Kuala Lumpur = Muddy Estuary
Thanks for bringing this [back] to our attention percy.
It is all clear as mud to me what the true position of MTF actually is.
What game are TNR's playing? The MTF shareholders or board can prevent them going over 10%. (Have I got that right at least?)
Best Wishes
Paper Tiger
TNR's own banking covenants to 30-09-2016
Quote:
Originally Posted by
Paper Tiger
It also makes me wonder whether TNR are setting themselves up for a potential fall in that I think that they are stretching themselves a bit and a knock would leave them with a sudden need for equity, especially given that Snoopy (& the other holders) can demand that he gets cash for his bonds next year.
Pulled out my Turners bond prospectus last night. I see that if I want my bonds to convert to TNR shares, I have to let TNR know one month before the maturity date of 30th September 2016. If I do nothing then all my bonds are repaid in cash. As you readers have probably figured out, I am extremely suspicious of investing in finance companies. But, as a bondholder seduced by that 9% gross yield, I stilll have this running one year trial with TNR to see if TNR, at least, can win me over.
Being a bondholder, we got all sorts of useful information on the banks arrangements with TNR, which you plebian shareholders don't need. However in the interest of open debate, I don't mind sharing with you.
From p34 of the bond prospectus, the TNR banking covenants:
1/ Interest Cover Ratio:
EBITDA/ Total Interest > 3.5
2/ Leverage Ratio:
Gross Debt / EBITDA < (Requirement). Requirement varies as below
Period |
100% Turners (TUA) Takeover |
< 80% Turners (TUA) Holding |
Issue date to 31/12/2014 |
3.75 |
2.00 |
01/01/2015 to 31/03/2015 |
3.50 |
2.00 |
01/04/2015 to 30/06/2015 |
3.00 |
2.00 |
01/07/2015 to 30/09/2015 |
2.75 |
2.00 |
01/10/2015 to 30/03/2016 |
2.50 |
2.00 |
01/04/2016 to 30/06/2016 |
2.25 |
2.00 |
01/07/2016 to Maturity |
2.00 |
2.00 |
The first column is the prevailing bank requirement. The second column is included as a comparison out of interest. At the time of the bond prospectus it was uncertain what holding percentage the then 'Dorchester Pacific' (now TNR) would secure of TUA, with their Turner's Auctions takeover. Thus alternative scenarios, based on the percentage of TUA shares that might be acquired were created in the prospectus. It is clear from the table that if TUA acceptances had been less than 80%, then the subsequent borrowing capacity of the then DPC would have been much more constrained. The fact that 100% of TUA shares were ultimately secured has opened the way for a debt fuelled expansion binge by TNR.
I would like to remind readers that since the 31st March balance date, TNR have acquired 'Greenwich Life' on 10-04-2015 and 'Southern Finance' (purchase price was $5.0 million for the net assets of
approximately $3.3 million and goodwill of $1.7 million) on 30-06-2015. Those purchases are not reflected in the latest published accounts. On top of that we now have the partial bid for MTF shares.
You can see from the table that the debt filled expansion party has to be brought under control such that by bond maturity date we are back to the same covenant level as before the full TUA acquisition. I would be grateful if any shareholder attending the AGM would ask how they are tracking towards that target!
SNOOPY