue?