RE: re: Double Indemnity Gator, you bring up an interesting point about the tests for insolvency.
One measure of insolvency is Assets < Liabilities. Because of the goodwill writeoff, YLO now has assets of $2.3 billion and liabilities of $3 billion. Check.
The other measure is that the company can't pay back its debts. The company can clearly pay back the banks Feb 2013, almost certainly can pay off the $130 million due July 2013, probably can pay the $125 million due December 2013, and then probably can't pay the $255 million due April 2014. Is that too far away to count? I don't know.
You were saying no one will lend YLO money. I think we now have the starting points. Some of the MTN's are willing to accept 9% for 6 years at about 50% plus stock.
This is not an offer to lend money. Existing creditors who don't expect to get all of their money back are willing to trade the debt for a combination of new bonds and new common shares. This would count as "people willing to lend YLO money" only if investors who do not currently owe YLO money offered to put up money (or existing bondholders offered to put up new money in addition to the existing debt).
Also, it is possible that some investors will be willing to put up new money after a restructuring that wipes out half of YLO's debt. That may or may not be true, but in either case you can't use it as an argument for why a restructuring is unneccessary.
The other possible funding is from the banks. If true then they want security for their loans. I don't know what rate but they can secure the loans with receivables (I checked with an accountant on this. I thought cash flow, he said receivables which are 171 million at Q2, also I don't know what percentage of receivables can be used). If true if appears the stumbling block is the MTN's not wanting to be junior to the banks.
I haven't read the MTN agreements, but people have suggested that the MTN agreements don't allow YLO to offer security for loans. If that's true, the only way to get agreement from the MTN holders would be a CBCA or CCAA processs with a vote - and we've seen how complicated that becomes.
And we have no evidence that the banks are in fact willing to advance new money or extend the line of credit if they are offered security. We have people on Stockhouse speculating that the banks would be willing to do this, but that's very far from evidence.
The judge has thrown out the amendment due to challenges from the debentures and banks. This means there is rational thought going into this. He has postponed the other challenges until after the vote. Perhaps he wants to see how the vote goes. Quebec has rewritten their business laws to be more favourable to shareholders. I can see if I can dig up the documents where read that if you like.
The judge is being a judge. He doesn't want to decide 10 questions if he can decide only one. And he doesn't want to decide even one question if he can get all parties to make their compromises and present him with a consensus proposal.
The banks and convertible debenture holders said that this deal is unfair and shouldn't be accepted even if it gets 2/3 approval. The judge said, let's see the vote first and if it's 2/3 yes I'll listen to your objections then.
YLO tried to amend the motion to refer to a hypothetical future CCAA action. The judge said No, let's deal with the CBCA action first. If there actually is a CCAA action in the future, we'll deal with that then.
Neither of these decisions indicate anything about how the judge will rule on the substantive CBCA or CCAA questions.
IMVHO opinion, the CEO should be focused on the business and not playing these games.
That's exactly why the CEO wants to address the "too much debt" question now rather than having a looming threat of default for the next year and a half. If this deal or any other deal goes through, the CEO will have to deal with a tight money situation but won't have to worry about the company's debt and capital structure for several years.
But since he and the BOD do not seem willing to divulge more information other than the reports, we can only utililze what we have to evaluate the situation.
I agree that YLO should have released more information. Since the revenue forecast is essentially part of the bank lending agreement, it should have been released along with the bank lending agreement. I understand that companies don't want to reveal all their secrets to potential competitors (and anything that points to YLO going under will be used by sales reps trying to win business away from YLO), but I don't think they struck the correct balance.
If I understood my contact with the Industry Canada CCAA team then everyone still would get a vote including shareholders. CCAA is not the end, bankruptcy is. CCAA is a timeout for the company to negotiate so they don't have to enter BIA. I don't understand why the bondholders would support CCAA as they don't get paid during this time.
I strongly suspect that you are wrong about this. Everything I've seen about CCAA talks about creditors getting as much as possible of their money back and the company continuing to exist. If shareholders want a say, they should invest in a company that doesn't stiff its creditors.