Reply to @KerrodT
BMM purchased both the CN and also their initial (85m parcel) equity stake in POS from Jefferies Bank (JB). They appended the partially redacted combined sale contract with their F603 in Aug, 2018 (here).
BMM Holdings History (all from pubic filings):
- They paid 6c (AUD) to Jefferies for their initial 85m parcel (AU$5.1m) (July, 2018).
- The 438m shares acquired via the Q3, 2018 CR (30m direct placement + 178m rights + 230m shortfall bookbuild) were all 5c (AU$21.9m).
- plus another ~26.5m shares purchased in March this year for a combined total of ~$708k (2.68c VWAP)
- Overall Current Holdings as at 17/03/20 (most recent F604): 549.35m shares acquired for combined AU$27.7m (5.04c/share overall VWAP).
What if BMM converted at 9c (theoretical exercise only!):
- US$17.5m @ Fx on conversion date of, say, 73.65c (close enough to tonight's spot) = AU$23.76m / 9c conversion price = 264m new shares.
- Hypothetical Revised Holdings (post-conversion): 813.35m shares acquired for combined AU$51.46m (6.33c/share theoretical revised overall VWAP).
- 28% (813.35m) holding of overall updated (2,907m) SOI.
This conservatively assumes that BMM paid Jefferies very close to par or PV, at least, for the CN (i.e. close to nil discount). If BMM paid materially less, then it would act to lower the overall revised VWAP.
Immediately prior to the announcements on 17/08/18 of BMM's initial holding (also purchased from Jefferies) and associated T/O offer the POS SP was trading ~4c. Given that Jefferies Bank managed to extract 6c/share (a 50% premium!) from BMM for sale of Jefferies' POS shares (i.e. BMM's original original equity stake), my guess is JB also extracted their pound of flesh for the CN purchase. Harbinger, the original holder of the (then US$35m) original CNs who JB purchased from would have taken the haircut. My guess is that JB probably did rather well out of the affair, after picking up the original US$35m CNs from Harbinger for cents in the dollar following the GFC and playing a long game. Why else would JB have been so willing to allow struggling POS to renegotiate the CNs into a single CN at half face value in late-2015. I digress.
Key Take-away:
- Converting the CN @ 9c would 'only' modestly raise the VWAP from 5.04c/share (current) to 6.33c/share (hypothetical).
The big question is whether BMM are willing to risk losing the right to add an 'easy' and certain 7.2% holding. It effectively adds an additional ~AU$10.5m outlay over and above their current VWAP for the privileged of surety. Not a trivial sum atm, but potentially peanuts if their bet on the larger thematic proves-up...
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