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  1. #21
    Legend peat's Avatar
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    With respect to the share placement that Turners have now completed in the last few days I have checked the PDS of the bond issue and it says

    "the terms of Conversion will be adjusted to ensure Bondholders arenot adversely impacted by any dilution."
    For clarity, nothing I say is advice....

  2. #22
    CEO Butch Analytics Ltd winner69's Avatar
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    Quote Originally Posted by peat View Post
    With respect to the share placement that Turners have now completed in the last few days I have checked the PDS of the bond issue and it says

    "the terms of Conversion will be adjusted to ensure Bondholders arenot adversely impacted by any dilution."
    Thanks Peat ...so the $3.75/$3.95 should be less .....if it comes into play as the minimum
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  3. #23
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    Quote Originally Posted by winner69 View Post
    Thanks Peat ...so the $3.75/$3.95 should be less .....if it comes into play as the minimum
    IIRC the bond conversion terms are 'market price less 5%'. Issuing more shares theoretically lowers the market price per share. But the discount remains at 5% from the new market price. So I don't believe the bondholders will be disadvantaged by the latest placement and SPP. Consequently I don't expect any change to the conversion terms of the bonds.

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  4. #24
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Snoopy View Post
    IIRC the bond conversion terms are 'market price less 5%'. Issuing more shares theoretically lowers the market price per share. But the discount remains at 5% from the new market price. So I don't believe the bondholders will be disadvantaged by the latest placement and SPP. Consequently I don't expect any change to the conversion terms of the bonds.

    SNOOPY
    At anything above $3.95 bondholders stand to have their shares issued at a bigger than 5% discount, i.e. the lower of $3.75 or a 5% discount to VWAP.
    The chances of the shares being higher than $3.95 at the time of conversion have been diluted by this issue so bondholders have indeed been disadvantaged BUT I do not expect the company directors to see it that way. They really are not interested in looking after the interests of small bondholders and shareholders. Anything that funds their growth ambitions and favor larger shareholders in friendly rights issues, no problem for them though. It's looking likely I will simply ask for my cash back at the conclusion of the bond as its quite clear that a $25m capital raise, (which is what a bond conversion ostensibly is) affects the SP going by the SP performance this week. What I am suggesting to be clear is a 5% share conversion discount is insufficient on an illiquid thinly traded share, (market evidence this week shows that a 10% discount is required to raise new capital) with a short track record of profitability. I regret investing in the bonds but will hold to maturity rather than taking a loss now...unless someone wants to offer me $1.05 per bond including accrued interest for the Sept quarter, please PM me.
    Last edited by Beagle; 16-09-2017 at 10:56 AM.
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  5. #25
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    Quote Originally Posted by Beagle View Post
    At anything above $3.95 bondholders stand to have their shares issued at a bigger than 5% discount, i.e. the lower of $3.75 or a 5% discount to VWAP.
    The chances of the shares being higher than $3.95 at the time of conversion have been diluted by this issue so bondholders have indeed been disadvantaged BUT I do not expect the company directors to see it that way.
    I managed to digest my Share Purchase Plan prospectus yesterday. The entitlement for bondholders is determined by taking the dollar value of the bonds and dividing that by $3.75, thus generating an 'equivalent shareholding' for SPP purchase purposes. As you suspected Beagle, this $3.75 price is unchanged from the bond prospectus dated 22nd August 2016. Except in the bond prospectus, the conversion terms for next year stipulate a $3.75 maximum conversion price, and a lesser price should the TRA share price be below $3.90 at conversion date. Clearly issuing a whole lot more shares at $3.02 today means it is less likely that the share price will be above $3.90 in a year's time. So I think bondholders have lost out here, despite this 'out' below, quoted from p17 of the Bond Prospectus.

    "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)."

    "The minimum provided by the discounted approach" refers to the minimum 5% discount on new shares issue at maturity that will increase if the share price goes above $3.95 by conversion date. But bondholders would get this discount whether the SPP and placement happened or not. So I think it would be clear to an independent observer that bondholders will be disadvantaged at conversion time, even if they (apparently) have an offsetting opportunity to buy some new shares at $3.02 today, as 'compensation'. I say 'apparently' because my offer to take part in the SPP came because I am also a shareholder. No mention was made of the fact that I am a bondholder as well.

