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As someone else has mentioned there may also be clauses which require them to purchase all of the debt at the same time, but without seeing the full bond prospectus we can only guess. In terms of paying the debt as it comes due - oil prices will play a big part, as the going concern statement mentions that in certain scenarios it won't have the free cash to repay the debt as it comes due. I would expect that the SP here - in the absence of further operational updates - will be highly geared towards the oil price movements.
I had considered covenants might prevent them which is why I put it out as a question. Clearly they are not going to be buying all or anywhere near that and they would have to stage their buying but if they could pick up say 10%-20% they save on both repayment and the interest. HUR have cash in the bank at the moment which is not being used . 10% would cost around $16m saving $6m on overall repayment and $3.45m interest There is the willingness of the holders to sell and any aggressive buying is likely to push the price up, but if the bond price starts to rise would that not give the sp a nudge?
Not certain, but possibly because the terms of the CB would requires HUR to purchase ALL of the CB's at the same time.
Critically, do they have the funds to do this?
They therefore cannot purchase the CB's piece-meal but a third-party can - hence the CB's being traded.
Of interest is why a discount of 48%? The company is able to pay the coupon and repayment at maturity does not appear to be a problem.
Happy to be corrected by the more knowledgable.
Buying back their own bonds would depend on covenants allowing that to happen - also need to remember that the debt isn't callable so they can't force anybody to sell and given the yield to maturity doubt many are selling down at these levels which would assume are being set more by what potential buyers are prepared to purchase the debt at. There s nothing to stop the company dong so - although the pricing of the bonds implies that the market doesn't believe that the company has the spare cash flow to allow it to purchase a sizeable chunk of the debt early and pay off the rest when it comes due.
Good q, DC.
garyn
Given that the debt is tradeable and is currently priced at a significant discount why would it not be possible for HUR to buy in the market. I have posed this question before but no body seem interested.
http://cbonds.com/emissions/issue/326067
$100k minimum I believe. Most bonds are tradeable, although for many you need to be subscribed to see live prices (I got the HUR price from someone I know who trades bonds and has access to the prices. The debt on the likes of ENQ s trading at a similar discount to par and similar maturity date. Although you also have cos like GENL where it is actually trading a fraction above par, with the 10% coupon being attractive compared to the debt risk.
garyn
Like a no of others I've not seen the debt traded anywhere. Can you point to it ? Is there a min amount, often that's set at a level that precludes PIs.
Certainly the risk/reward looks better on the dent than equity, give that equity wipeout would precede debt default/
JAdam, no need to feel sorry for me as I did rather well out of this one, apart from my last trade from low 20s which I took a loss on at around 17p when it became clear the operational issues were more serous :)
maybe check out the prices that the HUR debt is trading at... Anyone can buy it and there is a market for it. Currently offers a 52% return by 2022, assuming it is all repaid.
Garyn - please point me to where I can buy HUR debt at 52pc discount. You really are a clown.
add to that the risk of the falling oil price. oil price up with the markets at the moment. but when markets pull back like they do in Sept then expect oil price to drop too.
5.20p top. bang on. good call DBNO even if i say so myself!
The $230 million corporate debt is trading at just 48c on the dollar, and given it matures in 2022, that sort of yield to maturity suggests that debt holders aren't too confident here! Certainly doesn't bode well for equity holders and one to be careful of - especially if the eventual full field development is impacted. It also raises questions about ROI on the FPSO if reserves are materially impacted, plus it looks as though the water cut issues aren't exactly improving. Shame as it is a company I had very high hopes for when originally investing at around 29p prior to the Lancaster drill when few had even heard of the company!