Brother, can you spare a dime?

French supermajor Total has issued an interesting press release:

Total is raising approximately $1.2 billion of new debt financing through a structure combining the issue of non-dilutive cash-settled convertible bonds with the purchase of cash-settled call options to hedge Total’s exposure to the exercise of the conversion rights under the bonds.

Why does Total need to borrow $1.2bn?

Total intends to use the net proceeds of the issuance of the bonds for general corporate purposes.

General corporate purposes, eh?  Would that include paying salaries?

“You pay da vig, or it’s your kneecaps.  Capiche?”


3 Responses to Brother, can you spare a dime?

  1. Graeme says:

    Oh boy, as a rule of thumb, when a company goes in for this level of complexity, apparently assuring shareholders that no dilution will possibly occur….sell up and head for the hills.

    • Jake Barnes says:

      I confess, I read that passage several times before giving up none the wiser. I’m no finance guy, but even I could see this was an incredibly convoluted way of borrowing an awful lot of money to cover what looks like ongoing expenditures.

  2. Graeme says:

    Well it looks as if they want more money but don’t wan’t to risk having to do a share for debtt issue when they run out of cash, thereby ruining their debt-equity ratio. The only people who benefit are the advisors and financial institutions. In other words, they will run out of cash and know they will have to turn debt into equity but want a chance to hedge it.

    You never know. It might work out fine.