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I don't know how someone can be so ignorant about the factual information regarding the CB.
The documentation (or at least the ones provided to shareholders as placing documentation) is written in plain English. How does someone misunderstand, persist with the misunderstanding and post misleading information "for readers to draw their own conclusions", I don't even know!
Deluded? Denial? or just Dumb?
18% dilution? more like 200+% for partial D4E/restructure of c. $80b.
Good evening dflynch.
I note your post this morning where you persist with your incorrect understanding of the bonds, without reflecting on why your view does not accord with the clauses.
Originally you asked for help:
This CB issue is a bit of a confusing mystery to me.
Continuing my simplistic, and possibly wrong interpretation of the issue.
Once again am I missing something! If so, what is it? Could the better informed please elucidate?
but clearly you do not require any help, you are only here to see how many punters you can suck in with your posts, and very successful you were too with your idea of HUR tendering @ 5p to get the shares to give to the Bondholders, when of course any shares issued by the company cost the company nothing.
As a former Bondholder, I am sure that CA know whether buying is permitted or not, and the terms at maturity from having access to the full details of the Convertible Bonds.
You asked for help to correct any misunderstanding, I provided that factual information.
You have joined the many ultracrepidarians on this BB.
I wish you luck with your holding here and maybe CA will help.
Thank you for confirming your Sunday evening status.
I think we can agree that we disagree about the issue of the Hurricane CB holder’s ability to convert at a time of their choosing before the CB maturity date. They cannot!
Consequently, I see no reason to change my comments about what you referred to as a “mop up” clause at 21.39 hours on Sunday evening but now correct the terminology to “clean-up call,” and the associated conditions.
Your point about redeem, and repurchase is interesting.
I have previously suggested, on this BB, that a third-party could make purchases of the dicounted CB's on behalf of Hurricane with the object of acquiring the whole CB issued. Probably an impractical tactic. But if Hurricane were to purchase the CB’s what would be the re-action of the CB holders? Would they object on the grounds that the act was tantamount to a piece-meal redemption, which we both agree is not allowed. Rich pickings for the “bewigged” me-thinks.
The maturity options available to Hurricane in July 2022, the issue of 442,307,692 new shares, precludes the possibility of default.
Clearly the acceptance of the CB’s terms by holders in 2017 was indicative of the optimistic view of Hurricanes future by them. As previously stated, I do not understand why they allowed Hurricane to have the whip hand in the matter of conversion.
We can now leave it to readers to draw their own conclusions on the points we have debated, and our opposing viewpoints on the matter of the convertibility of these particular Hurricane Energy plc issued CB’s.
Raise money in hast, repent at leisure. How do we sign up to be future CB Holders ? It's more rewarding than being a PI.
Good evening dflynch.
re: "I believe you to be incorrect on what you have stated regarding a “forced conversion” clause. The CB holder has NO choice, or right to demand the newly issued shares, or receive the cash alternative, before maturity in July 2022. "
I note that you are sticking with your mistaken belief that the Holder cannot convert at a time of his choosing before the maturity date.
wrt the 'mop up' clause [it was actually called a 'clean-up call' in the RNS of 30June2017], and to force your thinking as correct you choose to dismiss this clause as 'sloppy drafting'; rather than trying to understand how any CBs might have been 'previously converted', and how/why 85% converted might have occurred.
Moreover, if they cannot choose to convert when the CBs approach $300,000, why would they agree to a clause that then just gives them their principal back?
I readily admit I was wrong to use the word shares (a post-prandial moment) when the clause under discussion said CBs, which gave you the opportunity to dodge the question, even though you knew what it was, lol.
I note that you now have used the word 'redeem', whereas previously it was 're-purchase' as per the CA suggestion.
I agree they cannot redeem the CB’s piecemeal, but that does not preclude them buying [or re-purchasing] in the market place.
That is why the phrase includes the word 'purchased', and why your initial assertion was false.
As to the final paragraph, sorry you found it unintelligible. It was simply stating that currently the BoD are saving up so as to be able to return the original principal of $230m when it becomes due on 22 July 2022. The alternative, of course, is to default and let the BHs take all they can, as I wrote in my first helpful reply.
It is essential to read the sentence in the July 2017 document “The Company will have the option to redeem all, but not some only, of the outstanding Convertible Bonds:” in conjunction with the two conditions that follow it.
I believe you to be incorrect on what you have stated regarding a “forced conversion” clause. The CB holder has NO choice, or right to demand the newly issued shares, or receive the cash alternative, before maturity in July 2022.
Hurricane can, however, choose to redeem ALL the CB’s before the maturity date by satisfying the requirements of the CB at maturity, once the first condition is met!
As to why the “mop up” clause is necessary is a mystery – unless it is an indication of sloppy drafting. If Hurricane were to exercise its option to redeem ALL of the CB’s early, as a consequence of first condition being met, then there would be no reluctant Bondholders with CB’s to “mop up”!
