It was interesting Kiwi. I guess he is involved in the discussions? I can see what he is saying. They can decide on a share price and then exchange the convertibles, royalties etc into stock at that price and offer shareholders the chance to avoid dilution buying at the same price. In theory it doesn't really matter how low the rights issue price is if you have cash to buy more. In practice, as we see over at BCC at the moment, the shareprice always trades right down to the rights price or lower so everyone gets smashed. And you have to add risk of course.
He also said the current structure doesn't work. No kidding! So perhaps all those hold co liabilites could be converted into shares in CCL and hold co shareholders given the chance to exchange their stock for op co shares. Not looked at this for a long time but the empowerment shareholding is at op co level isn't it? So they would need to approve something like that. Why would they? I assume various legal issues with collapsing the structure as well. Maybe though.
The note has an optimistic tone but I'm keeping in mind that this guy paid good money for CCC shares when they appeared to be insolvent. If I'm reading it right, there is some slim chance of a positive turn of events with shareholders given the right to put money in to help save CCC in return for structural improvement. The underlying problem though has always been that South African coal is just not a very good business in my view. It only every looked good in CCC's guidance and the wild extrapolations by a number of hotcopper posters. So not sure I'd put more cash in.
Not sure how VMR works, but isn't it amazing that Dippenaar still has his job after this debacle. Didn't he buy in after that meeting where CCC admitted they were in big trouble at the hold co?
CCC Price at posting:
2.0¢ Sentiment: Sell Disclosure: Not Held
