Their numbers check out. The conversion price calculation is based on taking 97.5% of the average closing price of $0.382, then rounding down to the even share and paying the difference in cash.
Now, with the conversion price determined, note holders KNOW that if they tender ALL their notes the company will probably declare BK... and they will be left with the option of waiting for the company, AFTER declaring the BK, to increase the authorized to issue the extra shares in a now BK company... and they'll get the shares issued while the company is in BK, paying $0.37245 for each share in accordance with their properly submitted tender offer... and then they can try to sell them for whatever a share in a BK XJT would get in the open market.
There seems to be a misconception on the boards that if the company declares itself insolvent due to insufficient shares to make the payment on demand, that the terms that apply in the tender offer somehow won't apply in BK... and the note holders who tendered will be treated as debt holders rather than common share holders. NOT.
The trap for note holders in this arrangement is that once you've tendered, you've tendered... tough luck... and the BK isn't declared until after you are committed, which is necessary to generate the demand for payment which cannot be met. Then you proceed to getting what ever comes next without having any of the protections that would be afforded to you as a note holder in BK. That, and if you didn't tender your notes before the cut off date, your conversion shares will be considered subject to the anti-takeover provisions... which means the dilution you intended to gain by conversion at low prices just won't happen... as the terms of the offering specify the notes gain the benefit of any rights issued DURING the period in which the price is calculated... NOT AFTER. Once it is determined that the conversion constitutes a takeover attempt, the shareholder rights kick in... and those rights are issued only to common shareholders or record and those who tendered BEFORE the cut off date.
Looks to me like the company wins this all the way around... There aren't many note holders who are going to subject themselves to that kind of crap shoot on the off chance the company survives BK, while their holdings are considered as common shares without the same rights as others... so instead of note holders diluting others... they'll get vastly diluted themselves as holders of devalued common in BK.
There are backups that exist... in case note holders find a way to wiggle out of that series of traps. As is its discretion, the company, in BK or not, can simply determine that in fact the general conditions for the offer were not met... and they can terminate it. If they terminate the offer for reasons contained within the general conditions... then the note holders won't have made a claim... so there isn't a cause for BK... note holders are still debt holders... and the company comes up with another plan. They may simply decide "we tried" suffices, given the general conditions for an offer were not met, and punt until the next mandatory offering under the indenture, when, hopefully, the general conditions WILL be met.
Of course, I could be missing some minor nuance that matters... IANAL, IANAIA, etc., and, IF the note holders decide to tender some but not all, the results might vary.
It still seems to me they will need to be VERY careful not only to avoid demanding more shares than are now authorized to avoid the ugliness of BK... but ALSO still need to avoid a level of conversion that will make the anti-takeover provisions kick in.
That is the significance of the announcement of a date certain to avoid the anti-takeover provisions. "Some" notes will have been tendered before that date... which will avoid the provisions... and only the company and the note holders know how many were tendered by that date and WHO tendered them.
... so, the entire scheme to get more for less using conversion of debt to shares... taking shareholders value by dilution... with conversion at below market share prices that would give note holders more shares for less $$$ in note face value... seems roundly defeated.
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