    Did any bondholder who is not a shareholder get the SPP offer document?

    For what it is worth I have applied for my maximum allowance. I am not sure how many I will get and I am not sure if $3.02 is really a bargain. It will only be a bargain if growth goes according to plan, and that is the risk that all shareholders take.

    SNOOPY
    Last edited by Snoopy; 23-09-2017 at 11:28 AM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  6. #26
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    Quote Originally Posted by Snoopy View Post
    I

    Did any bondholder who is not a shareholder get the SPP offer document?

    e.

    SNOOPY
    Yes, my partner who is only a bondholder got a SPP offer document. She has applied for shares at $3.02.

  7. #27
    Legend peat's Avatar
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    I've made an official inquiry on whether there will be an adjustment to the 'strike price'
    For clarity, nothing I say is advice....

  8. #28
    ShareTrader Legend Beagle's Avatar
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    Thanks Snoopy and peat. Yes I got an offer to apply for shares even though I am just a dissatisfied bondholder. The companies veracious appetite for new capital concerns me as does the depth of the discount required to get it. The 5% discount bondholders will "enjoy" if they choose to convert to shares next year does not appear to be sufficient if they're having to resort to issuing new capital at a 10% discount now. Those who do convert their bonds to shares next September are playing Russian roulette if their goal is to sell these very illiquid shares and try and work the 5% discount to their advantage.
    I feel the same way about the present apparent 5% discount ($3.20 current SP compared to $3.02 SPP) especially while we play flip the coin with which way Winston Peter's will jump. I think a left wing coalition with him the Greens and Labour could seriously undermine business confidence going forward. My sense is TRA have enough of my capital already and I am underwhelmed with how I am being treated as a bondholder in regard to conversion terms, the EPS growth and the discount on possible conversion of bonds is with hindsight, materially insufficient. I will decide at the time but its looking almost certain I will simply ask for my money back at the end of the convertible note term. No interest from me in the SPP for the shares at $3.02. I see far better value elsewhere.

    Colonial Motors are trading at a material PE discount and have an outstanding history of providing solid returns to shareholders over their 99 year history. I guess I just prefer strong stable companies that have been around for a really long time and weathered all sorts of financial conditions including the GFC. There's something about that sort of long history and solidity that really appeals to me.
    Last edited by Beagle; 27-09-2017 at 10:24 AM.
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  9. #29
    Legend peat's Avatar
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    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.
    For clarity, nothing I say is advice....

  10. #30
    CEO Butch Analytics Ltd winner69's Avatar
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    Quote Originally Posted by peat View Post
    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'?
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  11. #31
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by winner69 View Post
    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.
    No butts, hold no mutts, (unless they're the furry variety).

  12. #32
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    Quote Originally Posted by Beagle View Post
    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
    Last edited by Snoopy; 27-09-2017 at 02:30 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  13. #33
    ShareTrader Legend Beagle's Avatar
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    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.
    Last edited by Beagle; 27-09-2017 at 03:53 PM.
    No butts, hold no mutts, (unless they're the furry variety).

  14. #34
    percy
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    Quote Originally Posted by Beagle View Post
    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.
    Last edited by percy; 27-09-2017 at 04:56 PM.

  15. #35
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    Quote Originally Posted by Beagle View Post
    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.

  16. #36
    percy
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    Quote Originally Posted by blackcap View Post
    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 ?

  17. #37
    Legend
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    Quote Originally Posted by Beagle View Post
    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
    Last edited by Snoopy; 27-09-2017 at 07:20 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  18. #38
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    Quote Originally Posted by percy View Post
    Was this before WW1 or WW11 ?
    Yeah about 2012, 2013 or thereabouts....

  19. #39
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    Quote Originally Posted by blackcap View Post
    Yeah about 2012, 2013 or thereabouts....
    So well before TRA days.
    In late 2013 the present directors took control of DPC and had a lot of cleaning up to do.
    In fact DPC only survived because they fronted up.
    Come a long way since they took control.

  20. #40
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    Quote Originally Posted by percy View Post
    So well before TRA days.
    In late 2013 the present directors took control of DPC and had a lot of cleaning up to do.
    In fact DPC only survived because they fronted up.
    Come a long way since they took control.
    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.

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