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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....
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Originally Posted by peat
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
”When investors are euphoric, they are incapable of recognising euphoria itself “
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Originally Posted by winner69
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
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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Originally Posted by Snoopy
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.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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Originally Posted by Beagle
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.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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Originally Posted by Snoopy
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.
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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....
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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.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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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....
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Originally Posted by peat
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'?
”When investors are euphoric, they are incapable of recognising euphoria itself “
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