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1.2¢ vector resources limited

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HAC30

5,633 Posts.

479

25/10/18

11:07

Post #: 36255363
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Originally posted by Area51 ↑

Originally posted by HAC30
Spoken like someone who hasn't seen the effects con notes have on companies. Always the same dialogue how there may not be dilution etc.

You're welcome to continue to assume the best case scenario will always be the result, the market won't though and that's the point.

Just revisit the posts in future and see who was right.
HAC - on the contrary - you clearly dont understand con notes, debt instrument or capital structures in general.

The management here in my opinion have secured magnificent terms for this debt instrument.

For example if the 3rd Tranche is triggered, being a final DFS and move to mining operations the enterprise value of AK alone (put VEC total portfolio aside for this purpose) in my opinion could be 10 fold higher than today. You assume that there would also likely be improvement of the resource estimate up to this point in time to back this re-rate.

As mentioned, the debt could be relinquished from profits, but to purely entertain the core basis of your Mother Teresa like desire to warn and doom and gloom to us poor incapable investors; lets say the Company did choose to convert under there election rights, then that would also be a magnificent outcome. forcing $35M of debt to be converted to equity at Vector's election, at a time in when I would suggest benchmarked against market peers that VEC would be at a market cap in the hundreds of millions, provides for substantially less dilution - for example at a ratio comparatively to raising $3.5M today at current share prices.
How is this not a great outcome if this occurs??
Furthermore, I cannot buy a Car at a second hand dealer on a 7% interest rate over 3 years ! Yet the management have secure $35m on remarkable terms and flexibility at the Company's discretion. This screams to me that the financiers have tremendous confidence, in
1. at least achieving a 7% coupon on there loan, and
2. appear to have no concern of being converted to shareholders of VEC at VEC discretion.
On this basis ALL costs are known to the Company and can be planned , and factored into by the market.

I suggest you do some research and educate yourself on certain topics, as it will firstly make you a better fundamentalist, and secondly save you from embarrassing yourself and misleading other readers on this forum. This forum is too educate people, not scare monger with unsubstantiated and blatantly incorrect information, assumptions and metrics.

Expand

Enterprise value 10x higher than today, please provide your numbers. That is very contrary to Ballieu Holst's numbers, and lets be honest, plucking a figure out of thin air.

Secondly, the financier really isn't taking that much risk here due to the option to convert to equity. If the company cant afford to pay the interest and principal back, they just get greater ownership of the company through converting the loan to equity. If this was a simple 7% p.a. loan with no equity component I would praise the deal. Converting interest to equity is at lender's discretion. Converting principal to equity may or may not happen. Shareholders can reserve the right to vote on it but if the cash-flow isn't coming in by the time it is required, they don't have a choice. Its debt that ranks above shareholders in the capital structure of a company, if shareholders vote against conversion and the company doesn't have other means to repay the note, they just call in the loan (yes I actually understand how these things work as its part of my occupation to do so).

We can go around in circles or revisit these posts in future. Got the same stuff over at AUZ about how good their Con note deal was. " You dont understand"... "Educate yourself"... haha.

I am not saying the company cannot succeed. I am just pointing out the other side of the story and a possible scenario that could realistically play out.

VEC Price at posting: 1.9¢ Sentiment: None Disclosure: Not Held
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