Simla
I am between a rock and a hard place.
I have supported BLT from its inception, buying some of my holding at approximately 60cps, and I am now faced with the prospect of having to come up with well in excess of $10,000 to cover my share of the Rights Issue
The product ( K12) is very good, being benign, natural and effective, and logic would indicate that if bottled water can tempt a wide consumer base, something eminiantly more beneficial, should have a wider customer following than it presently commands. But in 9 years, that has yet to happen.
I am concerned. Underwriters normally claim a fee of 1.5% to 5%. Edinburgh Equity Nominee Limited are claiming from 5.1% ( page 13) to possibly 13.3% ( page 14) in the Simmons Appraisal Report in order to underwrite the issue. On the risk /return continuum, they must perceive their involvement to be so highly speculative that they need to be ( indecently?) compensated for the risk of their involvement.
I am concerned. the Preferential Shares offer a gross dividend of 10% per annum ( page12) but on page 16 the Simmons document refers to a situation where Preferential shares and dividends payable as "ordinary shares on conversion date" . This would seem to indicate that an annual dividend generation of 10% is tentative until conversion of the Preferential Shares in 2012.
I am concerned. In the worst case scenario, where we ( referred to as Non-associated Shareholders) fail to subscribe to the issuance, Edinburgh will effectively control 83.54% of the Company from its present 5.21% holding, effectively holding the position to buy all others out at a price that they would have power to manipulate in their favour, after May 2012.
The one ( minute) consoling note is that, if the Issue goes ahead, I would have until 2012 to cut my losses and sell up, hopefully at a price a little better than the price presently listed on NZX.
I will attend the meeting on 31 March with an open mind, but see no point in calling on the provisions of Sec.110 the Companies Act 1993 to have the Company buy my shares if I vote against the resolution.
I realise that the above comments are of little help to anyone ( including myself ) in reaching a decision on the Rights Issue, but merely my initial reaction after first reading of documents last evening. It is a tough call, as it will be for FPA and NPX holders in days to come. We are in completely new territory, with regard to the present credit squeeze. Do we cut our losses or bail out the company and hope for an upturn?
Apostle95