Agreed then if what you've said is correct, this seems like an exceptional deal for the noteholders, and not that great (although I have seen worse) for shareholders. Still wonder if we've missed something, it would seem out of character for sol to strike a deal not getting the best outcome for shareholders. They seem to have done a couple of things out of character in recent times (e.g. they invested in rfg, which seems both out of character, and in my mind, not a great investment but I may be proven wrong). Like I said they could not pay a dividend, or pay minimal dividends, over that timeframe to reduce dilution, however that also seems unlikely since sol have a policy of continually increasing dividends.
I'm possibly over thinking it, since it's only circa 10 - 15% dilution (more like 15% if a $1.60 conversion price is used) dilution, however it seems to me they could have simply raised capital at $1.60, possibly higher and would be done with it. Which if they pay dividends over the 5 years, and what you've said is correct, will be the approximate end result, but worse since they will have paid 2.75% interest over that timeframe. Like you said a a straightforward corporate bond in my mind would have been preferable, or a combination of corporate bond and equity raising. Is there any option for nhc to buy the notes back at any point (thus eliminating the equity dilution factor)? It is definitely an intentional structure, since it is unconventional and complex, so yes I would like to understand it a bit better to get to the heart of who is profiting from this and why it is structured this way. I might have to bit the bullet and read the documents. Like you said I'd potentially be interested in purchasing a note (if they're tradeable), although that would be stretching the funds for me.
NHC Price at posting:
$1.93 Sentiment: Buy Disclosure: Held
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