>>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.
