Gran Colombia Gold announced some upcoming debt redemptions, including the following for (TSX: GCM.NT.U):
Currently, the aggregate principal amount of Gold Notes issued and outstanding is US$32,637,500. The next regularly scheduled Amortizing Payment of the Gold Notes, amounting to US$2,887,500, will take place on April 30, 2021, reducing the outstanding amount to US$29,750,000. The Amortizing Payment will include a Gold Premium, as applicable, based on the London P.M. Fix as of April 15, 2021.
Gran Colombia also announced today that pursuant to the Gold Notes Indenture, it will complete an early optional redemption on May 3, 2021 of an additional US$10,000,000, equivalent to approximately 33.6% of the aggregate principal amount of its Gold Notes outstanding, following the scheduled Amortizing Payment on April 30, 2021. In accordance with the Gold Notes Indenture, the early redemption price will be 104.13% of the aggregate principal amount of the Gold Notes being redeemed plus accrued interest.
Following the Amortizing Payment and the early optional redemption, there will be US$19,750,000 aggregate principal amount of Gold Notes issued and outstanding.
Full details of the cash amounts to be paid in connection with the Amortizing Payment and the early redemption will be announced on or about April 15, 2021.
I was expecting GCM to redeem the entire batch of notes in one shot. They have the cash to do it – about US$90 million at the end of 2020. These notes represent extremely expensive financing for the company – with an 8.25% coupon, coupled with a quarterly payment of 3-4% (this depends on the price of gold, but if it is around $1725 it will be in low double-digits annualized), the total cost of capital for the debt to the company is about 20%.
Surely they can obtain debt financing on better terms. Why aren’t they redeeming the entire slab of debt is beyond me.
Liquidity on the notes is also harder and harder to find – trading has been very light since February. After May 3rd, the notes will certainly trade closer to the call price due to the looming threat of being cheaply called out.
Unless the notes trade ridiculously high, I’m very happy to have them mature. It is nearly risk-free money at this point with only a question of whether the company will slowly redeem the residual value over the quarters.
This company is full of puzzling move that just doesn’t make sense. The cynic in me thinks this is done to benefit certain insiders who does hold a significant sum of this instrument.
The most oddball explanation I can think of is performance bonuses contingent upon GAAP earnings and debt leverage ratios, and they are amortizing the debt offering financing expenses in a targeted manner before some presumptive half-year end milestone. I am likely completely out to lunch with this speculation but it was fun to think about.
I guess we got the reason why today with the takeover of GoldX. Maybe they want to conserve some cash post merger.
Hi Sacha….how does one take part in this early optional redemption on May 3rd ? I have under $300 of gcm.nt.u in my account which I would prefer to get off the books.
The date is now May 11th because CDS can’t process the redemption so soon after the April 30th amortization. This was announced in the last quarterly report.
The process is automatic, but sadly I regret to inform you that you will still have less than a couple hundred bucks of GCM.NT.U left in your account after all is said and done. Unless if you want to surrender the notes to your broker, you’ll have to patiently wait until GCM calls it out (which rationally speaking they should be doing before the next gold payment on July 30th).
Thanks, maybe I’ll let TD have the notes, as they have done such a good job over the last 13 months. NOT.
Personally I can’t wait for the position to get cleared out myself, although the compensation for holding the residual value of the notes I won’t be arguing with!
Haven’t heard anything about these notes. Are they still out there? They’ll need to fork out at least another gold premium if not redeemed.
They have to give 30 days notice, so current holders will get a gold premium of about 320-350bps, which makes for very expensive financing on GCM’s part. Makes zero sense to be giving out a dividend when your next best capital allocation is to take out debt that is blowing an annualized cost of capital of somewhere around 20%… in absolute dollars it isn’t a huge amount but man, if I was a shareholder I’d be a bit pissed off as this is the equivalent of throwing money away.