Is this a new product? No, not really. It is a simple variant of convertible bonds, that is called in France, the ocean (see our previous post http://investmentbankerparis.blogspot.com/2010/11/vive-les-emissions dobligations.html-) which is currently a very popular product investors lack of emissions. emissions of the Convertible Bonds have been made in recent months, two property companies (Silic and GECINA) and, more recently, LE NOBLE AGE, a small listed company Homes (nursing homes).
ORNANE means "Bonds redeemable in cash and / or Existing Shares and / or created. The acronym and the title somewhat pompous, and indeed quite daunting for the investor-covers, in fact, a convertible bonds (CBs), with an option given to the issuer to repay the bonds when they conversion or in shares (Which is the normal rule for convertible bonds) or, in part, in cash, to reduce shareholder dilution.
This option is not, frankly, a complete novation because it had already been introduced in oceans of type "swap".
In ORNANE recently issued the option was, in fact, specified as follows, in case of request for conversion of OC:
-either a refund in shares of OC, which is the normal rule is
- settlement in cash the par value of OC and the balance in shares
To illustrate this branch of the option, say the issuer has issued an SO to 125 while its share price was 100 (premium of 25%) and that it is 150 at the time of application for conversion: the transmitter can then repay 125 (the nominal OC) in cash and the remaining 25 (150-125) in shares.
shareholder dilution and may vary between 25 and 150, is from 1 to 7 after the option is exercised or not.
interest, obviously, such an option is to reduce the dilution, in time, for a refund in cash. Note that the values for liquids such results can be obtained by repurchases shares and / or surrender of existing shares. This option is not harmful for institutional investors in OC because generally they do not want or can not hold the shares and prefer to sell rather than the OC conversion, which is financially equivalent.
Using this option, LE NOBLE AGE, which has a market capitalization of EUR 130 million, issued a EUR 65 million Convertible Bonds, which is substantial, in relative value, and highly likely to dilute existing shareholders. Le Noble Age has certainly been hoping to play at maturity, the option of a cash refund This led him to issue a large, relative to its market capitalization, but ensuring a minimum liquidity to this line of OC for investors (50 million euros is a minimorum, EUR 100 million is better).
If we are convinced that long-standing interest in this refund option in cash, we're not fans of the presentation and structure ORNANE.
The Convertible Bonds is a structure, yet remained confidential, and that, therefore, tends to elicit from the outset because of his "cloak" of perplexity and distrust on the part of investors , shy away from innovation, since the crisis subprime.Il enough yet to say that it is a convertible bond with an option of repayment in cash, and would be both simpler and more enlightening.
Moreover, the option to cash refund can be modulated to gain a more flexible by the issuer when it binary - all or nothing - in the structure ORNANE: either cash refund of the full nominal issuance (65 million euros in the broadcast outlet for example) or return "normal" actions.
must beware of "ornans" and a temptation to innovation for innovation, out of season, not forgetting, already an important lesson from the subprime crisis: the simplicity of presentation and understanding. This is particularly important with regard to market operations. That's why a more simple and more illuminating would be welcome.
View features of the Convertible Bonds Le Noble Age related:
http://www.obliginfos.fr/2011/02/17/admission-des-orane-le-noble-age-2016-ornane-fr0004170017 -fr0011005446 /
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