Arcan Resources Ltd ARNBF

one step at a time....

[teevee]

Here is my take:

Step 1. ARN moves forward with vote and is voted down, or the proposal vote is cancelled.  What happens? Business as usual until first debenture due.

Step 2. First series of debentures come due. Conversion is $9.00 and debenture holders won't convert. ARN doesn't have cash to redeem debentures but has the right to pay with shares, so ARN proposes conversion at market, but requires shareholder approval in addition to debenture holder approval. Large shareholders (LTS and CPG) vote it down as they would be faced with unacceptable dilution. What happens? It is most likely voluntary bankruptcy, forcing a sale of assets to first pay the bankers and then debenture holders. Under voluntary bankruptcy, ARN chooses the receiver and controls the asset sale process. In this case, the banks get their money, shareholders get zero, and debenture holders might get 50 cents on the dollar.    

I hope this helps explain why I believe acceptance of the current proposal is best for both shareholders and debenture holders. If shareholders and debenture holders don't co-operate, I believe they are both screwed. The only fly in the ointment is that CPG and LTS have 38% of the stock and may well vote in their own best interests. THE only faint hope is for a 3rd party to come with a better deal. CPG and LTS don't have to if they want to play the long game. Who elese might come to the table? The other big player at Swan Hills just today stated that if the right offer came along, they would sell, so it won't likely be them.

[skeksis]

Hi teevee, Can you clarify why you believe the corporation would need the approval of their stockholders to issue stock at 95% of the current market price to meet the debenture obligations at maturity? They certainly don't need permission from the shareholders to issue stock normally: the corporation is authorized to issue an unlimited number of shares, as stated on the bottom of page 24 of

[teevee]

The reason why shareholder approval would be needed to approve conversion of debenture at or near market price is because it would effectively mean a change in control. 

[skeksis]

OK, I tried to verify this with the TSX venture exchange requirements I could find on their site. So this document says shareholder approval is required if a debt for shares exchange creates a new Control Person: https://www.tmx.com/en/pdf/Policy4-3.pdf And a Control Person is defined here as a >20% owner of the stock: https://www.tmx.com/en/pdf/Policy1-1.pdf So it seems like the debenture

[teevee]

It may all be moot as CPG and LTS must have about 19% each of the shares. The ball is entirely in their court to either vote in favor (not likely), or vote down the proposal (most likely), or  to make a better offer (least likely).....as far as I can see, individual share holders and individual debenture holders would be crazy to vote against the proposal as the risk would then tilt towards

[seriousinvest]

Yur step 2 is totally incorrect.  NO shareholder vote is required in order for the company to repay the debentures using common stock valued at 95% of the then current market.  Why do you keep posting misinformation? You clearly desperately want this deal to go through but it won't until it is changed and more of the consideration is given to the debenture hodlers and less to the

[rad10]

+1 Tx serious invest - it is good that this rebuttal comes from multiple sources.