Ann: Sale of New Hope Shares & Entry into Long Equity Derivative, page-29

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turbs

158 Posts.

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08/07/21

07:26

Post #: 54357736
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Originally posted by sab8: ↑

Thx for contributing Turbs.

You got me thinking.
My understanding is that $1.68 is the delta price and $2.10 is the starting Conversion Price (25% above delta).
Notes can be converted at any time (after a set date) for the starting Conversion Price less Adjustments (for Divs, Cap Issues, etc).

Not sure where you get the $2.52 - $2.83 range.

As to issues of more than 15%, that's a good point.
Unfortunately there is an "Exception" to this ASX rule for conversion of Convertible Notes into new shares.
(ASX Rule 7.2 Exception 9)
Great analysis Endorph.

I think you have to take Interest into consideration and cannot be excluded from your calcs for noteholders.
This is because funding from equity or debt still carries a cost to NHC and should (with divs) be included in the calc of "returns" for both shares & notes. After all, shareholders have a cost of funding their shares also. By including Int, this would push the returns to Noteholders up further.

The "perverse" outcomes to which you refer confirms our thoughts.
Why would a company want to divert the returns for outperformance to a new class of holders (already protected with a "guaranteed" cost of funds return of 2.75% pa) ?
Who does the new issue benefit most & why - name names ?
Why did NHC divert from the previous WHSP model used for this type of issue (and for NHC, give greater returns in both the Interest rate and potential conversion capital gains) ?
Is it providing guidance to the shareholders of future predicted performance of the company (ie dividend policy) ?
If NHC is NOT going to withold dividends, then what is it going to do with $400m+ cash per year ?

Maybe the board believes it is IMPOSSIBLE for NHC to raise funding without giving up these returns.
In which case, surely your "supporters and believers" (ie shareholders) should be given an opportunity to participate in the new issue.

Of course, time will muddy our assertions & calculations.(and prove us all redundant).......but one thing is certain, and that's NHC is now communicating to the market a heightened level of uncertainty.

Expand

This is point.8 in the placement offer copied and pasted

Conversion Price /Premium -----25% - 35% above the Reference Price (as determined
under the Delta Placement)

$2.52 - $2.83

NHC Price at posting: $1.84 Sentiment: Hold Disclosure: Held
Upvote

0 Great analysis

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Ann: Sale of New Hope Shares & Entry into Long Equity Derivative, page-29

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