Interesting Situation with SHNG Notes
Primer on my investment outlook
From a press release today,
In October 2004, Sherlock Bay Nickel issued 75 million Convertible Notes at a price of $0.20 per Note, earning interest at 12% pa and maturing on 1 September 2007. The Convertible Notes are listed on the ASX and, as at 28 July 2005,were trading (with minimal liquidity) at $0.10.
−There is currently no guarantee that the Project will proceed
−If the Project does proceed, there is uncertainty over the timing of its development and the commencement of project cash flows.
Given the uncertainty over the Project, the SBNC Board believes that it is prudent to refinance the Convertible Notes now.
On 1 August, cash per note is 9.3c. On 1 October cash per note is expected to be 6.7c per note.
At first glance, it looks like the existing noteholders are screwed. However, note a few things. SBNC does have fixed assets that will fetch a price - especially with this base metals bull market. I have averaged down my notes and now have them at a price of 13.9c per share. Clearly my gains will depend on the conversion terms on the noteholders meeting. I actually think that, if the notes fall to around 6c per share they are a terrific buy with a lot of value in them.
The notes are yielding 24% p.a. at a price of 0.20. They are priced for default, but this company has a substantial amount of cash and fixed assets. Clearly, the last management screwed up. However, I do believe that the company will avoid receivership and while the shares may not be beneficial, the notes will be of value...
At the moment I am holding my notes and waiting to see what happens!
From a press release today,
In October 2004, Sherlock Bay Nickel issued 75 million Convertible Notes at a price of $0.20 per Note, earning interest at 12% pa and maturing on 1 September 2007. The Convertible Notes are listed on the ASX and, as at 28 July 2005,were trading (with minimal liquidity) at $0.10.
−There is currently no guarantee that the Project will proceed
−If the Project does proceed, there is uncertainty over the timing of its development and the commencement of project cash flows.
Given the uncertainty over the Project, the SBNC Board believes that it is prudent to refinance the Convertible Notes now.
On 1 August, cash per note is 9.3c. On 1 October cash per note is expected to be 6.7c per note.
At first glance, it looks like the existing noteholders are screwed. However, note a few things. SBNC does have fixed assets that will fetch a price - especially with this base metals bull market. I have averaged down my notes and now have them at a price of 13.9c per share. Clearly my gains will depend on the conversion terms on the noteholders meeting. I actually think that, if the notes fall to around 6c per share they are a terrific buy with a lot of value in them.
The notes are yielding 24% p.a. at a price of 0.20. They are priced for default, but this company has a substantial amount of cash and fixed assets. Clearly, the last management screwed up. However, I do believe that the company will avoid receivership and while the shares may not be beneficial, the notes will be of value...
At the moment I am holding my notes and waiting to see what happens!
posted by anmol at 12:07 AM
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