Email to JayI sent an email yesterday afternoon.
Here is the bulk of what i sent;
``I have two main points about the two proposed transactions which were made public this month.
The first,
https://documentcentre.eycan.com/Pages/Main.aspx?SID=184 (as per the second bench brief filed on SEDAR on July 20th)
“19 Finally, in making orders under the CCAA, the court must never lose sight of the objectives of the legislation.
These were concisely summarized by the chambers judge and adopted by the British Columbia Court of
Appeal in Re Pacific National Lease Holding Corp. (1992), 15 C.B.R. (3d) 265 (B.C. C.A. [In Chambers]):
(1) The purpose of the CCAA is to allow an insolvent company a reasonable period of time to reorganize its
affairs and prepare and file a plan for its continued operation subject to the requisite approval of the creditors
and court.
(2) The CCAA is intended to serve not only the company's creditors but also a broad constituency which includes
the shareholders and employees.
(3) During the stay period, the Act is intended to prevent manoeuvres for positioning amongst the creditors
of the company.”
If this holds true, then the court should not allow the buyout while OPTI is under CCAA as this buyout may position creditors in a better position (arguable) but definitely puts shareholders in a less favourable position.
The second point;
As filed on SEDAR July 13th, the first debt equity swap transaction support agreement states;
“(c) Notwithstanding Sections 9(a) and (b), the Company shall not be prevented from
receiving any proposal for a refinancing, recapitalization or other extraordinary
transaction from a third party and negotiating such proposal with a third party if
the Board, on advice of its financial and legal advisors, determines that such
proposal would reasonably be expected to result in a transaction more favourable
to the Company and its stakeholders and no less favourable for the Noteholders
than the Recapitalization (including, without limitation, full payment in cash by
the Company of the aggregate amount of Debt in respect of the Notes) (a
"Superior Proposal"). In the event the Company receives any proposal from a
third party that the Board believes may constitute a Superior Proposal, it will
promptly notify the Noteholder Support Group of the terms thereof, including the
identity of the proposing party(ies). In the event that the Board, after consultation
with its financial and legal advisors, determines in good faith that it can no longer
support or recommend the Recapitalization, the Company shall promptly (in any
event no later than one (1) business day following such determination) so inform
the Noteholder Support Group (including as to the terms of any such proposal that
the Board has determined is a Superior Proposal) and the Initial Backstop Parties
shall have ten (10) business days to propose an alternative to the Superior
Proposal that is of comparable value to the Company and its stakeholders and no
less favourable for the Noteholders than the Superior Proposal and, at which time,
the Company shall commit to and pursue such alternative proposal."
So looking at the second quote, it seems to me that the OPTI Board has not fulfilled their fiduciary duty to preserve shareholder value, to the point where they have blatantly ignored their own support agreement and accepted a second proposal which IS less favourable not only the shareholders, but the bond/noteholders as well, (arguably, long term for the noteholders), and also less favourable, overall, for the company as they have no longer accrued the same amount of funds for expansion; as was set up in the debt/equity swap. (~$375 million in funds and ~ 500 million from warrants)
To compound the situation, this spring, both Chris Slubicky and Krista Ostapovich specifically acknowledged that OPTI was still able to borrow $400 milllion, if needed, to continue the ramp up of Long Lake. So obviously, OPTI did not have to enter creditor protection. It was only done on the basis of doing a debt/equity swap. With production increasing and the (market consensus) potential for oil prices to continue to climb, creditor protection is easily arguable as a position which OPTI did not have to put themselves into other than the sole purpose of the swap. I’m not sure how else to argue this point, but it appears to be a drastic attempt to take advantage of shareholders via the CCAA process; bringing in an outside bid and not allowing shareholders to vote.
To summarize, if we go back to the first point, how do we ensure that shareholders are represented during the CCAA process? Myself, I would be happy to have the first transaction on the table with the option to purchase the warrants which were originally proposed to shareholders. I think most other shareholders would accept this as a reasonable offer, as well. I’m not trying to discount the ineptness of Long Lake management over the last few years, but I believe that it would be best to focus on the immediate events at hand.``
I will let you know if I get a reply.
I would be shocked if another offer didn`t come up soon. It also appears that the CCAA process (if it works as intended) will stop this offer as well. So that`s 2 possible options that we need to ensure are no longer available before getting too aggressive. Not sure how much traction we can get on them breaching thier support aggreement, but it may be an option for us as well.
Giver