Change of interest rates n period

Hi guys,

Hope someone can enlighten me on this. I bought Aspial bond not too long ago and have recently received a letter from them asking me to vote (as a holder of the note) on changes of the bond they intend to implement. As it contains lots of jargon, what I could roughly gather is a proposal to change the coupon rate higher and extending the maturity period. My 1st qns is, is this normal of an issuer to propose such changes? What things should I note/consider when making my decision?

Thanks,
test

https://en.wikipedia.org/wiki/Debt_restructuring

(29-04-2013, 02:15 PM)test88 Wrote: Hi guys,

Hope someone can enlighten me on this. I bought Aspial bond not too long ago and have recently received a letter from them asking me to vote (as a holder of the note) on changes of the bond they intend to implement. As it contains lots of jargon, what I could roughly gather is a proposal to change the coupon rate higher and extending the maturity period. My 1st qns is, is this normal of an issuer to propose such changes? What things should I note/consider when making my decision?

Thanks,
test

it seems that under the mtn, there are predefined periods and each period has a gearing cap. i don't see anything about changing the maturity of the bonds though.

a) they are asking to increase the gearing limits (thus it prob means they have intention to borrow more, hence busting the previous limits)

b) they are raising the interest rates by 15-20bps.

since a) is obviously not you want (since more borrowing means more debt which increases the chance of default along with more number of debt claimants), they are compensating you with b)

since you are a bondholder, you have only one concern which is "is my principal and coupons safe"? i guess what you should ask is the reason why they want to borrow more, how they intend to use the proceeds and whether the step up in interest rates is enough to compensate for the increased risks (i.e. should they raise the rates more)

sidenote: i didn't realise aspial is so highly geared - a look at the balance sheets shows gearing 205% as of FY2012 and a -ve operating cashflow for the past 3 years!

(29-04-2013, 02:15 PM)test88 Wrote: Hi guys,

Hope someone can enlighten me on this. I bought Aspial bond not too long ago and have recently received a letter from them asking me to vote (as a holder of the note) on changes of the bond they intend to implement. As it contains lots of jargon, what I could roughly gather is a proposal to change the coupon rate higher and extending the maturity period. My 1st qns is, is this normal of an issuer to propose such changes? What things should I note/consider when making my decision?

Thanks,
test

go ahead and reject them... you have nothing to lose and much to gain since if they change their mind, they will try to entice you with much higher interest rate