Aberdeen Asian Smaller Cos offer?

[stevensfo]

I have just received a notification about Aberdeen Asian Smaller Companies IT (AAS):

Shareholders now have the opportunity to subscribe for GBP1 nominal of Aberdeen Asian Smaller Co Inv Tst 2.25% Conv Uns Ln Stk 31/05/2025 for every 1 basic subscription share held at a call price of GBP 1.00.

There appear to be two offers: Basic and Excess.

So is this just an offer for bonds paying 2.25% till 2025, or am I missing something?


Steve

[BBLSP1]

Yes, that is how I read it, but they do like to dress these things up in complex language!

On two occasions per year you can elect to convert these 'CULS' to AAS shares. It is not at all clear to me whether that would be a good deal or not, so I intend to default and not take this offer up by not responding.

From their RNS No. 9467K dated 16 April 2018:

Holders of 2025 CULS will be entitled to exercise their conversion rights twice annually throughout the life of the 2025 CULS, commencing 30 November 2018. The conversion price of the 2025 CULS, being the nominal amount of 2025 CULS required to convert into one ordinary share of 25p in the capital of the Company ("Ordinary Share"), will be set at a 20 per cent. premium to the Net Asset Value (fully diluted including income) ("NAV") per Ordinary Share shortly prior to the date of Admission rounded down to the nearest 5 pence.

[stevensfo]

Thanks for that!

being the nominal amount of 2025 CULS required to convert into one ordinary share of 25p in the capital of the Company ("Ordinary Share"), will be set at a 20 per cent. premium to the Net Asset Value

So, with AAS shares already at a discount of approx 13%, doesn't that mean I'd be paying more for the shares this way?

The 2.25% is ridiculous.

It's default for me as well.

Steve

[UncleEbenezer]

Yes, that is how I read it, but they do like to dress these things up in complex language!

On two occasions per year you can elect to convert these 'CULS' to AAS shares. It is not at all clear to me whether that would be a good deal or not, so I intend to default and not take this offer up by not responding.

At a wild guess, and without having read the details (I don't hold) ...

Presumably it starts to look like a Good Idea if the price of the ordinaries rises to make the conversion price look attractive? If it doesn't then you just have a modest coupon, but with lower risk/reward than the ords.

Wouldn't having a convertible share class tend to depress the ords? 'Cos if they perform well they get diluted by conversions, and if they perform poorly the convertibles work like debt to gear up the falls? That would explain why the price is a premium to $today, and why the ords should trade at a discount!

[syrio]

Personally, I'm not tempted to take up the offer.

Maybe the option of converting could pay off I suppose. Options are always valuable in some ways. You get a 2.25% income and the option to convert if the share price does well. Could end up being a good deal, but it would only be a relatively small amount of my portfolio anyway and probably not worth my time trying to understand the offer, and then having to remember to track the share price to work out if I should convert.

[ADrunkenMarcus]

I'm not taking it up, although I do hold the equity.

Leaving aside the bonds, I guess people will need to judge the likelihood of the equity trading at a substantial premium which might warrant conversion. Aberdeen Asian Smaller Companies has, historically, been a steller performer but it's come off the boil a bit lately. I don't have the 'discount' (share price vs. net asset value per share) figures to hand.

Best wishes

Mark.

[BasketCase]

I’m going to go for it on the basis that (hopefully):
- modest yield (but better than cash) and get money back if don’t convert (as long as doesn’t fail)
- option on there being strong performance over coming years (as can then convert)
- works for my portfolio as am low on fixed income and high on cash so see this as a defensive play with potential upside
Did it with F&C Smaller Companies and that has worked well so far. Getting yield still but options in the money so will convert at the last possible time if conversion price below share price.
Agree income not great though!