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Perpetual Energy Inc’s convertible debt holders won’t be joining the offering party

Perpetual is planning a rights offering designed to raise $25 million.

It’s a good deal for the issuer and its common shareholders but way less attractive for the company’s convertible debenture holders.

That’s the situation at Calgary-based Perpetual Energy Inc.,  which recently announced a number of recapitalization measures, all of which flowed from a decision on how to repay a $50 million maturing issue of seven per cent convertible debentures. Instead of paying the debenture holders in cash at year-end, Perpetual will offer shares, causing a massive flood of new shares onto the market.

The market has already reacted to the upcoming supply: the shares now trade at less than one-third of their value a month ago. The number of shares to be issued will be determined by 95 per cent of the 20-day “volume weighted average price from November 25 to December 22 inclusively.”

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