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>>I still am not seeing anywhere where hollister debt is carrying over to Burnstone in where you told me to read.
Some will, some won't. A trade creditor to Hollister who doesn't get paid in full gets shafted. A creditor with security who receives less than 100% wind ups with a 'deficiency claim'. If that debt was guaranteed by the parent holding co - it moves up the value chain. Trade creditors typically don't have their receivables guaranteed - but do you think CS didn't? Do you think they loaned money, sitting in the catbird seat as they were, without getting every last shred of protection their was?
GBG did a press release finally http://www.newswire.ca/en/story/1154923/great-basin-gold-limited-updates-insolvency-proceedings
Nope, it's not a 90 million dollar royalty. It's not even close. It goes to CS and barely makes a dent in the DIP liability. I don't know how to break this to you but there is no reorganization happening here....remember you heard it here first.
Listen to Prof HR and buy some more today RB :)
It doesn't appear to be going the auction route. The IBs have been retained to find a new equity partner. Berg appears to want to stay on as a major shareholder. This would greatly concern me if he didn't own half the equity and almost all the debt. I don't trust Berg to do right by shareholder, only to do right by himself. Given his holdings of both debt and equity, and given that he needs to bring on a major new partner, I think Berg is highly motivated to seek out the best possible valuation of the whole. Based on what JCI/NEC/Wanxiang were willing to bid for A123, I think it's not hard to see a number that clears the claims hurdle, at which point the absolute priority rule starts to work in our favor.
No, Franco Nevada has a NSR on the property - that comes off top line revenues of Waterton going forward - and NSR's are more like property rights - they go with the property, not the company. Franco Nevada filed a limited objection for their NSR to be specifically referenced in the APA.
Looks like the NPI that initially goes to GBG will be 10% (though I saw a reference as well to 15% - one or the other is a typo). As I speculated earlier - this will go to Credit Suisse via a plan - and guess what? The plan was earlier this evening. Credit Suisse takes everything, though in their generosity they are tossing a million bucks into a pot for the GUCs (general unsecured creditors). Not a whiff of JV in there unfortunately. At one point they refer to the auction process as 'unsuccessful' - yes that's an understatement. Here is a link to the Rodeo Creek Disclosure Statement - which also includes a copy of the Plan of Liquidation. Disclosure Statements are always good reads - the attorneys are supposed to tune down the legalese.
http://www.gcginc.com/cases/rodeocreekgold/pdflib/426_50301.pdf
The market is always willing to sell you shares at the highest price you're willing to pay :)
No, the 90 mm is one prong of a two prong ceiling on the net profit royalty. The part that I don't see in the APA is the % at which it is calculated. Let's say for the sake of argument that Waterton gets this project turned around in 1 year. They start making 100 million dollars net profit year in and year out. If the NPI is at 50%, then GBG, or it's assignee, gets 50 mm in year two and 40 mm in year three and then it's paid out. On the other hand, if the profit % is 5%, GBG, or it's assignee, gets 5 million in years 2 through 9 - for a total of 40 million, and then the agreement is paid out because 9 years have lapsed. We don't know if it's 5% or 50%.
The big problem right now is that whether it's 5% or 50%, Hollister isn't even close to showing profits - so when it comes CS's turn to argue to the court that this NPI is not very valuable when it's credited against their secured debt, it's going to be not a difficult argument for them to make.
You typically see these contingent royalty arrangements in deals where there is very significant execution risk for the buyer in effecting a turn around of operations - if we look at the mine production for Hollister over the last 12 months - it screams execution risk. The auction arrangement looks like nothing more than confirmation of this. Unfortunately, Burnstone has the same fundamental problem. When there aren't any large creditors in the room, I actually like these contingent royalty streams because the market significantly undervalues them. When there are large creditors in the room, I hate them.....because the market significant undervalues them. In both cases, they are an asset of the estate - when there aren't any creditors left unpaid with cash, they can go into a liquidating trust for future possible benefit of shareholders - when there are creditors left unpaid, they go to the creditors in satisfaction of debt.
Edit: one of the big things that remains apparently in limbo is the % on the NPI. According to the APA, the Net Profit Royalty agreement has not yet been finalized, though I suspect they have a number in mind. What that number is I have no idea. The only thing I'm sure of is that it is sweet enough to induce CS to go along.
