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$7.50 antares energy limited

Whilst the terms to noteholders are also a step in the right...

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tt2000

4,723 Posts.

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26/03/16

01:24

Post #: 17362997
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Originally posted by tt2000 ↑

@pblawley,

Whilst any disclosure from AZZ is welcomed and is a step in the right direction, there are still many unanswered questions and concerns:

My major outstanding concerns:

AZZ released an announcement to the market stating that ‘There are no conditions precedent to be effected prior to settlement.’ on 10/09/2015.

This was in direct response to a clarification that I asked him (and the ASX) on 09/09/15 as follows in relation to whether or not there were any conditions precedent:

Based on a 38.4 it appears as though ASX are of the belief that there were in fact conditions precedent. ASX requested “statement correcting the Company's previous disclosure that completion of the sale of the Assets was not subject to any conditions precedent and including in the Draft Shareholders Notice of Meeting the conditions precedent to completion contained in the Sale Agreements.”

I believe it is therefore imperative that AZZ disclose a full copy of the executed sale and purchase to the market, so that market participants are able to understand whether or not there were conditions precedent upon which they based their investment decision.

The announcement indicates that the 'agreements remain on foot' (with Wade).

What are the material terms to this agreement (further reasoning as to why a copy of this US$250M agreement should be disclosed to the market)

Is AZZ aware of the terms that Wade are having difficulty agreeing (e.g. are they not happy with the quality of AZZ’s assets, are they having difficulty raising financing).

Has AZZ asked Wade, at what price they would be willing to purchase the assets? Given the liquidity issues that AZZ are having, it is imperative that noteholders and shareholders understand whether AZZ has rejected a reasonable offer that would alleviate its liquidity concerns

Other information that AZZ should be required to disclose that a reasonable person would expect to have a material effect on the price or value of the entity’s securities:

Capital expenditure forecasts required to maintain its leases. AZZ’s value is dependent on it being able to maintain its leases – therefore it is important to understand what this capital expenditure requirements are in order to assess the likelihood of AZZ being able to maintain then, given its current liquidity position

Lease expiry dates – It is important that market participants are able to understand when AZZ’s leases lapse to ascertain the impact this has on AZZ’s asset value

How AZZ plans to fund the capital expenditure on leases, and net operating outflow.

What due diligence was conducted on the counterparty (Wade) prior to announcing a US$250M sale and purchase agreement to the market (given that AZZ was trading at a market cap of AUD$24M prior to this announcement) (specifically in relation to the ability for Wade to fund the acquisition with cash) given the reset date of 31 October 2015. A reasonable person would expect the actions (or inactions) of management to have a bearing on the riskiness and therefore price of a security.

Management have still not offered a reduction in salary and wages:

Noteholders have been asked to have a moratorium period apply to their interest payments

Shareholders will be asked to undertake a capital raising

Management are requesting more time to enable a transaction to occur, at the expense of shareholders and noteholders but are offering no reduction in their relatively exuberant salaries – why not be remunerated via options at 50c (the same terms as noteholders on a 4-1 conversion) given their confidence of a sale.

Expand

Whilst the terms to noteholders are also a step in the right direction, they are also still concerns that apply to them.

1. Whilst the Exit Payment of 10% of the value of the notes is some reward, it represents circa $5M AUD, relatively insignificant considering that apart from this $5MAUD noteholders receive no reward if the sale is between US$30M and US$165M, yet noteholders are taking on equity style risk.
2. Noteholders are still are risk if AZZ were to be taken over, or if AZZ enter into a Joint Venture - presumably this is why AZZ has offered to 'execute security documents by no later than 30 June 2016 to ensure that Antares' payment obligations to Noteholders under the Trust Deed are secured over the assets of Antares and its subsidiaries

Noteholders should be pushing for the execution of security documents prior to the voting on any resolution, and either a higher Exit Payment or higher conversion ratio to compensate for the additional risks.
AZZ Price at posting: 50.0¢ Sentiment: None Disclosure: Held
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