Debt Retirement - US $10M vs 7,081,837 SharesI tried an exercise doing the math using the ratios in this US$10m vs 7,081,837 shares deal. It’s likely a fool's game, but here goes.
US $10m equals Cdn $12.9M and divide that into $300M debt gets you 23.25 units, multiplied by 7,081,837 creates 164,652,710 new shares to take care of the debt.
The interest rate on the debt now is 8.5%, - $25,500,000 per year or $102,000,000 for 4 years when debt is due. In this scenario the company saves this amount by issuing shares.
So the company releases 164,652,710 shares, adds them to the current 49,378,026 for a float of 214,030,736.
You can play all sorts of games from here. When the current book value of $15.90 is bandied about does it take into account the long term $300 000,000 debt? Does it mean that the current value of the company is a multiple of the 49,378,026 shares by $15.90 = $785,110,613? Has the debt been deducted?
If the interest is saved and the debt erased does the total value go by $300,000,000 plus the saved interest, or some part of it? Like $1,185,110,613? Would that give a book value of $5.54?
In the four years without debt and with current oil prices what can the company accomplish?
Or was this trade of shares for the US$10m just a special case for some special reason which escapes us?