NGT Depositary Unitholders are entitled to receive $20.00 in cash for the zero coupon bond for each NGT Depositary Unit that such unitholder holds. In addition, based on ECA's agreement to acquire the perpetual net profits interest for approximately $5.9 million, each NGT Depositary Unitholder will receive approximately $0.95 in cash per NGT Depositary Unit at termination. NGT Depositary Unitholders tendering in the Offer will receive a number of ECT Common Units with a value (to be paid in ECT Common Units) of $22.55 per NGT Depositary Unit based on the 10-day volume weighted average trading price of ECT Common Units on the NYSE ending on the third day prior to the Settlement Date. For example, assuming ECT's volume weighted average trading price per unit for the 10-day period was $17.50, NGT Depositary Unitholders tendering 100 NGT Depositary Units would receive 128 ECT Common Units and a cash payment equal to the value of 0.857 ECT Common Units. The actual exchange ratio of ECT Common Units per NGT Depositary Unit will be determined three days prior to the Settlement Date. Any fractional units in ECT owed to NGT Depositary Unitholders will be paid in cash. The $22.55 per NGT Depositary Unit price offered by ECA reflects a 7.6% premium to $20.95 (the value of the zero coupon bond plus the per unit share of the proceeds attributable to the sale of the perpetual net profits interest), and, in establishing this price, ECA neither took into consideration any revenues attributable to the term net profits interest nor any costs and expenses or reserves of NGT through its liquidation.
NGT is terminating. There will be no 'NGT shares' to hold. The trust is about to dissolve.
Secondly, ECT cannot 'hold' NGT shares or anything else. ECT is a trust and cannot engage in any kind fo business activity other than collecting royalties and distributing them to trust unitholders.
It is the parent of ECT - Energy Corporation of America, who apparently must also be the parent of the NGT trust which is offering to exchange its units of ECT in exchange for NGT units rather than making a cash payment at termination. NGT was an unusual situation in that every unit was backed by a $20 bond which is redeemed upon termination. Thus the $21 value represents a $20 bond redemption plus $1 payout for asset sale.
Keep in mind that the subordination period just ended so now there is nothing to stop ECA (meaning Energy Corporation of America, not Encana) selling their ECT units. I guess this proposal is a way of selling some of them without doing an offering.
Sorry should be NGT.
Almost 4mm shares will hit the market. The NGT holders are also owning it for the zero coupon bond, not the energy exposure (which is minimal at this late stage). The way I read it is that ECT has 13.2mm outstanding, but ECA owns only 476k,per there latest filing. That means they are going to dilute the existing shares outstanding. Shares outstanding for all classes is 17.6mm. Any thoughts?
It appears Bloomberg has shares outstanding wrong, shares outstanding is 17.6mm, so the main effect will be that locked up (subordinated) shares will be released in the exchange. No effect on valuations.