Going bankrupt happens slowly at first, then all at once as Mark Twain said... now, thanks to @lordolean update, we can confirm things a number of things, including that NAIF are government shmucks!
Coburn has enough potential senior debt holders have agreed to keep it alive a while longer in case production, sales prices etc can turn around enough to demonstrate the mine being an ongoing concern and justify equity investors stepping in. If it was completely hopeless they would stop throwing good money after bad and put it on C&M.
Not sure how much this 'super senior' debt is or time it will buy, but there must be some plan to try and 'sell it' back to the equity market. That may be 1) a STA share/rights issue, heavily diluting no doubt. 2) a sale offer to the market at large (eg ILU, IMA someone outside min sands?), would wipe out STA
By funding more time, the two senior lenders (NAIF and Nordic Bonds) keep control and the mine operating. This is important if they think equity finance may be interested in a going concern, because if they tipped into administration without any working capital, it would close, everyone would get sacked and the creditors would still have to stump up funds for C&M to protect any residual value anyway (C&M still costs).
Given STA will be out of cash soon/now, I don;t see the creditors had any choice but to stump up and buy time to resolve the situation including testing for any industry sale interest. Hopefully things are improving and they are just buying time for the new mine plan and a STA share/rights issue... but I'm pessimistic. Spiralling debt and accumulated interest from loss making operations that can't improve after 6 months, when even nameplate was going to be thin margins.
NAIF played a weak hand imo by coughing up the $15M in Dec Qtr to keep STA afloat. NAIF and Nordic Bonds are both 'senior secured', which means they would split any losses/recovery from liquidation proportionally. NAIF was ~58.5% and Bonds ~41.5% split before Dec Qtr. After NAIF rehypothecated the $15M into STA working capital, they have contributed ~61.2% senior debt but will only receive 58.5% of any recoveries... it makes no sense for them to chip in the remaining $5M and free-carry the bond holders. (as I read things).
The Bond Holders are actually an assortment of individuals who own the bonds, they trade in an over-the-counter market so many are owned by individuals different to those who first raised them. Not sure how the Trusteee for the Nordic Bonds could come up with cash given the impossibility of getting the individual bond holders to come together and agree/vote at short notice etc? No doubt there is fine print for such a situation and the trustee can use the bonds as collateral like it or not?
Either way, NAIF and/or Bond Holders appear to have tipped in more working capital secured above the original senior secured debt to buy time. Probably the new money is a third-party credit facility (eg NAB, Taurus etc) and that is why the interest rate is so high and super-senior secured. That is a quick, simple and fair way to raise more debt than NAIF free-carrying the bondholders, or tyring to arrange some new bi-party loan arrangement between them.
I imagine the big guys will have a sniff at the situation, but almost no way will they invest before it's been put into administration, shareholders wiped out and the creditors given a very large haircut. We just have to hope production lifts with a bullet as it all falls into place and brokers can convince the equity market it's not good money after bad despite being 'cheap'.
GLTAH
STA Price at posting:
9.5¢ Sentiment: None Disclosure: Held
(20min delay)