Correct me if I'm wrong, but if the debenture of $25 million is secured by the investment credits, now classified as a cash receivable of the like amount, wouldn't the investment credits when paid out by the government to Orbite, go into a trustee's account, and then be called on the books, a cash receivable from the trustee? The debenture has to be secured by funds from these credits.

If so, wouldn't the secured funds now in the hands of a trustee earn an interest to offset against the 8 percent cost of the debenture?

If the holders of the debenture exchange that paper for treasury shares, wouldn't the withheld funds be released by the trustee amounting to another $25 million for general corporate uses?

 

I think this is what several have been suggesting, that the debenture could mean twice the amount of cash available medium term: that is, the amount of the debenture now, then later, the released credits held as security if and when a conversion is done. The cost is the issue of treasury shares at $3.50 ea plus the 8 percent interest payments less the earned interest credits of the secured receivables when held as cash by a trustee, if any. Or, if the loan goes to maturity, maybe there's away to offset to a great extent the 8 percent interest on the loan by interest earned on the secured cash received under the credit arrangement.

 

The declared purpose of this debenture is to monetize the credit funds now classed as an Account Receivable for immediate corporate use. Because the security will eventually turn into an offsetting cash account earning interest, the net cost of this debenture should be considerably less than 8 percent held to maturity.

 

Accountants in the group, please cast out the nines, and tell me if this adds up.