RE: Gina's $50m +CBs...hedged..but by who?28 Aug 2019 13:23
Now then Cranleigh.
I was hoping you would have found the bits yourself by now that have led me to that conclusion. From me 'FMU' is not code for 'I have privileged information' (as perhaps some may use it in the hope others infer so), it's purely a conclusion of mine from free available information/evidense. With conclusions from such for me 'between the lines' is as important if not more so than the 'lines' themselves.
The 'bits'.
Prospectus on what has been recognized in the accounting, in particular the embedded derivative associated with the Equity Purchase Price, p216/7:
"4.3 Net Finance Income /(Costs)
For the year ended 31 December 2018, the Company had net finance income of £10.7 million. This represents a change of £66.0 million when compared to net finance costs for the year ended 31 December 2017 of £55.3 million. The movement was primarily due to fair valuation movements in the embedded derivative associated with the Existing Convertible Bonds and the embedded derivative associated with the Equity Purchase Price. Due to the fall in the Ordinary Share price and the traded price of the Existing Convertible Bonds, which is correlated with the Ordinary Share price, over the course of 2018, a gain of £9.6 million was reported on the fair value remeasurement of these derivatives in the year, compared to a large expense in 2017 of £53.6 million.
For the year ended 31 December 2017 ...The movement in net finance costs was primarily attributable to fair valuation losses on the remeasurement of the embedded derivative associated with the Existing Convertible Bonds and the embedded derivative in relation to the Equity Purchase Price."
From this I conclude that Sirius hold real derivative positions, not accounting expedients and not to do with the $250m cash royalty, but in particular re this as the co say "in relation to the [Gina, $50m] Equity Purchase Price." Also that they have decided to book the value changes in the YE accounts from those positions even though they have not been crystallized into actual cash P&L. For this derivative re the EPP to show the P&Ls reported I conclude it can only be a short on Sirius stock.
Why do they have this derivative? Shorting for gain for the co I dismiss as implausible, so I conclude it is a hedge. A hedge to cover a potential future bill. From whom? I see that as obvious........but not disclosed by the co...so far.
Perhaps it will come out with the detail of what will be agreed within the RCF condition, P36:
"..(iii) entry into intercreditor arrangements, including an intercreditor
agreement with Hanc....,"
To me since when it comes to who is top dog re SM & GR, Fraser has the sawdust in his eyes, so I would not be the slightest bit surprised she would be making sure she will not be out of pocket because of the fixed no of shares agreed from the $50m EPP and that since then SH base has been diluted to bu....ry. She didn't get rich by losing money.....I imagine.
ATB.
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