MskiHntr. ASctually, the best place to look at the three Convertibles instruments is in the most recent S-3. On page 4 you will find a description of "Participation" ($35 MM), the investors have the right to convert (for two years starting between Oct 1998 and March 1999) at the then market price their payment (the 35) increases by 15% per year. If HEC forces the conversion, they get a 25% interest per year.
Thyen on April 9, 1998, HEC issued another floorless of $15 MM (bearing 5% interest, this one goes to April 1999.
Then, on May 26, 1998, HEC issued $85 convertible debenture with a ceiling of $6.5/share, but it becomes floorless in 2002, and if the overall capitalization of HEC is less than $500 MM, then not only it is floorless, but instead of a 10% discount the floorless get a 15% discount.
These are all major time bombs. If you assume that HEC will not use all their funds and then buy back these floorless, then you are fine, but they are already spending $20 MM to buy back shares instead of the floorless, and my gut feeling is that they are buying 80,000 shares on the average per day, and possibly they are buying shares sold short to them by the bandits. Note how the price has been stuck solid in the 3.875 to 4 for the last two days.
Conspiracy? Not necessarily, but a defacto helping hand to the bandits? I think it is quite possible.
Zeev |
