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Bearing in mind the behaviour of the new management of late, which seemed designed to frustrate a refinancing, I think there is a chance that the loans do get called. However, if this were to come about and they then attempted to buyout and merge with SF, they would be open to an action for abuse of minority shareholder interests. Thus I suspect that they will salvage a deal. Again their advisors will remind them of their obligations towards minority shareholders. Whether the deal is as good as that which was offered 2 months ago is quite another matter.
I understood that it was some form of 'sweetener' in lieu of not getting paid $75m early (and thus punitive on GMS equity holders). They also mention that once the warrants are issued, and somehow GMS manages to repay $100m, then the warrants don't get exercised. So the 20% dilution was for nothing in return, but it really didn't add much to the banks unless marketcap was $100m+. Obviously would have been fab if 20% dilution was for $75m - why would investors not vote for it when the mcap is at sub $50m!
SF was not willing to get diluted through: 1. rights issue (as they get diluted further, especially if equity is placed to a strategic investor), or 2. warrants issue. This explains their additional 9% purchase in June and changing the board. It is also clear they are not willing to buyout everyone at 22p (since no bids post the end of the no-bid period). So now the question is: what is SF going to do to create value for them? Will it be at the expense of minority? That is my only concern.
I thought the issuance of the warrants would have translated correspondingly into a reduction in debt, essentially being a partial debt for equity swap? It wouldn’t have just been an issuance of warrants for nothing - ie thereby being a fee of sorts to the banks.
Dilution was guaranteed by at least 20% if warrants were issued, with no reduction in debt through an equity raise. So that is the benchmark, and I was hoping they announced something which would be better than this. Nerve-racking indeed!
Also worth bearing in mind, based on customary loan documentation language, that technically come 1st Jan (assuming no deal is reached before then) GMS would “only” be considered to be in default. Banks would formally notify GMS of this and then there would be a so-called “cure period” typically at least 30 days for GMS to cure said default. Failing that then the banks can then call in the loans. Now whether the existing banks would go this far as you say is a whole different question.
Assuming the banks do eventually during this process call in the debt, GMS would have options. They could issue preference shares and/or issue a subordinated shareholder loan to SF+friends to fund the shortfall. Or they could simply refinance with a new set of banks whom SF+friends/ManCap are close to. Or a combination of these three funding options. Point being there are several different funding permutations available - most of which pivot in some way around SF+friends stumping up additional capital on attractive terms whilst maintaining control of GMS. But if I were them I’d be pushing the existing lenders to the limit so see how far they can go before needing to engage these alternative funding channels.
Nerve racking and suspenseful indeed for us “minority shareholders” but I do think GMS will come out of this intact in the end, albeit in fairness we will probably take a hit dilution-wise in some form.
Would have thought they announced something by now. I don't see why banks should not call in the loan as part of their negotiation strategy . Let's hope the board knows what they are doing. So far they seem to be SF proxies rubber stamping some (unknown) process run by SF in the background, and they are completely at the mercy of SF&Co. - i.e. they are not independent and could be voted out in a jiffy. I am happy to be proven wrong, and good luck to all.
Thanks 4C,
I assume we are going to end up with section 2 of Appendix A, as I do not see GMS coming up with a $75m repayment in the next few days .
· If the US$75 million prepayment referred to above is not made and the shareholder resolutions necessary to authorise the issuance of the warrants are not passed, in each case by 31 December 2020, the Banks would be entitled to call a default under the Agreements.
So the banks are entitled to call in the loan, but they do not have to, my guess is they will keep talking as SF would take a major hit if the banks took everything.
Here it is - https://otp.tools.investis.com/clients/uk/gulf_marine_services/rns/regulatory-story.aspx?cid=795&newsid=1395869
Check out Appendix A
Does anyone know the exact terms of the bank paper that is supposed to be due in 4 days time? And, what happens next?????
Playing the devil's advocate here. Too early to call this RNS as a display of the current board's noble intentions. If anything, the work on this tender must have been started months ago when the previous board was in place. To judge the current board's alignment with SF, we need to see the deal they strike with the banks, and how they resolve the capital raise. I don't see an announcement yet, and they are driving this to the edge so far.
@gruffj - good point, and i would like to think so too. But if there is an administration, it won't be the first time happening in the O&G offshore vessel sector or in the region.
What I find interesting is that the company even issued this RNS. They didn’t have to issue this. Issuing this RNS, which paints a positive narrative of the company, however small and incremental, isn’t normally associated with a Board who is attempting to drive the company into administration (the much talked about potential worse case scenario/outcome). It also helps potentially support any business plan assumptions as part of any current discussions with lenders.
What we be interesting to see would be what level of information the BOD where able to share with the client prior to the contract extension. These contracts are strategic for GMS's clients and you would think the BOD would have to provide a decent level of comfort that their debt isn't going to get called in and assets swallowed up. If I was a client I'd be after some certainty as to how the future looks before signing extensions. Given the location of this client maybe there were privy to some extra info????
I'm sure you're right I just thought it made a nice change to read anything from GMS
This is the drip feed type news which won't have any impact on the price whatsoever. They need to clear the overhang from the banks for this stock to respond to operational RNS like today.
So.good to read any news let alone news of increased utilisation in 2021.
Given the hostile way they do business, I don't feel the current board could give any less of a monkeys about private investors or anyone else for that matter. Think you have to hope whatever happens is good as a side effect rather than an intention
Let's hope so AA....I am waiting for this board to impress the minority shareholders though I wonder what they can do different that the previous board could not do. If banks are willing to do a better deal because of Emirati board members, that is a moral hazard as well.
I think any offer, or asset sale (given market cap), would require at least 75% shareholder approval. A squeeze out 90%. So on that basis alone I would think new Board/SF/Man Cap would need to play fair and reasonable.
Guess people getting bored and ditching this.....better opportunities elsewhere i suppose than this O&G play although this could be a multibagger in the medium term if the new board doesn't screw up things for SeaFox/Man Capital to takeover on the cheap
Not even that many trades, very quiet today.
I have to assume that SF has been having some discussions with the banks regarding the loans, otherwise why go to all the trouble of taking over the BoD. Who knows, they might even have a plan.....
Nothing more on the ADNOC/Zakher Marine deal either - obviously not expecting much since those would be in the private domain. Let's hope for an announcement before the year end or before the banks decide to call in the loans, whichever comes first
Indeed - all very boring at the moment. Tick tock, tick tock....
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Good volumes today though
What's with the ridiculously tight spread 6.68-6.7 on IG
could the company potentially underwrite their own loan through subsidiary and then run the company into the ground and acquire it that way?