RE:RE:RE:At stakeHello everybody.
This is the announcement we have been expecting, which confirms what those of us who speak to the company have been saying: Next stop, arbitration.
I've been chewing the terms over, and I fully get the Tranche 1. That takes care of obligations at a price fair to existing shareholders, $3 mil for just shy of the 10 per cent threshold for formal announcements of intentions.
It is the second tranche that bites into our equity stake big time. Basically, we are giving up either half the recovery (if there is one), or an additional 40 per cent of the company for $4 million (not $11 mil, because $7 mil is a loan that is to be repaid with interest). That $4 mil comes out to 4.73 cents US per share or about 6.25 cents CDN (at Friday's exchange rate of 1.32). Ouch. And we will be using the $7 mil equity stake to carry the $7 mil loan, consequently with some recovery of the investment on the part of Tenor over time.
So what is my guess as to why this structure? Well, on EOM's side, maybe management is still hoping to avoid the second tranche by some kind of accommodation by the Colombians. However, I also know that hopes have pretty much been extinguished on that score...so maybe the hope is that embarking on the arb in Sept. will shake things loose over the next couple of months.
So that means, with the exercise of Tranche 2, from Tenor's point of view they have launched an all-or-nothing play for either a big payoff for a small investment or lose the whole investment, less recovery through interest payments on the loan. Obviously, they think they have a shot, or they wouldn't have signed on. And what we have to accept is that this is the best deal we have on the table, because that has been the terms of evaluation by EOM.
According to EOM, the Colombians are basically in the mode of thinking these days that this problem will fall in the lap of the next government. So personally, I am expecting the arbitration to begin, and it is anybody's guess how it will turn out. But don't expect the Colombians to happily cut us a cheque even if they lose. I'm prepared for a long haul.
I just need to decide whether I want to give up have the company or half the potential payout. I guess one is pretty much the same as the other...except with the 51 per cent of EOM plan, Tenor has absolute control. Hmmm. I' have the rest of the summer to think about it...Good luck everyone!