>>The royalty agreement settles the Hollister facility and Hollister's DIP loan and the cash settles the trade debt and we move on to Burnstone
I'm not 100% sure that the NPI does settle the Hollister facility and/or DIP loan. Credit Suisse is going to argue that the value of the NPI needs to be discounted on multiple fronts - 1) time value and 2) execution risk being chief among those. Hollister wasn't even showing a gross profit in February when gold prices were up over $1600 - it isn't going to be hard to argue that a royalty based on NET profits, that is capped at 90 million....and is not in perpetuity is worth much less than 90 million.....MUCH LESS. What would you pay for a contingent payment stream that as things currently stand would pay you a big fat zero in year 1?
I think what happens next is that ad hoc noteholder group objects to the terms of the APA. Why wouldn't they when nothing is left over and above the secured debt? This ad hoc group is led by Sprott which inhereted a huge position in the notes when they acquired Flatiron back in the middle of '12. It was the same group that tired unsuccessfully to block the egregious DIP loan that Credit Suisse did in the first place. Not sure how far they will get with it, but I do suspect that comes next.
I think in another 2 or 3 weeks, we get something that resembles a rescue plan for Burnstone. If you use the results of Hollister as a proxy for how truly horrendous the market is right now, it's hard to see it being pretty. That said, Burnstone is a better asset than Hollister in many respect - it has a new mill, it's right next door, there is significant underground development etc. Of course, it also has it's own unique defects - it's in S.A., and it's had major geologic issues. I could see a Chinese sovereign fund bidding it up - but the price is always determined by the 2nd most motivated party.
>>Only skimmed trough it on my phone but smells like a JV to me! Too bad finny said there was a 0% chance of that happening so it can't be true :(
I'd suggest reading it again.
>>The debtors will be paid 90 million over 9 years, plus 15 million cash. Am I correct?
It's a NPI that will cease at the earlier to occur of a) 90 million paid out or b) 9 years. The 90 and 9 are ceilings, not floors - there is no floor.
http://www.franco-nevada.com/royalties/terms-explained
^^Simple yet decent breakdown on differences between NSR and NPI as well as Streams - And NPI is what you get when you can't get anything else. It's a contingent royalty as it's based on the bottom line, not the top line. It will go to CS via the plan of liquidation - that's just the simple math of the absolute priority rule.
No they don't - that is the exact opposite of what is in the APA
6.6 Employee Matters.
(a) The Sellers agree that the Buyer or an Affiliate of the Buyer may make
offers of employment, in the Buyer’s sole and absolute discretion, to any employee whose
employment is related to the maintenance and operation of the Business, including such
individuals who are not actively at work on account of illness, disability or leave of absence
(collectively, the “Employees”). Such offers of employment, if accepted by the Employees, shall
be on terms and conditions as Buyer and each such Employee may mutually agree. In
connection with the determination by the Buyer regarding whether to make any such potential
offers of employment, the Sellers shall, during the Interim Period, give the Buyer and its
Representatives reasonable access during normal business hours to all such Employees for
purposes of interviews.
Look at section 2.4 (a) - The APA very specifically states the CS debt is an excluded liability - that means not assumed.
2.4 Excluded Liabilities. The Buyer does not assume any Liability of the Sellers or of
any Affiliate of any Seller relating to or arising out of any of the following, which shall be
retained and remain Liabilities of the Sellers (collectively, the “Excluded Liabilities”):
(a) any indebtedness for borrowed money of the Sellers to the extent not
expressly assumed hereunder as part of the Assumed Liabilities, including the Existing CS Debt;
This is fuglier than I thought it would be. Basically they sold for 15 million cash plus the net present value of a net profits royalty capped at 90 million over 9 years. That will become an asset of the estate and will no doubt go to CS via the bk plan (hence the CS side letter referenced in the APA). I think CS comes out smelling like a rose here - they can heavily discount the NPR on multiple counts and take 100% of it as the secured lender on Hollister, with secured claims left over. Those Waterton boys never cease to impress me.
http://www.gcginc.com/cases/rodeocreekgold/pdflib/420_50301.pdf
The APA (asset purchase agreement) has hit the docket - haven't read it yet.
