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I think there are lots of legal grounds to challenge but it is not in our interest to do so.
The price of gold is going up slowly for a long, long time. This company is a marginal cost producer, with high debt. It should become immensely profitable and cash rich. Despite the crooked efforts of the old management team this is an attractive investment. We have to navigate the route to least pain/dilution for the ordinary shareholder. I am open at the moment, I want to see what UCG or a decent BOD have to offer.
Updownflat
Your quote from page 71 describes something very much like a scrip dividend, where the share entitlement of the bondholder is increased by each dividend. This would seem to be directly contradicted by Kenj's quote from page 38 "... Bonds will not have any voting rights, any right to receive dividends or other distributions or any other rights with respect to the Ordinary Shares until such time, if any, as Conversion Rights are exercised ...".
My guess is page 38 is a piece of boilerplate left over from the previous CB issue which they forgot to take out when they were cooking up their special 2019 treat. Grounds for a challenge, nonetheless, if the company ever pay a dividend and anyone could be bothered.
Yes, so basically ever time POG pays a dividend it’s like a free rights issue for the convertible bondholders. That’s why crooked Roderick and Prosperity was so keen to encourage it.
Workingstiff,
As I said in an earlier post, it is not that unusual for Company's to insert such clauses. It is to cover for unforeseen circumstances.
UpDownFlat,
You are right any dividend paid affects the conversion price for the bondholders. By how much, I have no idea, the formula shown is double dutch to me.
So in summary, the bondholders do not receive any dividends, but the conversion price will no doubt be reduced if a divi is paid.
i.e. more shares
I would value another opinion, on the surface, it seems that although they don’t directly get a dividend the get it knocked off the conversion price.
If and whenever the Issuer shall declare, announce, make or pay any Dividend to Shareholders, the Exchange Price shall be adjusted by multiplying the Exchange Price in force immediately prior to the Effective Date by the following fraction:A-B/A
Have a look at page 71. From my reading the exchange price of 0.135 is adjusted down by the value of the dividend
Kenj
"... that is exactly what I am saying."
Do you have a view as to what resolution 19 was for?
UpDownFlat,
This is from p38 of the CB document.
"Holders of the Bonds will not be holders of the Ordinary Shares. Holders of the Bonds will not have any voting rights, any right to receive dividends or other distributions or any other rights with respect to the Ordinary Shares until such time, if any, as Conversion Rights are exercised and (to the extent applicable) such holder becomes registered as the holder of the Ordinary Shares."
So it appears the bondholders would not get any dividends.
effectively I think they own 22% of the equity and 22% of the bonds(Which are 1/3) of the equity
In any one of the RNS items when they cross a threashold they break it down into two columns Equity and other financial instruments and give a percentage of voting rights of each.
Kenj, yes maybe they are not voting rights at the moment, but I thought they kept their stake just under 29% - 22% in equity and the rest in convertable. Ravishenko also had this but these were the old convertables no the super-duper new ones.
UpDownFlat,
I don't know which RNS you are referring to. I know little about Financial Instruments, but what I do know is that any voting rights attributed to Convertible Bonds is purely imaginary until the bonds have been converted.
Rusty,
kenj can confirm this but when I read the document it says they are entitled to dividends. One of the new additional items they got.
Kenj, I appreciate what you are saying, I will add something else to the mix, as I don't know the answer. What if the company decides to pay dividends. My understanding is that convertibles would not be entitled to the dividends as they are not shares.
So could a possible incentive for them to convert, be to pay some of the interest upfront, then pay a dividend. Now I know thats not like interest, but it has tax advantages, AND, they would be converting at a low rate ( i,e 13p or so ) the dividend yield for them would be higher. Just a thought, Especially as it has been mooted that they are considering a dividend and the company, should, be in a much healthier position soon.
"Are you saying you don't think it will happen early?"
Workingstiff, that is exactly what I am saying.
The bondholders are due to earn 8.25% interest for the next four years, a total of $41.25m.
Interest rates anywhere near 8% are a thing of the past, unless the borrower is high risk. The International Banks are currently offering bonds at negative interest rates. Collecting 8.25% PA interest for lending to a successful FTSE 250 gold miner is a really good deal, and unlikely to be matched.
Ask yourself this: if you were a bondholder guaranteed 8.25% interest for the next 4 years, and then the option to convert into shares costing around 13p, would you convert early?
Then consider that this idea has supposedly come from the Russia Prosperity Fund, who explained all of this to a poster who has popped out of nowhere. I do not know whether Mdunside is genuine or a fake, but I retain a level of scepticism and caution with any poster making unsupported claims.
I though UCG owned about 8% of the convertable bonds ? Isnt that thier other voting instruments on the RNS
Kenj
Legal - maybe / maybe not.
Fear - or prudence. 2024 is a long way out. Who knows where the share price / gold price will be then. Nothing wrong with taking a profit. A lot of successful investors leave something on the table.
Conversion - I am not clear what you are saying about this. Are you saying you don't think it will happen early?
Workingstiff,
I do not believe that any legal challenge is likely regarding the issue or terms of the CB's. Fear though, might make them convert early - the fear of the sp falling significantly.
Consequently, I would be very worried if the CB holders asked to convert before 2024.
Davidthe Grim,
The bonds cannot be called in early by POG, only at the election of the bondholders.
Secondly, we do not know who holds the bonds. Perhaps UGC are major bondholders.
So I take it this is what UGC are against as if the convertibles are called before maturity UGC's hold on POG decreases dramatically to bellow half of what it is today, giving less influence on future decision making.....
But who holds the bonds?
Kenj - that is a very good question.
If the contact from Prosperity is right I can only think that Pav has got them to agree to convert early. Perhaps they fear some legal challenge, as the bonds were issued without any reference to shareholders. It would also provide Pav with an extra 800m (or however many it is) friendly votes. Useful to him, given the current strength of his enemies.
Workingstiff & UpDownFlat,
Talk of redeeming the Convertible Bonds early, is all very well, but please explain how this might happen?
As far as I can see there is no clause or option in the CB contract whereby POG can enforce conversion early. The bondholders can continue to earn 8.25% for the next 4 years and then elect to convert their bonds to shares, probably at a much higher sp than today. So why in hell would they wish to convert now?
The post from Mdunside re: his chat with the Russia Prosperity Fund makes the same bland suggestion, and talks of some "green leaf". The interest still due on this bond amounts to $41.25m, so that green leaf will need to be very enticing indeed!
"3) About Article 19 of the AGM - the reasons for this were yes to redeem the bond early i.e. to be able to offer the convertible bondholders to convert into equity as 8% is too hefty a burden interest wise and they could offer some green leaf to bond holders to convert earlier in a deeply "in the money"
I like you workingstiff, I agree with you conversion must happen. What’s done is done. Just find it very unpalatable to be a fanboy