Hycroft Mining Holding Corp (HYMC)

[LouisDesyjr]

Class 8 - Existing Common shares rejects plan

Document #1107 details the existing common shares as class 8 rejecting the plan.

I was not expecting that to happen, so I looked to see what could happen next.


One of two things can now happen:

1: The debtors can amend the plan, and go through the whole process again of collecting votes and try to get a modified plan accepted. I do not expect the debtors will bother with that. The problem is that there is no indication that the existing common share class would approve anything short of retaining most of the equity in NewCo, making it almost impossible for the secured debtors to ever get their money back.

2: The debtors can file for a cramdown, and force the existing plan of reorganization. While it may take a while, I expect this is what will be done. It is possible that it will take so long to do this that the company will not be able to complete its plan of reogranization since that plan is dependent on there being $25 million in cash available for NewCo.

Link for cramdown explanation:
http://www.fjc.gov/federal/courts.nsf/autoframe?OpenForm&nav=menu4c&page=/federal/courts.nsf/page/265?opendocument

cramdown -- in bankruptcy, court confirmation of a Chapter 11 plan despite the opposition of certain creditors.



There is also a possibility that an amended plan may be filed that wipes out the existing common, with no warrants, as 'retaliation' for delaying the plan of reorganization by not approving the plan. I can only see this happening is if the secured debtors want to put 'people on notice in the future' that when they have money in a bankruptcy (DIP financing) that if the classes do not go along with what they consider fair, that they would then retaliate and wipe those classes out in the plan. While a brutal way to conduct business, it would tend to put everyone on notice in future deals what would happen for needlessly delaying things, and hurting other classes in the plan.


Louis J. Desy Jr.