RE:Executives and severance payments From a late August 2016 article: “Shareholders left quietly. One, who had travelled to Calgary for the meeting said that his children’s education savings plans were tied up in Twin Butte stock (currently quoted at four cents per share on the Toronto Stock Exchange). “People are getting hurt on this one,” he said.”
I submit that, somehow, Burge may have a point. In a way, this is really sad.
I think simple mitigation considerations may not enough.
Basic duty to evaluate fairness and equity for the severance payments of insiders/top executives, at a minimum, requires that the top execs, through complete disclosure (Reignwood and themselves), demonstrate the following:
1-the allocation of the purchase price (CBCA arrangement) between SHs and DHs was out of their control and was imposed (or “dictated”) by Reignwood.
Because the offer was unfair, unreasonable, imbalanced and led to filing. The unfairness became more and more obvious as August progressed.
2-The Reignwood “Arrangement” did not contain, somehow, provisions of earmarked equity for the senior executives in the new entity (basically “a new TBE” with SHs, DHs and syndicate debt with a haircut out of the way).
Because that would be unfair and conscionably questionable.
3-The post filing waiver and accelerated application of remedies had nothing to do with the possibility that Reignwood buys the asset on the cheap, in the context of a fire sale, with top execs remaining on board.
Because that would be an unfair self-fulfilling prophecy.
In August 2016, I evaluated the fair value (see previous posts for rationale) of debentures at +/- 40 cents on the dollar in a well executed and cost effective market value-based liquidation process. Hypothetical but very reasonable. At the same time, TBE unremittingly reported (“our collective judgement”) that the value expected to DHs going forward was zero in a liquidation process???
Then, there came the Canaccord fairness opinion which was, in my opinion, not really one.
Interesting to re-read what a Canaccord analyst had to say about this. On August 31st 2016, the analyst felt that TBE shares should be downgraded to sell and zero value, with a target price up to that time at 6 cents per share.
Zero fair value for debentures? Really? Why base a fundamental conclusion on the premise of what top execs said and not on a reasoning/calculation based on market-based inputs???
https://www.stockwatch.com/News/Item.aspx?bid=Z-C:TBE-2404156&symbol=TBE®ion=C
And then (?): “Management intends to engage in proactive discussions with its lenders in this regard.”
Definition of proactive: serving to prepare for, intervene in, or control an expected occurrence or situation, especially a negative or difficult one; anticipatory.
To be proactive or not, that seems to be a relevant question. No?
That was on August 31st, 2016. Famous last words?
Somehow, this whole issue has to be clarified and/or justified.
This is not about a lonesome soliloquy.
bon entendeur, Salut!
Ordinary investors need answers too.
All stakeholders may mean something after all.