Colossus Minerals Inc COLUF

Bondholders versus Shareholders?

[wwadehammer]

Right now, the bondholders and large shareholders are analyzing whether or not to let the company go under or to invest more funds to bail it out.  Per post from weknowenergy, we know who gets paid first:

Sandstorm has $10 million in securded notes and then $150 million of unsecured bonds (notes).  Then accounts payable.  Then interest due on the bonds.

I assume the mine work and plant and equipment would be worth at least $200 million to an outside investor who didn't need a NI43-101 to take a chance.  If so, the bondholders are covered and would not like the haircut proposed by Arias.  Assume company was sold for $200 million.  Secured and unsecured noteholders would get around $160 million plus interest due so the bondholders would get their money back plus interest.  After the accounts payable was taken care of, there would be nothing left for stockholders. Obviously, the stockholders would reject the deal because it would wipe-out their investment. So who ever buys it would have to pony up significantly more than $200 million to get the stockholders to buy in.  Don't know if any big company would invest that much given the risks.

So it looks like a stand-off between the bondholders and shareholders.  We need someone to buy us out for around $300 million which would pay-off bondholders and give shareholders 57 cents per share ($100 million divided by176 million shares outstanding).  I'm guessing the shareholders would accept that but its just a guess.  Other scenario is we get some $70 million financing from outside investor who gets first rights in a bankruptcy.  Bondholders might go for that as it increases their risk but gets the mine in operation.  I'm sure the stockholders would go for that.  Lets hope we get $70 million in financing and bring the mine into operation.