As much as I would like to think that a no vote would hurt the hedge funds, it won't.
A no vote to the morsel that will be offered to shareholders in a debt for equity swop is a vote that can only hurt shareholders.
The hedge funds who bought debt at a discount will be happy to take at a minimum their money back but I think at those discounts they will get a return in a liquidation scenario.
The question is do they really want to have a long term play in energy in Australia?
If you believe this then they may offer something worth taking.
In my opinion hedge funds never offer more than they have to.
If they offer next to nothing a no vote means management re-finances the debt or the debt holders liquidate the company.
If the hedge funds want to hold the debt and I think that is a remote possibility then management may be able to re-finance. The rates are good and cash flow is there to meet interest payments. If hedge funds were nice funds.
What the do these hedge funds want? Maximum return.
I don't trust hedge funds acting like this. They are notoriously ruthless. They are in control of any outcome now and they will act together like a pack of dogs.
What suitor wants to deal with this pack of dogs? They will try to block asset sales until they get their hands on the shares for nothing and then they will start selling assets.
The hedge funds will wait until the debt maturity dates collecting interest on the full debt amount all the way. Can you imagine the effective rate on the discounted amounts they paid? Then they will offer a debt for equity with nothing for existing shareholders under threat of liquidation. Either way they win.
Any debt repayments during this time is a further win for them.
Will GPG vote no? Loose evrything vs. loose a lot.
AEJ Price at posting:
4.9¢ Sentiment: None Disclosure: Held
