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Let us see but in my opinion any d4e swap would dilute existing shareholders heavioy.
Think about it less debt less interest to pay theres more to consider than you initially think
Exactly that is my point, in my opinion d4e swap would give them most of the company and majority to take it private.Really Really bad for someholders as somehokders have much higher averages.
In terms of the shareholder protections arising out of the Solomon offer (2011), the relevant section from the agreement:
"All shareholder resolutions of the Company will be proposed as special resolutions for so long as the
aggregate holding of the Concert Party is 70 per cent. or more of the issued share capital of the
Company."
My understanding is that the concert Party is made up of Baker Steel too, because Solomon Capital (ie. MTL Luxembourg) transferred a share option deed to be managed by their fund.
So, although Baker Steel (6.59%) would likely act with the majority shareholders (65.81%) (total = 72.4%), in theory they're short of the shares needed to pass a special resolution (75%) with a block vote. But... what about the rest of the holders?
Surely though if MTL Luxembourg did get over 50%, they would still be compelled to make an offer under the takeover code.
Bloodninja - I hope you're right!
shaml89 - They made an offer back in 2010 and intended to take that shares off AIM if they got to 75% ownership.
They only owned 44% back then.
Debt holders own the company effectively and total debt is 123 million. So it would be interesting to see how many debt is converted ibto equity.In almost all of debt to equity swaps previous shareholders are heavily diluted but here is the trick as debt holders are also largest shareholders and they own 66% shares so debt for equity swap could increase their shareholding to the point where they can gain majority to take the company private. I hope I am wrong but I cant digest the timing of this D4E swap as company is generating enough cash to pay off debt in couple of years or more and lenders should not worry about debt but they are imposing D4E to dilute existing shareholders.
I've done some ultra crude maths, so the debt is GBP 53 million, if they convert the lot at 0.0135 then shares in issuance would increase to 6 billion. If the company then has the ability to knock out a dividend of say 15m a year, then capitalised at 5% return that equates to a 300 million mkt cap which based on 6 billion shares in issue is 0.05 (triple where we are today). So essentially this is the softest route to this becoming a dividend paying share, and you'd better believe the Candy boys will want to start stripping capital out of this via a dividend at the earliest opportunity.
Just some thoughts
As somebody posted these major shareholders own 66% shares and they are debt holders.So if they enforce D4E swap, previous shareholders would be heavily diluted and these lot could end up owing the most of the company and can have majority to take it private. I am not an expert but right now they should have made an offer to previous shareholders but instead they are going through D4E swap route. Company is generating enough cash to meet quarterly interest payments and production rate is improving , so why go for D4E now?
Banks wanted to raise 20 million last year but these major shareholders opposed it, company is in much better position today and they bought the debt and now want to enforce D4E swap.
I actually don’t understand any of these concerns and here’s why;
The debt turned into equity is an amount no longer outstanding against the company.
So whilst shareholding will be diluted this will be negated by the increase in value per share due to the lower debt of the company.
2) The company can’t be taken private on a debt for equity deal
The company will have a secure future and finances meaning again shares increase in value.
Ultimately think about it the shareholders wouldnt convert the debt into equity if they didnt believe the shares would grow in value simple as. Otherwise they’d of left it to accrue interest
shaml89 - The major shareholders own 65.81% of the shares. That percentage will increase with their shares gained from the D4E swap. The remaining 34.19% of shares will be diluted.
It will depend on how the shareholders vote. If they need 75% to approve then it could be tight with Baker Steel going with the major shareholders.
They made an offer for the outstanding shares many years ago which valued the company at around £35m iirc.
I cant Digest this D4E scenario as right now company is generating healthy cash and should be able to meet its quarterly interest payments and production is increasing so further cash would be generated. They needed to make an offer but instead they have gone for D4E swap and that would dilute existing shareholders heavily. Candy brothers and Other major shareholders hold 60% or more between them.
I have to say I have taken a few off the table based on the uncertain situation concerning the debt for equity swap, I think the reason the Q4 numbers were delayed may be because management were hoping to complete the finance deal and deliver it with these results - not so.
The one thing the market hates is uncertainty, new buyers now have no idea as to what terms the D4E swap will occur and that is unsettling.
I have looked at the situation at AAZ where their debt hit circa £45m at it's height, so one may suggest the MTL D4E swap could be 50% (£50m) as opposed to my suggested earlier £25m. It is all guesswork now.
It is a great shame this uncertainty now exists but I think all will work out in due course.
However they can also take it private as now they would almost certainly own most of the company. I hope I am wrong but this is likely scenario I can see emerging.Now company is able to pay off debt and production is rising, so why should they enforce debt to equity swap now?
i think they would need to make a bid for the company over a certain amount haven't got time to read through the takeover code at the moment although there are plenty of debt for equity options involving warrants etc.
Lets see but previous debt to equity swaps have not gone really well for holders and shareholders are heavily diluted in almost every single debt to equity swap.
I don't think these prices will last long. The biggest debt holders will be keen to turn their debt (which the company can't service) into shares (which once the debt is gone will easily double in value). Especially as the biggest debt holders already own most of the shares.
it does say to include a 'debt equity swap component' which suggests to me partial ownership which is only fair under the circumstances
Got £2,000 to add but quoting me 1.42 and i wanted slightly lower lol might wait n see how it settles n purchase just before 4:30
Has scared the people and in if company goes ahead with it than biggest debt holders who also happen to be biggest shareholders can end up owning the company . A cunning way to get this flagship asset at a very cheap price.