RE:RE: Article... Many good points are being raised here.
This is retrospective analysis that will not be useful for TBE as the transaction will close soon but useful for the next opportunities.
1-Need for more government intervention to "protect" CDN oil industry and investors in general.
This is a wide topic but I submit that our system is pretty good even if imperfect. I believe in free markets, meritocracy and the need for creative destruction that comes with it. For TBE, along the way, there was an obvious possibility for CDN players to submit bids. It did not happen. The TBE sale is insignificant in the grand scheme of things.
2-It is often mentioned that there was an equity claim in TBE when it got squeezed.
In late 2015 and early 2016, TBE leverage, by ANY measure, was way out of line with benchmarks. Banks are in the business of lending in order to earn a return on the interest margin not in order to risk losing the principal (ie the risk of equity) expecting/hoping for a hypothetical eventual recovery and the upside that come with recovery. Banks have a leveraged structure by definition and need to protect their capital. The time when the door was closing unfortunately happened in early 2016 when oil prices hit bottom. We know now that it hit bottom then, but the oil price trajectory was unknown then. The 4 Cs of credit are: Character, Capacity, Capital and Collateral. TBE was failing in all 4 categories. I even submit that the banking syndicate was relatively patient when they granted the unusual recurrent extensions. For those who disagree, please indicate factually and/or with specific examples how banks did not do what they had to do under the circumstances.
In this context, was there an equity claim? Was there a place for CCAA? For many many months in 2016, the ONLY offer before the conclusion on 20/12/2016 was the Reignwood "arrangement". There is a relative agreement on this board that the deal was unfair versus enterprise value. But that is the only deal that allocated funds to shareholders. It was voted down by debenture holders essentially because the "arrangement" did not respect basic capital structure rules for a firm in the extreme vicinity of insolvency. During that period, any deal that would have given funds to shareholders without appropriate AND immediate compensation for debenture holders would have failed. For instance, in courts, debenture holders could have simply invoked the oppression principles that apply in that kind of transaction. In addition, even if TBE entered receivership, the operations continued, the oil price environment improved, a historic OPEC deal was announced and the purchase price was obtained in a competitive process. This does not fit with a fire sale. Last summer, there were no white knights. During receivership that lasted several months, there was not a single reorg/recap propoal submitted, not even by debenture holders. In these circumstances, please explain how one can assert that there was a residual equity claim in the excessively leveraged TBE assets. After the Reignwood deal, there was NO party ready to infuse capital in order to continue as a going concern because there was NO residual equity claim. I could change my opinion but I am looking for facts and a rational analysis.