Background
In November 2021 Global Masters Fund (GFL) issued $10.0 million in convertible notes (GFL Notes). The GFL Notes were issued to increase the overall size of the investment portfolio without diluting existing GFL Shareholders. The proceeds of the Notes have been used to expand the portfolio, providing greater exposure to global high-quality growth businesses, leveraging the success of the existing active portfolio and utilising the same investment philosophy. The convertible notes paid interest at 5.5% pa which stepped up to 6.5% pa on 23 November 2024 due to the movement of the Bank Bill Swap rate.
Conversion
With the GFL Notes now eligible for conversion, investors in the notes have a timely opportunity to evaluate the benefits of transitioning this debt instrument into equity. This article explains the mechanics, strategic implications, and steps involved in converting these notes, aligning with the long-term growth vision shared in our earlier communications.
Mechanics of Conversion
Convertible notes are hybrid instruments that initially function as debt but can be converted to equity at the investors discretion any time after 23 November 2023 and up until 10 days before the maturity date or in accordance with the GFL Note terms.
The GFL Notes convert to GFL Ordinary Shares on a 1:1 ratio.
Implications for Investors
Equity Upside Potential
By converting notes to equity positions investors benefit directly from future appreciation in GFL’s share price. The GFL Notes were issued at $3.10 per note, and while they can be traded directly on the ASX, the market for Ordinary Shares is generally more liquid. The Share price of ordinary shares at close on 31 January 2025 was $3.76 representing 21.3% uplift on the cost of the GFL Notes.
Forfeiting Yield
By converting to Ordinary shares, the Note holder is no longer entitled to the interest coupon. Interest is paid quarterly on the GFL Notes whereas GFL does not pay dividends on Ordinary shares as the primary investment in Berkshire Hathaway does not yield a cash dividend.
How to Proceed with Conversion
- Download the attached conversion notice form.
- Complete the form and return it to equiries@boardroomlimited.com.au or info@globalmastersfund.com.au along with a copy of your holding statement
- A Welcome letter is sent for new Ordinary Share holdings and a CHESS holding statement will be sent for CHESS accounts.
Conclusion
The GFL Convertible Notes represent a strategic tool to provide investors with a fixed interest yield and the possibility to benefit from the appreciation in the price of GFL ordinary shares. The transition of GFL Noteholders from creditors to shareholders provides GFL with the benefits of growing our investor base and the size and scale of our investment portfolio, aligning with GFL’s long term strategic trajectory. There has already been interest from investors acting to capitalise on the current market position.
By converting now, you join a cohort of long-term shareholders positioned to benefit from disciplined capital allocation and global market opportunities—principles that have guided our strategy since inception.
If investors have any questions about the GFL Notes please contact us at info@globalmastersfund.com.au
