Re: Conspiracy versus bad luckBojangle3,
I would tend to agree that different and maybe more favorable outcomes could have been obtained for the different classes that financed TBE, but this is retrospective hindsight. I tend to think that management took the wrong paths and didn't play the game well but, from my take, I cannot go further than that in terms of the analysis.
PANTSONFIRE,
I would agrre with you on equity recovery in an early 2016 hypothetical CCAA scenario. However, I would not rule out any residual equity claim of pre-existing shareholders because valuation of the TBE assets must have been quite volatile around that time. In retrospect, even the Provost assets did not likely attract the attention of related players especially in Canada. Key inputs here would have been the necessary cash infusion (probably large) needed as well the substance of the recap transaction. The CCAA Act is relatively short and the flexibilty can bring confusion especially in the context of rapidly changing valuation parameters of the assets.You must be aware of the phoenix factor in those circumstances, ie pre-existing shareholders do not automatically obtain an equity claim in the "phoenix" raising from the ashes. My take though is that, in an early 2016 fair CCAA process to uncover value, shareholders would have ended up with a nominal value (ie substantially close to zero) and convertible (convertible feature having no value then) debenture holders would have recovered value modestly (maybe not very much, but probably more than what Reignwood offered) through a debt equity-swap.
It is interesting then to reflect on why the Reignwood deal was wrong, why it failed and why it was voted down by a debenture holders majority no vote. Humbly said, I think that the Reignwood deal did not reflect the underlying value of TBE especially later in 2016.
Interestingly, the path chosen by management in 2016 sealed the fate of shareholders and paved the way for a delayed and relatively lengthy process after the majority no vote that happen to match well with higher oil prices and prospects, at least for some time, for stable or rising prices. So, in comparison to an early and fair CCAA reorg in late 2015 or early 2016 which would have resulted in a modest result at best for debenture holders, we had an imposed receivership in late 2016 that is resulting in a substantial return. Here, it is important for some readers to take a deep breath, to understand the true sarcastic meaning of the following statement and to think for a minute before spitting back but, as debenture holders, I think that somehow we have thank management for the way they handled the downturn. I will try to remind myself to send a thank you gift next Christmas to Jim Brown.