It's not that easy, there were backdoors that were built into the debt that essentially force dilution to first occur followed by bankruptcy, which would mean that every large debt holder would become shareholders, added with the current large shareholders = FIU management facing a firestorm of **** that they will be hard pressed to deal with. Bankruptcy really is the last possible scenario, and the most unlikely simply because there are better avenues that benefit everyone.
Under the current asset sale everyone is winning except shareholders which is why shareholders will vote this down. I don't know what made managment believe otherwise.
Increase the asset sale price to a fair valuation and everyone wins but Anglo-Gold and Gold One just don't get the amazing deal they were hoping for.
Debt holders renegotiate the debt, or be diluted. Debt holder's will not want this to happen.
Its a little bit like playing chicken...except shareholders are the drivers and the debt holders are the chicken, if the chicken doesn't move the shareholder's will run them over. Why would shareholders choose this path? Because the relative gains to shareholders are essentially the same, and arguably even better, as long as they do not accept this asset sale.
Under the current asset sale we get 0.15/share and maybe something up to 0.26/share if everything works out perfectly. Which I do not believe will happen, there are too many factors that will bring the 0.26/share down, such as the 10mil credit facility that drops EZ asset sale from 70mil to 60mil and the inevitable class actions that will dry up the escrow fund, or at the very least tie the funds up for 1-3 years. 0.15/share is the most likely scenario if the asset sale goes through.
in bankruptcy we would still get between 0.15-0.26/share with the real possibility of getting upwards of 0.30-0.60+/share. Why? Because suddenly everyone is shareholders, there are not debt holders, and everyone gets the same price/share, and everyone will be pressuring FIU to get the best possible deal they can. Under the current terms, debt holders get paid out first from the proceeds of the asset sale and shareholders get the leftover scraps, after dilution, everyone gets paid out at once if bankruptcy occurs.
And of course, by voting the asset sale down, shareholders are forcing debt holders and Anglo-Gold and Gold One to make a choice - debt holders will have the choice to renegotiate the terms and Anglo-Gold and Gold One will have the choice to increase the asset sale bid.
Why would they do this? Well as I previously said debt holders will not be served by becoming shareholders, as they lose their privilaged position of receiving compensation before shareholders. Why would Gold One and Anglo-Gold decide to increase the asset sale bid? Because if they do not increase the bid the assets will be sold by the courts, who will need more than oral opinions on the asset values, which will mean that MWS and EZ get sold for substantially more than they are now.
So...given the choice what do I choose? I choose to give debt holders the chance to renegotiate the terms, I choose to give Anglo-Gold and Gold One the choice to increase the asset sale bid, and I choose to accept that bankruptcy is a possibility - but I also accept that under bankruptcy all that is left is shareholders, shareholders who will want FIU assets to be sold as close to fair value as possible so they get more.
Here's a question to all those for this asset sale...are you happy with 0.15/share? Or did you actually make the mistake of not realizing that the 10 mil credit facility is deducted from the EZ sale price, oh, and not realizing that there will inevitably be class actions suits, which take between 1-3 years to be completed and even if FIU wins, just fighting the class action suit will deplete the escrow fund. SO YOU WILL GET 0.15/SHARE, AND IF YOUR LUCKY YOU WILL GET A FEW MORE CENTS 1-3 YEARS LATER.