Hello dalesio_98 - thanks for the explanations.

 

I will try to bring further clarification:

 

If I understand correctly, each $1,000 block of debentures can be converted in all time (until Dec. 2017) into 286 Orbite shares. Of course the debenture holder would normally not convert into shares if share price is lower than $3.50 (used to determine the quantity of shares he is entitled to obtain from the conversion), and rather get paid in cash at the Maturity Date (13 Dec. 2017). The yield from the debentures also has to be taken into account (this $3.50 will increase over time at an 8% yearly rate, paid quarterly).

 

So the debenture holder pays $1,000 upfront (that goes readily into Orbite coffers minus some fees like you mentioned), then Orbite has to pay the debenture holder 8% per year on a quarterly basis as long as not converted into shares.  Then, the holder can:

1- either keep the debentures until Maturity Date (Dec 13, 2017), and get the interests throughout the entire holding period (paid every 3 month), and the capital (paid back by Orbite in cash at Maturity Date);

2- or convert each of his $1,000 debentures into 286 Orbite shares, and get interests for only the period during which the debentures were held prior to conversion.  Orbite does not receive any money from the conversion but won't have to reimburse corresponding capital in cash (holder paid in shares).

 

So, we can expect a maximum of 7,142,857 shares to be issued from the debenture conversion.

 

Bottom line :

Deal looks good. Win-Win-Loose (ORT-Longs-Shorts)

  • The debentures conversion will most probably start in the $4+ range - very soon, allowing Orbite Aluminae to pay minimum interests and capital; great incentive for Orbite to deliver (although they are already fully motivated).
  • Dilution is fully/mostly offset by Cash increase.
  • Euro Pacific Canada, Roth Capital Partners, and Mackie Research Capital Corporation united together showing strong vote of confidence for Orbite @ min. “suggested” share price of $3.50
    • These companies did thorough & conservative Research Analysis
  • Only Common Shares are issued at debenture conversion; no Warrants.
  • Orbite clearly considered as a strong growth stock – absolutely not a good candidate for short selling…

 

It was mentioned on a previous post (from crestliner DEBENTURES) that the $25 M is already fully subscribed.

Numbers below are for $25,000,000 debentures at closing date:

 

  Debenture Conversion Price Max. number of shares issued from conversion Current number of shares Maximum dilution, if all converted into shares Max. Interests (if no conversion/no dilution) after 5 years  
   $                  3.50 7,142,857 181,332,876 3.9% $12,148,685  
             
             
  285.7 shares per $1,000 debenture      
             
             
  Added Capital     % cash increase    
   $        25,000,000   Market      
      Capitalization      
  Current share price  $                     2.82  $     511,358,710 4.9%    
  Conversion price  $                     3.50  $     634,665,066 3.9%    
  Higher share price  $                     4.00  $     725,331,504 3.4%    
             
             
  Yearly interest 8%        
  Quarterly interest 2% Q1 Q2 Q3 Q4
  Period 0 1 2 3 4
    December 13, 2012 March 13, 2013 June 13, 2013 September 13, 2013 December 13, 2013
   $       (25,000,000) $25,000,000 $25,500,000 $26,010,000 $26,530,200 $27,060,804
   $               (1,000) $1,000 $1,020 $1,040 $1,061 $1,082
Price above which share conversion is interesting $3.50 $3.57 $3.64 $3.71 $3.79
             
      Q1 Q2 Q3 Q4
      5 6 7 8
      March 13, 2014 June 13, 2014 September 13, 2014 December 13, 2014
      $27,602,020 $28,154,060 $28,717,142 $29,291,485
      $1,104 $1,126 $1,149 $1,172
      $3.86 $3.94 $4.02 $4.10
             
      Q1 Q2 Q3 Q4
      9 10 11 12
      March 13, 2015 June 13, 2015 September 13, 2015 December 13, 2015
      $29,877,314 $30,474,860 $31,084,358 $31,706,045
      $1,195 $1,219 $1,243 $1,268
      $4.18 $4.27 $4.35 $4.44
             
      Q1 Q2 Q3 Q4
      13 14 15 16
      March 13, 2016 June 13, 2016 September 13, 2016 December 13, 2016
      $32,340,166 $32,986,969 $33,646,708 $34,319,643
      $1,294 $1,319 $1,346 $1,373
      $4.53 $4.62 $4.71 $4.80
             
      Q1 Q2 Q3 Q4
      17 18 19 20
      March 13, 2017 June 13, 2017 September 13, 2017 December 13, 2017
      $35,006,035 $35,706,156 $36,420,279 $37,148,685
      $1,400 $1,428 $1,457 $1,486
      $4.90 $5.00 $5.10 $5.20

 

Good reading on this topic:

http://www.ehow.com/info_8224863_convertible-debentures-guidelines.html

 

Hope this helps.

 

Alumina1

 

 

IMO, think of the guaranteed convertible debenture as a guaranteed investment certifcate (GIC) for example, both will pay a fixed interest rate. The funds received through the debenture offering ($20M + an over-allotment of $5M) will go to Orbite coffers, less any fees for Euro Pacific Canada, Mackie Research Capital Corporation and Roth Capital Partners LLC.

 

In the case of Orbite's convertible debentures, they bear interest at a rate of 8% per annum paid quarterly, furthermore what differentiates the debenture from the GIC example, is the fact that a retail shareholder or otherwise can convert the debenture to shares at $3.50 within the 5 years prior to the expiry date (term) which will be December 13, 2017. One can hold till term, collect the 8% interest over the 5 years or convert to shares at any point at $3.50 regardless what the current share price is at that moment, clearly it must be over $3.50 or one would not convert.

 

I hope my explanation helps, kindly correct me if I am wrong.

 

Good luck to all,

dalesio_98

 

PS. As for the warrant question, as per the Q2 2012 financial docs, there are warrants at $3.20 and at $4.50.

 

------------------------------------------------------

 

I thought that the possible conversion of of the debantures to $3.50 shares

would ad 25 million to their coffers. Correct me if I'm mistaken. Thanks