Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Possibility one: to me, the first ‘leg’ seems too heavily weighted for that to be the case. But I do see your point.
Possibility two: we have seen from the two RNSs that these equity swaps can be altered; ‘leg 2’ has been significantly reduced. If that date was no longer relevant perhaps some of the impetus (circa 50% of the entire swap) would have been taken off it?
Wwguk, great explanation of Citi’s position. And an interesting perspective on why the counterparty don’t just buy the shares... perhaps they don’t have the funds at hand because they are commited to buying a chunk of the bonds? Best of both world’s in this case for them.
On another note, which makes me feel there may be a little more to this, is that if there’s no news by 3rd Sept -and as you say, there will probably have been little movement in price.... but may about to be- there seems little point in this leg of the swap, as it basically just cancels itself out, and it’s almost 50% of the entire swap! What’s in it then for the counterparty trying to capitalise on SXX SP gains, they’re just handing Citi the interest payment are they not? This just gives me an inkling that something might have already happened by then.
Didn’t Fraser say in an article somewhere that it’s now just a case of good execution. Perhaps there won’t be a whole 3 day process of pricing and placement, perhaps it’s all ready to go, just a case of signing on the dotted line. They could go quick.
All in all, I think I’m right in believing that ‘someone’ is betting c8.5m on the bonds going, as if they don’t they owe it all to Citi. That’s some bet. Who at this stage is that confident, besides ‘someone’ who knows they can get them gone?
AIMO
Just pondering...
ATB
Ultimately then, none of this is really about Citi- they stand to lose or gain nothing in the short term (apart from agreed % interest from counterparty). This is so so sooo much more about the mysterious counterparty who are betting the value of 46m shares that the bonds are gone by Sept 3. But what’s in it for them, why not just buy the shares? Ahh, maybe because after the bond sale they would have 46m shares to dump in order to realise their profits... too much work? Perhaps this is a route to quicker/easier profits?
But then we have another dilemma, if this counterparty seems so sure that the bonds will go and the SP will rise, why would Citi so willingly give them their profits from the equity they already own... for a measly (let’s call it 6%)?
UNLESS....... this said counterparty is instrumental to whether bonds go or not?
So a hypothetical agreement (to try and get some kind of possible understanding of what’s going on) might be...
Counterparty to Citi- ‘you can have the long term appreciation that completion of st.2 financing delivers, that incidently we can ensure happens, we just want the profits from the initial spike such news will inevitably cause.. without the exposure. It’s the least we deserve for taking these bonds!’
This is of course all my opinion and my way of trying to make sense of the recent RNS. Any further thoughts welcome. Would this hypothetical scenario constitute ‘insider dealing’?
Oh, and this is all before we even get started on the ‘Exchangable Bonds’!!!!
ATB
WW... how do you know whether Citi are in the long or short position of the swap?
Also some adjustments to the previously existing equity swaps
Decreasing! 35m outright sold down to 6m- 6m loaned out with right to recall.
One small equity swap added at 600,000
And 10m and 12m added to the exchangable bonds.
A rejig and 5% down to 4.88%.
Loaned out are they not? 6m added to the right to recall list?
Could be to do with STDC/Redcar Mudstone.
If SM are not selling it to them perhaps providing it under any other circumstances or agreement, is not written in the companies original objectives (2003), though these objectives cover almost every avenue, perhaps this was one not anticipated- therefore, it’s an arbitary case of just adding it to the list to avoid any wrongdoing.
Just my thoughts based on what I’ve read/understand.
Thanks for the warm welcome GK.
Been a long term reader here, some great insight on offer.
I tend to agree with your sentiments on the sp- don’t see it skyrocketing even if bonds do get away favourably.
ATB
But what would you consider the more astute investor’s average price to be given the developments of St.2 financing?
Will it be disclosed who the ‘owners’ of the shares in the equity swap are?
Pure speculation but just wondering if this all bears any significance to the recent short position that Blackrock took up... aren’t they significant holders?
If so, the upcoming volatility (before possible bond sale?) that Citi are alledgedly avoiding through the equity swap could be taken advantage of by current share owners, could it not?
Scenario:
-Share price down in run up to bond sale (pre 3rd sept equity swap maturity) close short at a profit...
-equity swap matures after bond sale, sp up, pay Citi the difference out of short profit, share price increase value duly maintained +addition % interest as part of Equity swap?
Possible or not?
Like everyone, just trying to get my head around all this..
1. 35m shares bought - new purchase
2. Equity swap c100m shares, new agreement presumably- designed to increase exposure... if sp goes up by expiration SM pay agreed amount of shares at price already exchanged (8p?) if they go down Citi pay difference minus an agreed % not disclosed.
3. C200m shares from Convertible bonds from uptake during st2.1 (presume these aren’t new due to being dated May19 and maturing 2027)
Tot 5% of sxx
Correct. Will become clearer in a day or two. RNS is always the first the market knows for sure about anything, the rest is speculation.
Before. Blackrock came in at .56% on Tuesday. Citidel increased a smidge (0.05%) yesterday.
No they are regarding the converible bonds offered alongside the open offer at beginning of st2 financing. We can deduce this as they mature 2027. An RNS was released only to say they were being offered... the next day another RNS was released confirming they had been placed, with no info on who they were taken up by... It appears Citigroup took a huge chunk of convertible bonds- and have now added c35m shares to this bringing their entire holding (on conversion) to 5% of the company. Talk about lack of Institutional Investment, only the 3rd biggest bank in America, with the biggest providing the sales of the bonds and the RCF. Bank of America major holding RNS tomorrow?
Blackrock hedging?
Convertible bond holding
35m shares acquired (0.5% sxx) to add to 4.5% already held through other financial instruments- presumably citigroup took a big chunk of the convertible bonds. That’s how I read it anyway.
FWIW
Jupiter last night announced they will be creating a new high yield bond fund- 75 bonds- 70% of which will be short term (up to 5 years). Remaining 30%(presumably longer term) could be making room to take up some of SM’s? Coincidence? Possibly, but one of SM’s biggest shareholders...