Post by
Capharnaum on Oct 22, 2021 4:06pm
Venator Capital Recommends vote Against Debenture Amendments
Other investors are also publicly stating that they feel the offer made for the amendments is really poor. Their arguments are pretty much the same ones I've voiced in this thread. They even use the Chemtrade debentures issue that I quoted in one of my post in their analysis:
https://www.newswire.ca/news-releases/venator-capital-recommends-vote-against-invesque-inc-debenture-amendments-815972012.html
Points that they make:
- The Board of Invesque is effectively asking Debentureholders to convert their current holdings into a new three year bond and we believe that if we are to consider this "new investment" we should get "fair current market terms" in exchange. Venator Capital Management has extensive experience in the convertible bond market and is of the opinion that all the proposed amendments, designed to avoid payment on maturity on January 31, 2022, are woefully inadequate in order to gain our support
- The proposal that the interest rate be increased from 5.00% to 6.25% is too low. Given that this would be seen as a very low quality credit (the current debt-to-market capitalization ratio is 9-1), we would suggest that the cash interest rate should be well in excess of the coupon provided by the Chemtrade 2025 convertible debentures which was priced at 8.5%. Considering Invesque would be viewed as a higher risk credit than Chemtrade was at the time of issue, the coupon should be in excess of 10%.
- The proposal that the conversion price be lowered from US$11.00 to US$6.00 is still too high a conversion price. Again, using the Chemtrade 2025 debentures as a proxy, the strike price for the conversion was approximately 40% above the market price of the stock when issued, which is typical for new issue convertible bonds. With Invesque stock trading around the US$2.00 level, this would suggest an appropriate strike price of the bonds would be around US$3.00.
Cast your vote AGAINST the proposed amendments