Alan , as part of any recapitalisation the prefs will likely be converted to ordinary shares , imo .
M
Printable View
Alan , as part of any recapitalisation the prefs will likely be converted to ordinary shares , imo .
M
Yes, thats my view too Misc, but that depends on who raises the capital, SCF or Southbury - see earlier ramblings
Hi Misc,
That will be interesting. Would they have to convert are par value ($1.00 each)? If so, then the pref share holders would receive $1.00 of market value of new, ordinary shares, for each $1.00 (nominal) of prefs they hold?
If we assume, for the sake of discussion, that the recapitalisation is done by way of a public offering, then effectively the pref shares would actually migrate towards a market value of $1.00 each?
Is that right?
Thanks,
Alan.
Alan , the Co is insolvent , and desperately needs new capital to survive , therefore any 'white-knight' will call all the shots , pref holders will likely have to vote to convert to ordinary shares , or the Company folds ... Hobsons Choice!
Possibly even the 2011 and 2012 Bonds may also be converted to ordinary equity ?
M
Hi Misc,
Why do you say it is insolvent?
The latest financials (published a few weeks ago, for the year to 30 Jun 2009) do not indicate that.
The auditors gave the technical 'uncertainty' statement, but they would have had no choice but to effectively offer 'no opinion' which is what that really means, since the $100m of financing was repayable on demand. That meant that SCFs going concern status was dependent on the US investors not making that demand.
The announcement yesterday that they are replacing the $100m of loans (repayable on demand) with $75m (we don't know yet, but maybe not repayable on demand) would seem to say that they are fine?
If they sit tight and stop lending, and just take in the repayments on existing loans, then they should be fine (albeit much smaller!) over time?
Thanks,
Alan.
Alan: You are absolutely right, and this is a point that many investors fail to grasp, irrespective of the particular investment. Whatever has been paid for a particular security is history and is utterly irrelevant to today's decision-making processes (ignoring CGT and other tax considerations, of course).
I have not contributed to the ongoing discussion on SCF for a few days as I am growing rather weary of all the would-be funeral undertakers - they could scarcely contain their glee when the company went into a trading halt yesterday, only to be bitterly disappointed that its death was not subsequently announced; instead, sensible progress is being made towards a more solid future. SCF will not be allowed to fail - and I make that statement advisedly. It is certainly not "insolvent" by the accepted definition of that term. And snide remarks like "South Island brokers pushing South Island investments" are uninformed and unwarranted - why not similarly dismiss "North Island brokers pushing North Island investments"?
I also happen to agree with the observation that it is quite possible that preference shareholders may be given the opportunity to convert to ordinary shares. Remember, this was being given consideration when Alan Hubbard first conceived of a public issue of securities a few years ago but he then backed away from the idea. With the benefit of hindsight he probably now wishes he had gone ahead with that proposal at the time.
My own considered view is that the present depressed prices of each of the listed SCF securities offer great opportunities for those who are prepared to venture their arm.
Nobody will and should ever argue that NZ needs companies like SCF. Especially with the finance sector now controlled by the freaking Australians who care not a hoot about NZ businesses.
That does not mean however that NZers should blindly support any NZ finance company - especially when the company contemptously (in my view) uses the public's money for private purposes.
SCF has to change dramatically and this crisis is good if SCF learns from it. What does not kill it will make it stronger.
A few points :
1. When a company cannot meet its obligations when they are due or are called, are they not 'insolvent'?
2. Are you comfortable depositing money with a company which is reliant upon a short-term crown guarantee to fund long term lending?
3. The reference to SCF as a South Island company is and was used extensively by certain brokers to differentiate it from other finance companies - that it is conservatively run etc. Suddenly it's not okay to refer to SCF in the same light?
SCF has 5.5 months to recapitalize and become strong again. Let's hope it has learnt a valuable lesson.
A few points :
1. When a company cannot meet its obligations when they are due or are called, are they not 'insolvent'?
No they are not. insolvent is when liabilities are greater than assets.