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Post by veritasfiliatemporis on Sept 20, 2024 7:20:00 GMT -5
A rate cut reduces the incentive for the bond holders to want the bonds converted.to cash or shares, because the delta shrinks between current interest rates and the 2.5% on the covertible bond debt. The conversion cost is approximately $299M. MNKD used approximately $30M cash (give or take) after the Sagard deal and last I saw had about $265M (I think), so eliminating the debt now would require some dilution. A rate cut also reduces MNKD’s interest income from the cash in the bank, and decreases the benefit of waiting for the debt to mature. I don’t think a half point is enough to drive a move for conversion, and the $6.77 or greater for 20 out of 30 days also hasn’t happened yet. I am curious to see the next SIR report. Maybe they prefer to use the money with trials... |
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Post by casualinvestor on Sept 20, 2024 8:16:37 GMT -5
A rate cut reduces the incentive for the bond holders to want the bonds converted.to cash or shares, because the delta shrinks between current interest rates and the 2.5% on the covertible bond debt. The conversion cost is approximately $299M. MNKD used approximately $30M cash (give or take) after the Sagard deal and last I saw had about $265M (I think), so eliminating the debt now would require some dilution. A rate cut also reduces MNKD’s interest income from the cash in the bank, and decreases the benefit of waiting for the debt to mature. I don’t think a half point is enough to drive a move for conversion, and the $6.77 or greater for 20 out of 30 days also hasn’t happened yet. I am curious to see the next SIR report. MNKD has been paying interest semi-annually already. If paying back in cash, why would they have to pay back more than the $230M? AFAIK the 130% conversion rate only applies to "converting to shares", not paying pack the cash. It would be a really raw deal if MNKD had to pay 2.5% interest and payback an extra 30% of the warrant amount too (or get kneecapped by Jimmy the Greek I assume) |
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Post by prcgorman2 on Sept 20, 2024 9:56:59 GMT -5
A rate cut reduces the incentive for the bond holders to want the bonds converted.to cash or shares, because the delta shrinks between current interest rates and the 2.5% on the covertible bond debt. The conversion cost is approximately $299M. MNKD used approximately $30M cash (give or take) after the Sagard deal and last I saw had about $265M (I think), so eliminating the debt now would require some dilution. A rate cut also reduces MNKD’s interest income from the cash in the bank, and decreases the benefit of waiting for the debt to mature. I don’t think a half point is enough to drive a move for conversion, and the $6.77 or greater for 20 out of 30 days also hasn’t happened yet. I am curious to see the next SIR report. MNKD has been paying interest semi-annually already. If paying back in cash, why would they have to pay back more than the $230M? AFAIK the 130% conversion rate only applies to "converting to shares", not paying pack the cash. It would be a really raw deal if MNKD had to pay 2.5% interest and payback an extra 30% of the warrant amount too (or get kneecapped by Jimmy the Greek I assume) I will admit to being too lazy to try to dig through the debt covenant information to search for details.
I based the $299M on 130% of $230M, but that might not have been the right way to calculate it. The reason I did that was I assumed the $230M was the amount of the initial private placement based on an initial $4.01 per share price. i.e., the bond holders gave MannKind $230M to spend however they liked and it wasn't the amount to pay back. I may misunderstand but we've been saying the bonds will convert at 130% of $4.01 which is the $5.21, so yes, the only way I interpret that is if the initial placement was $230M, then the conversion is $299M. And yes, that would mean 2.5% per annum, plus an additional 30%, and it staggers me that it wouldn't be considered usury, but I'm not a lawyer and don't know how usury is technically defined (but it might be fair to consider it more "toxic debt" at least?).
Would love to be wrong on how I've been looking at this, so please correct me where I'm going wrong if I'm missing something obvious.
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Post by cretin11 on Sept 20, 2024 10:45:23 GMT -5
Not sure if your "usury" comment is serious or not. But usury laws vary widely state by state. The lender's state is the one that applies, so most such entities domicile themselves accordingly. Usury laws are primarily aimed at protecting consumers. They can also apply to commercial loans, but there are many exceptions and ways around them. Safe to say usury not an issue here (if it were an issue, shame on MNKD for not knowing better).
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Post by ktim on Sept 20, 2024 13:58:59 GMT -5
The "toxic" debt that kept MNKD alive and lead to profitability?
MNKD was very high risk then.
It really isn't that big of deal. No one would consider MNKD's balance sheet to be toxic now.
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Post by prcgorman2 on Sept 20, 2024 14:15:35 GMT -5
The "toxic" debt that kept MNKD alive and lead to profitability? MNKD was very high risk then. It really isn't that big of deal. No one would consider MNKD's balance sheet to be toxic now. I agree that high risk is deserving of high reward, but man, 40% or 50% overall? Ouch. Couldn't have been fun signing that debt instrument, but yeah, takes money to make money. |
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Post by Thundersnow on Sept 21, 2024 11:01:05 GMT -5
The "toxic" debt that kept MNKD alive and lead to profitability? MNKD was very high risk then. It really isn't that big of deal. No one would consider MNKD's balance sheet to be toxic now. Some analysts think MNKD has a great balance sheet with NO DEBT. I guess they feel the Convertible Deal will be covered with shares and the 1% Royalty Deal is not a Loan. |
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