W, I'm a bit hazy at what happens come 14 Oct this year.Here's...

W, I'm a bit hazy at what happens come 14 Oct this year.

Here's my take on this:

A holder wouldn't lodge a Exchange notice before hand because:

"On receipt of a valid Holder Exchange Notice the Issuer must, on the relevant Exchange Date, Convert such FORESTS into the Minimum Conversion Number of Ordinary Shares.
See clauses 3.6 and 3.7(b) of the Terms of Issue."

The min conv is set at 18.2 shares and at a current prcie of $2.40 that comes up well short.

So, we have to wait and see what the company will do which seems to be the following:

"If not subject to a Holder Exchange Notice or successful Re-offer Notice, Gunns may Exchange some or all FORESTS. The Issuer can also issue an Exchange Notice in the event of a recommended Takeover Event.

On Exchange, subject to Holder Exchange rights Gunns may, at its sole discretion:
• Convert FORESTS into Ordinary Shares calculated with reference to the Conversion Ratio:
• the rate at which FORESTS will Convert into Ordinary Shares will be calculated by reference to the 20 day VWAP of Ordinary Shares immediately preceding the Exchange Date, at a discount of 2.5%.
• Redeem FORESTS for their Face Value;
• procure the acquisition of FORESTS by a third party for Face Value;
or
• undertake a combination of the above.
See clause 3 of the Terms of Issue."

Redeem for cash...great! A bonanza.

But in all probability it will be an ord share conversion. And if this means $100 divided by VWAP less 2.5% = ord shares issued. Then, this is fine too...but as you have pointed out, there will be approx 10% of the issued captial looking to convert and possibly head to the door. There will be enormous downward pressure on price, I would imagine.

However, the phrase "Convert FORESTS into Ordinary Shares calculated with reference to the Conversion Ratio" is intriguing. Does this mean at the minimum?

Also, I understand anothor choice for Gunns is to make a re-offer which is eoither acceoted or rejected by the holders. But if you reject, what then?

Wato...what is your understanding of the folowing?:

"If Gunns does not Exchange FORESTS on 14 October 2008 the Margin will be increased by a one-time increase of 2.50%, expressed as a percentage per annum, until FORESTS are Exchanged unless a successful re-offer is executed."

All in all W...the end game here is not all that clear.