Turners (TNR) bonds

[winner69]

The official answer is that there is no adjustment to the $3.75 figure.
Colleagues consider this immaterial, I am not sure.

But a strict reading of the PDS allows for it

I had read this :
Turners may issue further Shares from time to time before the Maturity Date of the Bonds, which may negatively affect the Share price. This may reduce the value Bondholders receive on Conversion (but subject to the minimum provided by the discounted approach). As described below, in the case of an issue of Shares to Shareholders, the terms of Conversion will be adjusted to ensure Bondholders are not adversely impacted by any dilution.


But, there is also this

If, prior to the Maturity Date, Turners issues any Shares or other instruments to its Shareholders byway of capitalisation of profits, reserves or otherwise (other than pursuant to a dividend reinvestmentplan or share purchase plan) the terms of Conversion will be adjusted to ensure Bondholders are notadversely impacted by any dilution. Turners and the Supervisor shall agree on the adjustment and ifthey are unable to agree, the Supervisor will appoint an independent adviser, approved by Turners, tomake the determination.

Thanks Peat

First paragraph says maybe ....but second says NO (as a SPP)

Immaterial - dilution was about 10 million shares on top of 74 million shares - quite a lot I reckon. The $3.75 would be reduced to about $3.26 (my calc) in theory to keep things fair (?)

If second paragraph is the gospel according to Turners then have we been 'screwed'?

[Beagle]

Thanks Peat

First paragraph says maybe ....but second says NO (as a SPP)

Immaterial - dilution was about 10 million shares on top of 74 million shares - quite a lot I reckon. The $3.75 would be reduced to about $3.26 (my calc) in theory to keep things fair (?)

If second paragraph is the gospel according to Turners then have we been 'screwed'?

No question whatsoever that bondholders have been materially disadvantaged.

[Snoopy]

No question whatsoever that bondholders have been materially disadvantaged.

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

[Beagle]

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.

[percy]

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.

[blackcap]

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.

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.

[percy]

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.

Was this before WW1 or WW11 ?

[blackcap]

Was this before WW1 or WW11 ?

Yeah about 2012, 2013 or thereabouts....

[Snoopy]

This issue waters down the chances of the bonds being in the money at conversion date

'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

[Beagle]

'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

You need a super discount if you can call it that for any new shares on bond conversion to be in the money if recent market evidence is reliable. Shares were $3.40 or thereabouts for quite a while and are now $3.20 or thereabouts which is a 6% SP decrease through the current capital raise and we're not done yet. There's also the chance more shareholders will sell in the next few days to fund their SPP entitlement and more selling after the SPP shares are issued as some shareholders look to work the arbitrage between the current SP and $3.02.

I agree 100% that the likelihood of a new issue of TRAHC is extremely high and as you quite rightly point out the current bonds confer preference on a future issue of same, (for whatever that's worth) which in light of the history that Blackcap has kindly reminded me of, it would appear to be very little.

Get bitten once through lack of deep research is one thing but to expose yourself to being treated inequitably a second time, that's one's own fault. Any way you slice and dice this bondholders are being treated inequitably. The premium to par the bonds have been trading at has vanished and that is clear market evidence that bondholders prospects for a capital gain on conversion has sharply diminished. I will take the 6.5% return and while I won't absolutely commit to a course of action at this stage, at this point I am strongly inclined towards investing elsewhere next September. 9% EPS growth this year, (even if achieved) doesn't overwhelm me with enthusiasm.

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.

Thanks mate, appreciate your background reminder on their darker historical days. Makes another motor vehicle company's 99 year solid history look even more compelling by comparison doesn't it !