RE:Any Debentureholders here?
quicksilver545 wrote: Just curious if there's any holders here. I purchased around 120,000 debenture units at a ridiculous 6 to 8 cents per share, so have done well on the rise in debenture prices.
however, working out the number of units awarded, I feel like things could get even better.
In reading the documents, quorum is 25%, then needs 66 percent majority. I voted my small percentage of debentures in favour of the restructuring, as something is better than nothing.
Curious though if this gets approved, the dilution will be massive. From 20 million units total to 670 million units. I have not seen anything about consolidation of units following transaction, but I would assume that is on the table. Otherwise, the TSXV has a limit bid price of .005, so at minimum the company will go from market cap of 300k to 3.35M following the dilution. Can't imagine the market will re-rate the units so favourable, but perhaps i'm missing something. I find it intersting that the unit price has stayed fairly stable. Perhaps the market is not expecting this to go through, or just market makers on very small volume not adjusting to the news.
Thoughts?
I worry about the dilution as well. Those that bought the debentures when they were offered were buying for income. Once the denetures get converted, that concept goes away.
Personally, I think they will eventually consolidate. But if they do, I would expect they have to receive a positive vote to approve the Plan of Arrangement first, before the consolidation can be put to a vote.
On the other side of the equation, by converting the debt to equity the company is improving its balance sheet significantly. That should give some life to the company, although I would expect some softness in the share price once the conversion happens as some debenture holders will exit their position - especially original holders. It may take a few months for the share price to find a new level of support.
You did mention:
. . . the TSXV has a limit bid price of .005, so at minimum the company will go from market cap of 300k to 3.35M following the dilution.
Considering the company has stated this:
The Trust is seeking to exchange of all of the issued and outstanding Debentures in the aggregate principal amount of $24,810,800, together with all the accrued or unpaid interest owing on the Debentures from and including January 1, 2016 to but not including the Exchange Date, estimated to be approximately $7,973,444, for Units on the basis of a deemed price of $0.05 per Unit (the “Exchange Transaction”).
That is almost $33MM of debt changing sides on the balance sheet. Ascribing 10% of the value of the converted debt to market cap seems low. However, I think that it would be wise for the company to consider proposing a share consolidation in conjunction with some sort of good news.