TSX:IBG.DB.E - Post by User
Comment by
nkbourbakion Dec 01, 2015 8:12pm
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Post# 24344950
RE:Rights Offering
RE:Rights OfferingIBI owed the management partnership $10 mil. They agreed a while back to settle the debt by converting it to equity, in some way or another. I have no idea why it took so long to finally announce the deal, or what type of discussions were going on behind closed doors... but of course the partnership would only swap the debt for equity if it was done on very favourable terms (ie. at a discount). The rights offering is a mechanism for minority stakeholders to participate with the same favourable terms, so that their stake is not diluted unfairly with respect to the partnership. The partnership is backstopping the offering, which means they're happy to gobble up ALL of the new shares if others don't take the opportunity.
Doing a secondary equity offering isn't as easy as saying "okay, we'll create a bunch of new shares at today's trading price". Of cours they could try, but nobody is going to underwrite it for a company in the weakened financial position IBI is in.
Note also that there will be a private placement to settle the balance of the debt. I read somewhere that this placement is expected to be at the average recent trading price, rather than at some deep discount.
I am curious how the $1.60 price (or, rather, discount rate) was decided. And I wonder if the nature of the offering was known for ages, but they were waiting for a higher base trading price. Who knows.
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