My assertion regarding Hurricane’s inability to redeem the CB’s piecemeal is clearly true and therefore correct.
“If it were the case, kindly explain how shares may be "purchased and cancelled" as distinct to those " previously converted, redeemed"
This seems to indicate a confusion on your part. Those words in the July 2017 document clearly refer to the CB’s, and not shares. If you wish to make a further point about these particular words, please clarify the point you are attempting to make. Happy to respond further on receipt of clarification.
Your final paragraph is also puzzling. The sole purpose of the 52cent figure is to quantify the underlying number of new shares to be issued at maturity. I have stated that this was 442,307,692 and you appear to agree with that figure. I have never said that the CB’s have to be converted at 52cents nor have I ever used 52cents in any other calculations “meaningless” or otherwise.
Unfortunately, the remainder of this final paragraph makes no sense. Could you please re-write it so that this poorly educated illiterate can interpret what it is you are trying to say so late, for some, on a Sunday night!
dflynch re :
"• at any time on or after 14 August 2020 at par plus accrued interest if the value (calculated over a specified period) of the Ordinary Shares underlying each Convertible Bond of denomination US$200,000 shall have been at least US$300,000; "
This is a 'forced conversion' clause telling the Bondholder that if he has chosen not to convert his investment into shares when it has appreciated by 50%, then the company can pay him just his original investment [par] and cancel any future expected interest. This would need a share price to be in excess of 48p. All reluctant bondholders are to be treated the same at the same time.
" • at any time, if 85 per cent. or more of the aggregate principal amount of the Convertible Bonds originally issued shall have been previously converted, redeemed or purchased and cancelled."
This is a 'mop-up' clause that enables the company to close out all the reluctant bondholder(s) when 85% have already chosen to redeem the Bond and take up the Ordinary shares, irrespective of the prevailing SP.
wrt your assertion "I trust this clarifies and deals with the incorrect speculative suggestion currently circulating that Hurricane can re-purchase the CB’s piece-meal. It clearly cannot!"
It is quite simply false.
If it were the case, kindly explain how shares may be "purchased and cancelled" as distinct to those " previously converted, redeemed".
Your whole understanding and meaningless calculations are based on the false premise that the Bonds must be converted at 0.52cents.
"The Convertible Bond was issued at par [ie no discount or fees applied] and carries a coupon of 7.5% payable quarterly in arrears. The Convertible Bond is convertible into fully paid Ordinary Shares with the initial conversion price set at $0.52, representing a 25% premium above the placing price of the concurrent equity placement, being £0.32 (converted into US Dollars at USD/GBP 1.30). The number of potential Ordinary Shares that could be issued if all the Convertible Bonds were converted is 442,307,692 (assuming conversion at the initial conversion price of $0.52). Unless previously converted, redeemed or purchased and cancelled, the Convertible Bond will be redeemed at par on 24 July 2022." from the 2018 AR Borrowings pg91.
'At par' means the full $230M (as none have been converted, redeemed or purchased and cancelled to our certain knowledge), ie return of the principal originally invested is currently expected and has to be budgeted for July 2022.
Consequently, I would be cautious of accepting any of the attributable “no brainer” advice currently being bandied around.
In the case of Crystal Amber, from what DiveCentre attributes to them, they appear confused as to the nature of Hurricane’s capital structure - which does little for their “activist investor” credentials.
That attributable by DiveCentre to the non-executive Chairman of Hurricane is deeply concerning. If DiveCentre is correct in what he attributes then either the Chairman of Hurricane has not understood the July 2017 document, or he has knowledge that is contrary to the published information that shareholders used to vote in 2017.
If the Chairman has failed to understand the document, then this would support the expressed view on the competence of the BoD. If he has contrary information then it would appear that the BoD has mis-led investors. I am curious as to the truth!
Again, happy to be corrected, if I have got something wrong, and read any alternative coherent and resilient factual counter argument that clarifies the situation beyond doubt.
The document issued on the 4 July 2017 to support the share placing and CB issue states in Para 10 Page 20, which I assume you have read and have to hand, states.
The Company will have the option to redeem all, BUT NOT SOME ONLY, of the outstanding Convertible Bonds:
• at any time on or after 14 August 2020 at par plus accrued interest if the value (calculated over a specified period) of the Ordinary Shares underlying each Convertible Bond of denomination US$200,000 shall have been at least US$300,000; and
• at any time, if 85 per cent. or more of the aggregate principal amount of the Convertible Bonds originally issued shall have been previously converted, redeemed or purchased and cancelled.
I trust this clarifies and deals with the incorrect speculative suggestion currently circulating that Hurricane can re-purchase the CB’s piece-meal. It clearly cannot!
