So let me get this straight, you think CS got the shaft here? And your corollary to that is that shareholders didn't? Let's walk through the logic of that first. First, CS is a TBTF bank, and on the equity side it's pretty much retail, even Van Eck is merely a conduit for more retail holders. Second, CS is the secured lender - the highest of the pecking order in bk, and equity by contrast is the very lowest rung. CS has been a part of the approval process every single step of the way from the time they filed till now......equity has not been a part of that process and has been the last to know everything. Lastly, CS has signed off on this deal - they aren't going to object....THEY'VE ALREADY SIGNED OFF. Equity hasn't even been consulted. But you still think CS got the shaft and equity is better off with this deal?
Logic aside, this is how the mechanics of it work. Hollister will have 15 mm cash plus the NPI. The NPI will be appraised - a process of discounting possible future payments for both time and probability - this is a quite common occurrence in bk, esp. with biotechs - I'd guess that will come out to around 10, maybe 15 million (but as you saw from last week, I tend to guess high). CS basically gets all of that because they are secured, less the 1,000,000 bone they are throwing to the unsecured creditors of Hollister. So let's go the high road and say CS get's roughly 30 mm at the Hollister level where they are secured. The difference between their secured debt and that 30 mm becomes a 'deficiency claim', which is an unsecured claim at the Great Basin Gold level (because CS would have had the holdco guarantee the debt). The SR Secured Notes will work the same way to the extent their second liens on the subsidiary assets aren't satisfied at the sub level. So here is the problem, you as an equity holder of Great Basin Gold are behind the unsecured 'deficiency claims' - what was the secured sub debt that didn't get satisfied by the collateral. (BTW, RB - this is the process whereby some debt rolls up and some doesn't - the trade creditors are rarely smart enough to get a HOLCO guarantee - so some will and some won't - can't quite figure out how you didn't know this)
The quick way to remember it is that crap rolls down hill and we retail guys are all down at the bottom. :)
AI