I would stress that the US Trustee appears receptive to appointment of an EC. That is extremely rare. Being counsel for an EC is a great gig for the law firm - they can bill their 600-900 an hour and unlike being general counsel for a company - there really isn't any haggling over a bill. The biggest problem is that normally it takes an act of god to get one because trustees usually oppose their formation - which means that the case must be motioned to the court, which is time consuming and usually leads to unbillable time. If a firm thinks it's close to a slam dunk to get appointed - I think they will take up the case - success is another issue, but at this point, equity just needs to get over the hurdle of not having professional representation at the official bargaining table. I think if you can convince a firm to call Juliette you might get one of these to give it a go. FWIW.
So Van Eck sold 1.7 - 1.8 mm shares on Friday - any theories?
I can't wait to hear from the Van Eck isn't selling/they must know something guys on this board. Why are they selling again?
I wasn't aware Baker McKenzie was already on the case - yes it would be a conflict for anyone at the firm to represent common. Not surprised I guess that the convertible noteholders used her as she is very good. Proskaeur will normally do this sort of thing too, but I believe at some point I saw they were involved at some level as well.
My interest is in seeing the equity not get screwed, even though I don't have shares at this point. I've traded bk stocks for 10 years - I like to see equity get their due when it's fair whether I hold or not. I think equity deserves to be included in the plan here - I don't hold shares because I don't think that will happen - if I did have shares, I'd be making phone calls and emails to attorneys trying to convince them they have a good shot at being appointed as EC counsel in this case. My point remains - you need to find counsel (who isn't conflicted) that does EC work on a regular basis because time is of the essence - if you don't believe me, just keep writing shareholder letters to the court and see where that gets you.
There are big firms who will spec an EC motion if the think there is a high probability of getting the gig. My suggestion would be to stress that the US Trustee appears receptive and get them to call her. You could try Carmen at Baker Mackensie, she's bad ass.
Try this: go to the stock house website - it's the primary message board for Canadian stocks. To go t.GGN or V.FAU and ask for feedback from shareholders on either one how it is to partner with Waterton. There are more than just those two, but that would be a good start for you. (notwithstanding the fact that the chances of this being a JV are pretty much zero). Waterton is doing what Waterton does best - taking advantage of insanely low valuations and economic duress in the mining sector.
It's painful to read these posts. I said it earlier in the week, I'll say it again - if you want a shot at saving equity one of you is going to have to contact an attorney at one of the big firms that routinely handles equity committees. You are spinning your wheels to talk to the branch manager of an Edward Jones office. This should have been done days ago....maybe somebody not on this board is working on it. It's not enough to write the judge and US Trustee letters saying it's not fair - you need a substantive argument as to why SCHSQ is worth more than the creditors are owed. The problem I see now is that some attorneys who may have been willing to give this a shot a few weeks ago may feel there is too little time left to get up to speed.
Came across quite an amazing page on FB last week - Delaware Shareholder Services - if you're on FB, highly recommend liking the page for Ilene's updates on Delaware bankruptcies. Link below is to her notes on the A123 sale confirmation hearing. Like having a time machine to go back and follow a case I wasn't paying attention to at the time. In my opinion it gives color on two fronts - JCI being not happy about not getting the IP, and towards the end, even better color on what Wanxiang plans are - they are bring a lot of working capital to the table. I'm not quite sure how to interpret the 350 mm - I'd think it means 100 mm working capital after paying the roughly 250 cash price, but Ilene reports a junior atty saying it was all W/C - either way - I believe the Valence team took notice. The plan at this date was still to emerge without ever having hired an IB - that meant one and one thing only - Berg planned to fund the exit. But Berg is no dummy - there isn't much point in being the skinny kid once the A123 IP goes on steroids with Wanxiang cash in the coffers.
