Read a few posts up, I posted the covenants
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Doesn't seem to be "very clear where the banks are at", at all. Maybe Liz and Brent were lying (by omission) when they reported in the Sept'23 interim "The Directors have resolved not to pay an interim dividend to provide for ongoing investment in Oceania’s growth and portfolio transformation."
And, of the $500m Committed Bank Facilities, with $396m drawn, they were also telling porkies that "is compliant with all bank facility covenants".
With current debt at around $620M or 61% of equity, let's hope they don't need to utilize the additional $100M available to them.
80% I am sure would really start making the banks uncomfortable.
You better hope I am right on the property market ValueNZ so debt levels only go in one direction.
That 620M in debt isn't current it's due to be refinanced in 2028. Also not sure why debt levels would change if property doesn't rise...
A fall in property prices would however cause a change in equity so yeah theres some risk with the LVR covenant. But OCA isn't close to breaching that anyway.
OK, here are the details on the latest cash raising by OCA that I have got wind of, that will be announced to the market tomorrow.
1/ Latest reporting period being HY2024, as reported in November 2023 shows net assets of $1.017.3m on the balance sheet.
2/ On 6th December 2023 there were 724.155m OCA shares on issue.
3/ So NTA at the most recent balance date was $1,017.3m/724.155m = $1.40.
4/ At the end of business on 5th February 2024, the OCA share price closed at 70c.
5/ So the market was valuing OCA shares at half their asset backing: 70c/$1.40 = 1/2. Or put another way, the discount to asset backing was 50%.
6/ Now suppose on Wednesday 8th February 2024, OCA announced a 1:4 cash issue at a price of 60c.
7/ That would raise (724.255m/4) x $0.6 = $108,623m in new capital for the company,.
8/ The number of shares on issue once the capital raise was completed would rise to: 724.255m + (724.255m)/4 = 905.319m
9/ The net assets of the company would rise from $1,017.3m to $1,017.3m+$108.6m= $1,125.9m
10/ So the net asset backing of the company following the capital raise would fall to: $1,125m/905.318m = $1.24.
11/ Now let's say the company share price settles at say 65cps, after the capital raise is completed (this is an assumption albeit not an unrealistic one for the purposes of this example).
Now we have to consider what has happened from the point of view from the perspective of two different shareholders.
Shareholder A - The long termer: For every share they held prior to the capital raising, shares that the market valued at 70c, Shareholder A has to shell out an additional 15c to take up the 1:4 cash issue at 60c. (4x15c=60c). From a post capital raising perspective, they would have 5 shares for every 4 they used to own before the capital raise. But the price paid for the assets, as measured by asset backing, has increased from 50c in the dollar to 50c+15c = 65cps in the dollar for the same underlying assets (this is assuming the purpose of the cash issue was to pay down debt, not buy more assets). Note that 65c/$1.24= 52.4%. So 'Shareholder A' has had to lay out more cash to own the same assets which they previously owned before the capital raise.
Shareholder B - The opportunist: This shareholder, on hearing of the capital raising, buys OCA shares on the market at 65c after they fall from the 70c pre-capital raising announcement price. At the time these shares are bought by Shareholder B, they are trading at 65c/140 = 46% of asset backing. So in net asset backing terms, Shareholder B is already four percentage point ahead of Shareholder A, as they have bought those underlying assets for only 46c in the dollar, not 50c. After having taken up the 1:4 cash issue, Shareholder B has paid 46c+15c = 61cps in the dollar for the same underlying assets. Note that 61c/$1.24 = 49.2%. So 'Shareholder B' has also had to fork out more cash to own those same assets.
Conclusion
'Shareholder B' is better off, because they have only had to fork out 49.2c in the dollar overall to own OCA assets, whereas 'Shareholder A' has had to fork out 52.4c in the dollar to own those same assets. And how was it that Shareholder B became better off? Because some of the wealth that was in the company prior to the 'cash issue capital raising' ended up being transferred from 'Shareholder A' to 'Shareholder B'. This was a real transfer of wealth of 52.4c - 49.2c = 3.2cps from 'Shareholder A' to 'Shareholder B'. These are the numerical workings behind my comment in post 18467:
"Under a 'new capital raising scenario', existing shareholders (as represented by Shareholder A) will have their capital diluted more than shareholders who 'come on board' after a capital raising is announced (as represented by Shareholder B)."
SNOOPY