Esterad Convertible Bond Offer Withdrawn

Further my earlier post, today Esterad announced on the BSE that it has withdrawn its Convertible Bond Offer due to "prevailing market conditions" and that BBK (the Collecting Bank) will return funds to those who did subscribe for the Offer.

As well, Esterad also announced that its ordinary general meeting of shareholders would be held on 30 March.  More importantly it disclosed that its Board had recommended against any cash distribution (dividends) for the fiscal year 2009.

That latter point is signficant, though not surprising.   

The company didn't pay dividends in 2008, a year in which it had a net loss of roughly BD 11 million (income statement) and a BD 14 million comprehensive loss.   For 2009, it had net loss of BD 3.8 million (income statement) and BD1 million in comprehensive loss.  The difference between net income or loss and comprehensive income is that comprehensive income  (or in this case loss) includes changes in equity, such as fair value changes,  that do not pass through the income statement.  

It should be noted that from at least 1975 through 2007, Esterad paid cash dividends each year with the latter years at a generous 45% distribution rate.

Esterad Rumored to Have Pulled Convertible Bond Issue

I heard that Esterad has announced that it is withdrawing its BD 7 million  (US$18.6 million) convertible bond offer and that the Collecting Bank (BBK)  will be returning subscription funds to investors.  I didn't see anything in the Bahraini press, though to be candid, I did not do an "e" - search. 

Earlier Esterad had extended the period for subscriptions saying that several institutional investors had asked for more time to complete due diligence.  At that time, I  took that to be a strong indication of less than robust demand.

There should be something in the press tomorrow (meaning Sunday's paper) or an announcement at the BSE so until then treat this as a market rumor.

Esterad Convertible Bond Offer Period Extended to 31 January

 

As per its announcement on the BSE today, Esterad has extended the offer period for its new convertible bond issue seven days (to 31 January) in response to a request by institutional investors for more time for due diligence.

Clearly, the issue is not flying off the shelves or Esterad would not be extending.  On a positive note, it's nice to see investors exercising a bit of due diligence before making a commitment.  Previous post here.

Esterad Bahrain Offers Convertible Bond

I thought that readers might find the transaction description of interest.  So here's the link.

The announcement provides a description of several of the requirements/features under Bahrain law:

1. Shareholder pre-emptive rights
2. Renunciation of those rights
3. Conversion mechanism (See comment below)
   

Regarding the conversion, you will notice it is at the option of the bondholder not the issuer.

And you will notice the strike price mechanism provides the buyer a bit of protection.  If the book price (and note that is not the same as the market price) goes below BD0.365 per share, the bondholder may convert at the book price.  Current trading range for the shares is around BD0.300 and the book value is close to the strike price.