https://www.facebook.com/notes/delaware-shareholder-services/aoneq-hearing-121112/495483290501917
60 mm was just my guess - and it's hard to guess as there isn't a lot of precedent of gold mines being on the auction block. Tri-Valley auctioned off two properties several months back - I think it was the Shorty and the Richardson in Alaska. Mind you, these were drilled but not as well developed. They went for 200k. I met the people that got it - they were shocked that was all they had to pay - as I've said before, it's not a strong market. I guess sixty because I believe the secured debt is 50 and there is another 7 or so of DIP tied to Hollister - I could be wrong on those numbers by a little. It wouldn't go for less - the secured lenders would credit bid to that level. So my guess is 60, but I wouldn't be surprised at 70 or 80. Given that we now know Waterton won the auction, as opposed to Barrick and Newmont having gotten into a bidding war, I would be surprised it it was higher than 80. The problem with the Nevada properties is that you esentially have a mill without a mine and a mine without a mill. They are 280 mm apart - the only reason GBG was trucking it that far was because technically it is a trial mining project for now. Not having a mill in proximity to Hollister wouldn't be a problem for a Barrick or Newmont as they have existing mills in the Elko vicinity. Waterton doesn't - which means there is significant capex that they would need to do here, and huge lead times given permitting requirements. In this environment, it's a real stretch to hope they would pay up for value. I personally don't see it, and the above is basically why. You have plenty of operating mines that are currently valued at EVs of 10 to 15 buck an ounce in the ground - with an onsite mill, and doing much more than the 600 oz a week that Hollister is doing - at a loss, even when gold prices were 200 higher than right now. I halfway suspect that Waterton was as equally interested in the Esmerelda Mill as it sits in the Borealis District where they already have almost complete control of Gryphon's mine, it's just a few miles away - and that project desperately needs a mill. But noone else would have much use for the Esmerelda - which isn't a great situation at auction. So that's the basis behind my opinion. What's the basis behind yours?
(BTW, Esmeralda Mill sits in beautiful country - probably no more than 30 miles due East of Yosemite as the crow flies (not as the car drives, not easily anyway). I was there back in July - you could see the GBG trucks throwing up huge dust clouds in the middle of nowhere - the people there all talked about how they must be crazy to drive ore 280 miles, even good ore. The District is the same one where Samuel Clemens worked for 2 years as a gold miner - he wrote 'Roughing It' about the experience - good book - free to download to an e-reader on Amazon)
GPB - you think Hollister is a really special property right? Great grades, I'm not sure they are the highest in the world, but even I agree they are really good. I think it's a great property too. So it's a great property with tons of potential and 'gold is money, nothing else is.' I'm completely on board with all of that. And then there is Waterton. I have nothing but respect for them - they are indeed very sharp - they run private money for clients and they are good at it and they charge accordingly - you can ask around when you get to Toronto - everyone who knows of them will tell you they run a tight ship and clients pay through the nose for it. Here's the problem - you aren't their client. None of the GBGLF shareholders are. There was an auction, they won it - why do you think they are going to bring non-paying non-customers along into the Hollister sunset? That's actually the really big problem in bankruptcy when the asset is really good - other people want it all for themselves as cheap as they can get it. And bear in mind I've been doing this for 10 years - mgmt never stands up for equity when they don't own equity. Equity has to stand up for itself - but the only ones standing up for themselves are creditors. Bankruptcy is a fight over assets. "Business Rescue" - the S. African term for the process - it's not "Equity Rescue"....I think some people here don't see that distinction. Caveat Emptor - not you, I think you know what you are doing - but everyone else.
And who would be left to do any digging?
http://www.gcginc.com/cases/rodeocreekgold/pdflib/408_50301.pdf
Ad hoc noteholders filed a reservation of rights. On the bright side, looks like the auction went two days. Whatever happened, they don't know. My understanding is that one of Eric Sprott's companies is ringleader of the ad hoc group.
>>I just don't understand why you are here, then.
For the last 10 years, I've only followed two types of companies - bankruptcies and miners, mostly gold and silver, but some met coal as well. GBG is both a miner and a bankruptcy obviously, so I have a great deal of interest in watching how this plays out. BK is very much about the process - so what you learn watching one you don't have to check at the door when you leave, which means it can be quite worthwhile to continue following even after you've given up on the equity. So that's why I follow GBG, and even to a lesser extent School Specialty, when I don't have a position (GBG is more interesting because it also has implications for the state of the gold mining industry right now). As for why I participate on the board - well board participation on any stock I find forces one to be more critical in their thinking (obviously, that is not something that everyone takes to heart - not looking at you but a few others who have now leapt to the conclusion we are not just in a JV with Waterton following a 363 auction, but also with Barrick - WOW is all that comes to mind). So here I am. I'll admit the last few days I've rather quite enjoyed the back and forth sparring, but it's not why I'm here.
