Sherritt Shelf Prospectus Makes for Interesting Reading!The Sherritt shelf prospectus is an interesting read, especially the following paragraph:
The Shareholders Agreement prohibits the transfer of shares of any JV Corporation, subject to limited specific exceptions. It also provides that each party will afford Moa Nickel reasonable opportunity to participate in existing and future development of nickel and cobalt reserves, in the case of GNC, and in nickel and cobalt extraction and refining projects, in the case of Sherritt. The Shareholders Agreement provides for certain rights for GNC in the event of an “Acquisition of Control” of Sherritt in specific circumstances such that an Acquisition of Control of Sherritt to which GNC objects could result in the liquidation of Sherritt’s interest in the Moa Joint Venture. The Shareholders Agreement defines the Acquisition of Control of Sherritt as the acquisition of shares of Sherritt by a single investor or group of investors which are associated or otherwise acting in concert such that the investor or group (the “Controller”) (i) exercises or may reasonably be expected to have, and to exercise, the power to determine who will become directors of Sherritt; or (ii) is the beneficial owner of more than 35% of the voting shares of Sherritt, and GNC, acting reasonably, believes that the investment decisions of the Controller with respect to the shares of the JV Corporations owned by Sherritt will be made on a basis that is influenced by bias or prejudice against the Republic of Cuba.
What this means is that in difficult times were Sherritt to default on a bond term or covenent the bondholders will not be able to get their hands on the equity (as we saw in the SCN "winter" in 2020) in any reorganization. The bondholders will never be able to force SCN into bankruptcy. The "usual" power dynamic between bond holders and equity holders in a corporate hierarchy does not exist here. In any reorganization bond holders will be extended, reduced, or otherwise compromised.
Obviously with nickel prices where they are currently and where they are likely to end up, this is not an issue. Just a thought to keep in mind for a future rainy day!