Fairness? I don’t have any skin in this game but I have been watching this “gong show” unfold.
Normally a Plan of Arrangement will include a “Fairness Opinion” from a “Reputable” source and at some point an “Independent Proxy Advisor” or two will give a “Fairness Opinion” c/w a recommendation to accept or reject.
To date the following is the “Fairness Opinion”;
RECOMMENDATION OF THE TWIN BUTTE BOARD Based on the Fairness Opinion (as defined below) and the recommendation of the special committee of the Twin Butte Board, and after consulting with its financial and legal advisors, among other considerations, the Twin Butte Board has unanimously: (i) determined that the Transaction is in the best interests of Twin Butte, the Twin Butte shareholders and the Twin Butte debentureholders; (ii) resolved to recommend that Twin Butte shareholders and Twin Butte debentureholders vote in favor of the Transaction; and (iii) determined that the consideration to be received by Twin Butte shareholders and Twin Butte debentureholders pursuant to the Transaction is fair to the Twin Butte shareholders and the Twin Butte debentureholders, respectively. **Apparently Twin Butte’s Management and BOD who own 3.9% of the Shares and a massive .08% of the Debentures claim that this offer is “Fair” to all. Consider the source, this “opinion” looks just a bit “self serving” to my untrained eye.
ADVISORS Peters & Co. Limited acted as co-financial advisor to Twin Butte in connection with the Transaction and has provided its verbal fairness opinion that, subject to review of the final form of documents affecting the Transaction, as at the date of the Arrangement Agreement, the consideration to be received by Twin Butte shareholders pursuant to the Transaction is fair, from a financial point of view to Twin Butte shareholders. National Bank Financial Inc. is also acting as co-financial advisor to Twin Butte. Burnet, Duckworth & Palmer LLP acted as legal counsel to Twin Butte. **It’s interesting that although Peters & Co (who to the best of my knowledge are reputable) have given a verbal opinion that the offer is fair to the “Shareholders” the Debenture holders were NOT mentioned.
Was that an unintentional omission or intentional due to the fact that this offer is in no way “Fair” to the Debenture holders?
The owners “Shareholders” of a company are responsible for ALL of the Debts and Obligations of the Company. Their Liability is limited to 100% of their Equity.
The Debenture “Indenture” (short form prospectus) posted on SEDAR Dec 06 2013
https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00001562 is a Legally Binding Contract between the Shareholders (owners of the company) and the Debenture holders.
It’s literally mind boggling! Offering the TBE.DB holders 14% (abt. $11.9m) of the $85m that they are owed and the Shareholders that owe the money substantially more (abt. $21.3m) and claiming that it is in any way “Fair” to all is seriously delusional! It’s a blatant attempt to “pick the pockets” of the Debenture holders!
In a CCAA liquidation or recapitalization although the Debentures are Subordinate to the Lenders they definitely have Priority over the Shareholders who owe them the money.
I would be SHOCKED if any Reputable Advisor or Independent Proxy Advisor says that this offer is in any way “Fair” to the Debenture holders and advise them to accept it.
The meeting to vote on the Plan of arrangement has been scheduled for August 11.
There is lots of time for the “offer” to be modified. For it to have any chance of success the offer to the Debenture holders will have to be increased substantially.
The “Secured Lenders” are NOT taking a haircut. Why should the Debenture holders who are also Lenders be expected to take an 86% haircut for the benefit of the shareholders that owe them the money!
The Long Run (LRE.DB) debenture holders were recently offered and accepted 75% of face value.
As Always; Do Your Own Due Diligence; It’s Your Money !!