Are you absolutely sure I'm deceitful.....or is that conclusion merely the inevitable result of the cognitive dissonance that you face when I say things you don't want to hear? Let's face it, you are emotionally married to your position at this point, but that fact doesn't in the least little bit make me deceitful. Seriously, why would I own GBGLF or SCHSQ at this point in time given the things I've said I believe about both? (I did own both in the past as I've said on numerous occasions). If I really had shares, it would make me masochistic, not deceitful.
(btw, when I don't state on a board that I don't have a position, it's means I do have a position - some call it full disclosure...what a concept)
The subject of SCHSQ and my posts on it was brought up by Damsammit - I was replying to that and never said they had anything to do with each other.
And look how wrong I was on SCHSQ. Not.
I had a horse in the race, I still have a very strong interest in the case regardless of outcome. There is a chance this turns around, but it gets smaller by the day. When Hollister couldn't get a stalking horse bid, that was enough for me. Having a financial buyer like Waterton buy Hollister as opposed to a Barrick or Newmont show up ( as so many here took for granted would be the case) is another nail in the coffin.....yes I know, Waterton didn't buy it at auction, they JV'd with GBG to partner up with their obvious mining talent....it's so hilarious it almost hurts. I'm 99% following this case closely, closer than most of you longs (why was I the first to see the auction winner when I don't have a horse is the race is a good question to ask, and no RB, you ding dong, it was absolutely in the public domain, that's how I saw it in the first place). There is also about a 1% chance of a miracle....maybe 1%....I'm probably rounding up :).
Alas RB, I see my posts from last night have been removed....where could they have gone? As to employees, I'm guessing you don't have any familiarity with the labor market for miners out West. It's beyond tight - they can work wherever they want to and they all know it.....companies are running job fairs on the east coast and offering 5k inducements just to move to try and deal with the skilled labor shortage....but somehow you've convinced yourself that some sort of hiring of some people by GBG in the recent past is the key to decoding that the auction wasn't really an auction...but a JV disguised as an auction?....yeah, there is a novice here for sure, but it's not me.
On the question of 3 million shares trading at the ask, I'm guessing you and a few others are buying hand over fist. Do you know how many shares are O/S? 3 mm is not a large number relative to the float. Nor is it a large number in dollar terms....it's quite the opposite actually. Maybe you are right that I'm a 'disinformation agent' - if you are right about that, my very presence here should be all the proof you would need to double down today....course, if you are wrong about that too...that will probably come back to bite you. Happy trading.
>>Again, Waterton is not a mining company. GBG is
But GBG isn't a very good one....in fact, they are truly horrid at it. Do you really think that Waterton wants to JV with them? They will hire a good contractor, who will hire the grunts (because they are in very short supply) and they will retain the newly unemployed project geo and mine engineer as consultants for 6 months to figure out where the geological skeletons are in the mine. I've never said Hollister was a bad project - it's a great prospect but it needs professional help - which clearly GBG is not capable of. If I had shares I'd be crossing fingers that Waterton paid a good price - but given my experience with how they operate - I highly highly doubt it - especially as they don't have a mill which to me suggests they are a financial buyer, not a strategic one.
Don't shoot the messenger people. You still have Burnstone, for now.
Damnsammit - go take a closer look at Gryphon - those knuckleheads couldn't mine their way out of a wet paper bag - Waterton took over that project back in February for pennies on the dollar - and they will probably own the rest of the JV by end of summer.
(and I'm out of posts for the day)
Waterton will simply hire a mining contractor to run the mine with close oversight from the team they brought over from Barrick last year.
(edit: I'm almost through my daily allottment of posts - I'm sure you are relieved. I stated my best guess a few days ago - 60 mm)
I can make this real simple for you - call counsel for Rodeo Creek, or call the monitor in Canada, and ask if the auction results mean that GBG shareholders are now in a JV with Waterton on the Hollister property. I'm guessing you will here a short pause, possibly a giggle, followed by a definitive 'no'.
>>all these gryphon, fire river went through same sale motion/bidding procedures/auction as RodeoCreek & affiliates did?
If so, holly molly this is going to huge
No, Waterton originally loaned them money on unserviceable terms - and those JV arrangements are almost the end result of a 'loan to own' program. If you think Waterton is here to bail you out - you are going to be very sadly mistaken in the very near future. :)
I'm very familiar with Waterton - again, this was an auction, not a JV.