The CA extract quoted by DiveCentre, regarding the option Hurricane has to repurchase the CB’s, actually refers to Loan Notes. These are a completely different financial animal to the CB’s issued by Hurricane. Hurricane did not have any Loan Notes in July 2017, as far as I can discover. Furthermore, the publicly available conditions attached to the issue of the CB’s does not permit Hurricane to acquire debt, which includes the issue of Loan Notes, without the consent of the CB holders. Again, there is no evidence that Loan Notes have been issued.
Now whilst it may be a “no brainer” to purchase the CB’s at a 50% discount I wonder if it would have been financially astute to have done so.
Well for the purposes of illustration let us assume that the CB were issued in US$ 100,000 quantities. That would have created 2300 individual tradeable Convertible Bonds with an underlying holding of 192,307 shares to be issued at Maturity. Additionally, each of these 2300 individual bonds would also receive an interest payment of US$ 1875 per quarter.
If someone purchased one of these CB’s at the time of CA’s quoted statement (February 2021) they would have effectively paid to receive the delivery of 192,307 newly issued Hurricane shares in July 2022 and additionally receive six quarterly interest payments of US$1875 ie US$11,250 in total.
In February the price of Hurricane shares where in the range 2.9 to 4p. It would therefore have been possible to obtain the same number of Hurricane shares as the underlying individual CB’s (192,307) for between US$ 7500 and US$ 10500.
So why pay a discount of 50% ie US$50,000 to acquire 192,307 Hurricane shares in July 2022 when the same number of shares could be purchased then for between US$7,500 and US$10,500?
Given the current sp converting the CB’s to ordinary shares is an irrelevance.
The only question of any significance is whether the Company is or has bought CB’s on the open market at their currently discounted price and if not why not.
This is a quote from Crystal Ambers Interim Report published 3rd March 2021 (it has been mentioned here previously)
“following discussions with other Hurricane shareholders, that it should allocate a portion of its cash to buy in some of the Hurricane loan notes at below 50% of par value. The Chairman of Hurricane had previously told the Fund that he regarded such a purchase as "a commercial no brainer". No update on bond purchases or capital allocation has been provided to the Fund or the market.”
Why would Richard Bernstein make this public statement proposing such action if it were not possible? Furthermore why would Steven McTiernan the chairman of Hurricane Energy regard such a purchase as a commercial no brainer? Surely the Chairman of the Company would know if buying in the market is an option available to the company and surely he would know if there are covenants in place that ruled out this option.
The only public information regarding the bonds that I am aware of is that contained in the Convertible Bond Offering RNS 29.06.2017 and the Results of Convertible Bond Offering RNS 30.06.2017. Neither specifically rule out the possibility of the Company buying the CB’s on the open market.
I emailed the company 10 months ago to ask if there was anything that would prevent the Company from buying the Bonds in the market if they chose to do so, but received no reply.
They have no drilling programme for this year which means they have substantial cash in the bank doing nothing apart from sitting there until required for redemption. As Steven McTiernan is alleged to have said it is a commercial no brainer. Every CB bought at a discount is a saving on the eventual redemption cost plus the additional saving on interest payment in the meantime, so if the option is open to them and they are not buying they are defrauding the ordinary shareholders. If there are secret covenants that deny them the option then at least tell the shareholders and Steven McTiernan should resign or be sacked if what he is alleged to have said is true.
Bonds are not due till 24 July 2022 which is still more than 15 months away, Brent prices will be Key going forward, GLA.
Don't forget another years coupon at 7.5% on $230m, plus any already paid but not yet accounted for.
Borrow off a bank to pay off bondholders while interest rates are low? Look at the interest rates that pay day loans charge for poor risk borrowers even in these low interest rate times. What % would a bank demand for a loan to an failing enterprise like HUR when they have no clue if either the repayments will be honoured let alone whether the capital will be repaid?
how they will pay in October 2021, its only 6 months from now.
even $10million per month profit will give us $60million and if they have lets say $140million even then it will be $200million.
Let's see first how much they have. Also don't forget that they can't touch $20million to $30million as they need to keep some for decommissioning
No present PI Shareholder is under any illusion regarding how desperate the situation is presently .
To believe that a investment recovery of +4p is possible , is a Dream for most . The many deliberate 'Kitchen Sink' communications over the last 9 months have put pay to a full price recovery .
However a glimmer of Hope exists while Well 6 still pumps at 11-12k boepd and Brent remains over $60 .
Hurricane is sitting on a rising cash pile of $140m with CB Debt of $230m .
As a large Shareholder the solution to me is straightforward lol :
Hedge 10k production at $60 for 12 months .
Ensure the next April , June , August and September tankers are full .
October 2021 pay off the CB holders .
All the debate on Dilution , Cheap Takeovers , CB holders dictating terms ect , fall away .
Hurricane , IF they have the Water cut under control , can deliver the business back to Shareholder control from CB control .
Should Well 6 water out in December 2021, i would be more confident with CB'S removed from the Equation , believing Shareholders will be in a much improved position .
We shall see .