No question whatsoever that bondholders have been materially disadvantaged.
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The counterpoint is that:
1/ Bondholders have been offered the wonderful chance of buying some new 'extra' TRA shares at $3.02, something that wasn't envisaged at bond issue time. AND
2/ Come the time when the bonds are due to mature, in a years time, those extra shares that you bought at $3.02 will be shown to have been issued at a wonderful discount to the expected $3.75 conversion price for shares at bond maturity. WHILE
3/ Bondholders have collected stellar 6.5% gross interest for the two years they had the privilege of holding those TRAHB bonds.
"A real win-win-win for bondholders!"
Or from the perspective of the other Beagle who doesn't consider $3.02 cheap and doesn't consider a 6.5% gross bond return adequate for the risk taken:
"A real whine-whine-whine for bondholders!"
The difference between the two points of view is confidence. You have to be confident that management will continue to do what they say they will do. If you are confident, then all puffed up risks disappear. Simple. ;-P
SNOOPY
New Zealand shareholders association were deeply unimpressed with how quickly the issue was done and the methodology used. Behind the paywall article on NBR questioned what was the rush and said no satisfactory explanation had been forthcoming.
My point is that I shouldn't have to throw them more bones to compensate for the fact that the conversion terms on the ones I've already leant them have become less attractive.
How do you have confidence in a company that waters down the terms of the deal you already have with them ? Why would you give them more capital to play with when they don't play fair with the money you've already loaned them ? This issue waters down the chances of the bonds being in the money at conversion date, that's in plain sight for anyone thinking objectively about this and disregarding the specific terms and idiosyncrasies of the bond offer document is a direct violation of the principle's of natural justice of the bondholders.
There is no way I will do further business with a company that conducts itself in that manner. I look forward to asking for my bondholder money to be redeemed in cash on conversion date.
I am sure other bond holders will feel the same way.
It is in TRA's interest to have happy bond holders,who will continue to support future larger issues.
The trust I help out on holds both TRAHBs and TRA shares.They are held in Hobson Wealth "custodial services".We have instructed them to apply for $15,000 spp via TRAHBs and $15,000 via TRA's.Be interesting to see if we get both.?
It will be interesting to compare the "full" returns from holding TRAHBs compared with other bonds the trust holds,when the TRAHB's mature.At least at that time, the trust will have the option to take cash or shares.
PS.Bit early, but I posted the wife's and mine cheques away today for the SPP.Applying for the full amount for both of us.
Hi Beagle,
If you had done some serious due diligence you will see that TRA when they were DPC have previously in the opinion of some "shafted" bond holders. The DPC010's (I think from memory were called 010's) were repurchased at below par or something like that..... I do not have all the details at hand but I know that a colleauge sold DPCOB's to purchase bonds and was ropable when the options shot up and the bonds went down because of the actions of DPC.
'The SPP issue and placement' waters down the chance to buy shares at a 'super discounted' price, should the TRA share price at the conversion date be more than $3.95 (triggering the $3.75 conversion price ceiling). But it doesn't water down the chance of the bonds being 'in the money'. Because the offer to purchase shares using the bond money at bond maturity still stands. And those shares will still be issued at a 5% discount to the prevailing share price, whatever that price may be. The lower the prevailing share price at bond maturity time, the more shares the bondholder gets. Granted most of that 5% discount would evaporate if the bondholder wanted to sell their newly acquired shares in a hurry. But why would they want to do that, when the option exists for a full cash repayment of the bond at face value?
There is one more benefit for bondholders that deserves a mention. That is the opportunity to get in on the ground floor for a helping of new TRAHC bonds should Turners see fit to issue such a thing. I am betting TRAHC bonds will be a reality.
SNOOPY
Correct, and DPC survived because they did front up. I just know that at the time it was not all kosher in the eyes of a few what happened. They did not need to do what they did. Some of the directors that were there then are still here now. Not saying they are implicit, just stating let the buyer beware. I know back then too the actions did wonders for the share price, it was bond holders who felt disadvantaged. As a shareholder myself I was not concerned. However my friend who had sold his shares (options) to buy the "less risky" bonds (to keep the same $ investment in DPC) felt he lost a lot of money and we are talking in the $100,000's here. So he was mightily ropable.