"1. Convertible Notes issued at 12.5%pa interest. Better than...

"1. Convertible Notes issued at 12.5%pa interest. Better than the bank.
2. They are secured. Against what, I am not sure, but it puts you at the front of the queue if the company goes into Administration.
3. Maturity date of 18 months. Short enough.
4. Being able to be converted to shares at any time, at a ...20% discount (to the prevailing price).
5. Options. When it rains, it pours. 1 option is also issued for each converted share issued, exercisable at the same price for up to 3 years time."

HK1 summarised it well, but the point might also be made that it looks like the Board and Management consider that Reduit has reasonable prospects.
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It has been clear for months that Reduit needed funding and that the Nutrition Systems deal was a very clumsy way to go about it.

The logical alternative was to raise the money directly from shareholders so I, and perhaps others, sent emails to OBJ itself and to one of the directors suggesting that “shareholders might be more supportive of a capraising if it was done in a way by which Steve Schapera and his group put in a fair bit of the funds and took a larger stake in the company.”

But the directors and management have decided to bypass the shareholders and have decided not to buy shares in the company but to lend it their own money. I have no quibble with the terms of the loan only the fact of it.

1. By making a loan to the company, the directors have not aligned themselves with the shareholders. On the contrary they and senior management have formed a group of their own. In a sense that group may have a conflict of interest, in that as lenders to the company their interests as lenders may conflict with its interests as a borrower.

2. That group now has a "secured" loan. We do not know exactly what that means. The Announcement is unclear. It talks about what may happen "following a default event" and says that the lenders can "request repayment of the Note", but the precise details of the security including the definition of a "breach" or the consequences of one have not been stated.

What shareholders need to know are the precise terms of the security arrangements, what might happen to the company's assets in the event of a default and whether shareholders themselves will be able to step in and repay the loan.