Thursday, May 15, 2014

IBI Group Management Tries To Put One Over On Debt Holders

IBI Group's (OTCPK:OTCPK:IBIBF) 2014 debentures are due on December 31st of this year. But rather than pay them off, the company is asking debt holders for a five-year extension. To ratify the extension, the company needs 2/3's of debt holders to agree to the company's offer.

One might think that in order to secure such an extension, the company might offer superior terms (e.g. a higher interest rate); but no, the other terms offered by the company remain exactly the same.

So what is the company offering these debt holders? A proposal right out of the prisoner's dilemma handbook: a "consent fee" payment of 7 cents per dollar of par only for those who vote "yes". This egregious manner of garnering votes is unfortunately somehow legal, and the company is using this method to try to extract a deal from debenture holders that is wholly unfair. Read more...


Frank said...

Hi Saj,

Looks like a majority of debenture holders agreed with you and a follow-up offer has been tabled rather quickly.

What is your opinion of the new offer(s)?

It seems that debenture holders are still being asked to shoulder most of the company risk.

Can the debentures be converted to shares at any time once they hit $5. What is the possibility of that happening?



Saj Karsan said...

Hi Frank,

Obviously I'm much happier with the new offer. I believe they can be converted at any time, but your guess is as good as mine as to when the shares would hit $5. I plan to write up my thoughts on the new offer soon.