Why Vote NO (long post)Based on my experience with TBE, it only makes sense to vote NO. The reason being, not only do the debentures have priority but they also have legal rights that common shares do not have. There is very little that wasn't done in the TBE !@#$show but they couldn't get around the fact the debentures, as low ranking as they were, were debt (I was going to say debt can't be created but in the TBE file, creditors came out of the woodwork like you wouldn't believe). As a result, we ultimately received almost 80 cents on the dollar.
Now if this proposal by Zargon was in Q2 when things were looking good, it might be "ok" if there was some cash. But right now, for all we know we are close to the company having to be placed in Receivership. The company had $3.6M in cash at Q3, how much will they burn in Q4? We don't know. How much will they burn in Q1? We don't know. Even with the $3.5MM US (less the fees which are a liability to be reported in Q4), the outcome is uncertain if prices remain like this for another 6 months.
In other words, would you agree to convert your debentures into shares the day before Receivership? Of course not, right? So this is the point why you can't vote YES right now. We don't know and we won't know the company's financial condition. Moreover, as we found out with TBE, in the Canadian securities legal environment, the BoD can decide to do what they feel is in the best interest of the company with little to no consequences. But they can't get around the fact that debentures are a $41.8M liability.
Secondly, if the issue is to defer the March interest payment, we should simply vote on that - add it to the principal, convert it into shares at 5 cents, whatever. Or follow the process currently outlined in the indenture LOL (although we know that would probably result in receivership if things were as dire as they are now as they would be unable with the debentures in place to raise the $1.7M via sales of common shares period).
So why they are not simply doing that is beyond me - they're either not thinking clearly or there is another transaction to follow IMO. Well if there is another transaction to follow, we should be privy to it.
I actually always liked the conversion idea but not if we don't get some cash especially now with the severe deterioration of WCS, WTI and the increase in market volatility. I would be amenable to a conversion if we got say 40 cents in cash plus interest ($18M?) and converted the rest. Obviously that would require an asset sale or some sort of transaction...But a full conversion right now in this environment? No way.
By the way, Receivership may not be the worst thing as we found out with TBE. Mainly because its a very slow process. So if an O&G goes into receivership, by the time they sell the assets, WCS and WTI may have normalized. North Dakota alone would be worth at least $25M you would think which is over 60 cents on the debenture dollar.
IMO. YMMV.