Eastmaque sets conversion period allowing 30 days

The board of directors of Eastmaque Gold Mines (TSE) has set the 30-day special conversion period for the company’s convertible preferred shares to begin on Nov. 19. The special conversion allows convertible preferred series A holders to convert their shares into common equity on the basis of 1.2 common shares per preferred. The conversion terms for the preferred shares will return to their stated level of 0.833 common shares per preferred after the 30 days.

The preferreds have a par value of $3.75, carry a cumulative dividend of 30 cents per year, and are retractable at $3.75 plus accrued dividends on Sept. 15, 1993. As of Jan. 1, 1991, the preferred shares will have a cumulative dividend of $1.28.

Given the present trading level of Eastmaque’s common shares at about 65 cents, the conversion would not only be worth less than the par value, but less than the present accrued dividends.

If no dividends are paid over the life of the preferred shares and holders force redemption, the cumulative total of par value plus accrued dividends will have reached about $5.84 per share.

Ventures Trident II, a limited partnership which holds positions in a number of mining companies, had previously indicated that it would convert its preferred shares under the special conversion. Ventures owns just over one million preferred shares, or about 36.5% of those outstanding, in addition to about 1.5 million common shares (14.2%).

Paul Bailly, president of Fulcrum Management which is the partnership’s manager, said the circumstances have changed since the conversion rate was set, and the final decision to convert has not been made by the board.

Since the conversion rate was set, Eastmaque’s common stock has dropped from the $1.70 level to the 65 cents level.