Tomboys MBN Creditors Meeting Report
At Ferrier Hodgson Chartered Accountants
Level 28, Bankwest Tower, 108 St Georges Terrace
11am-12pm 7 October 2015
(ironically the old Bond Corp Tower built by Alan Bond)
Attendees
golfbravo, ross, tomboy
Martin Jones & 3 staff for VA inc 2 chartered accountants, 1 secretary
Jeffery Black special counsel and solicitor attended from Norton Rose Fullbright Solicitors Perth of Level 30, 2 floors up from the VA, they can use the stairwell in which to negotiate!
(acting for Bank of New York Mellon)
at least 12 listening on conference call unquestioning from USA, only 1 person spoke (US NHs)
Pr Linda Tompkins (unresigned company secretary)
several unknown observers
Apologies:- No other listed creditors out of a list of 30 attended in person.
The US NHs in the CN are led by one group
Banco Bradesco nowhere to be seen and not interested
My Analysis- the VA was all over us HC rebels asking questions and being buddy, Tompkins knew the VA, Griffiths looks like went to FH first, Banco Bradesco missing in action. One US NH running the show for all NHs and all CNs (total surprise).
Resolutions Passed
1. VA retained, no attempt to appoint receiver or alternate VA (puzzling)
2. creditors committee made up of only 1 US NH creditor being:-
- Bank of New York Mellon as trustee for the CN holders represented by 1 man Jeremy Hollingsworth
- Bank of New York Mellon as trustee for its own debt holders represented by Jeffrey Black Counsel
3. all resolutions passed unanimously without dissent
4. Creditors report by 24 October and 2nd creditors meeting by 30 October
5. Minutes out in 10 days
6. No creditor has sought to enforce their securities
My analysis - The VA was appointed by the board for the business/shareholders, the creditors are solely the US NHs & CN holders all in one, sounds like a deal offered and only 2 persons are in the room, the VA & BNYM, due to a conflict, BNYM has a local solicitor sit in the corner.
Statement of Director Ross Griffiths to all
The VA read out his statement he insisted be read -
- apologises as he is in Sydney
- End of July they had $10M cash at bank,
- NP went lower & COP went lower in July
- they were negotiating with financiers to inject funds of $30M
- they had worked on deals for recap for $30M from financiers, got to signature stage. then the CN holders pulled out
- appointed a VA so he could independently negotiate the finance with greater insight
- expected to receive the funding but didn't, negotiations continued for months while funding offered
- positive discussions and negotiations were on foot for months
- stalled as the funds were to go to brasil entity but they insisted on OZ entity, no disagreement on amount of $30M
- they did all they could to keep it afloat [but the CN holders didn't let it happen]
My analysis- They knew since the AGM in June of this, they were offered funding but CN did the dirty and put this into VA basically not the mine, the staff or the ASX
Statements made by VA:-
1. cash & stock reconciliations being examined
2. revaluation being arranged (like in 2014 of US$250M)
3. no takeover offers for whole business received
4. $30M financing deal scuttled in August
5. $6M cash in bank now
6. disputes over terms of contractual terms of financing
7. no current offer for finance made capable of acceptance
8. several offers received, being negotiated
9. Wellingtons Keith White conversed with VA in a "couple of conversations"
10. Mine continues to trade, working capital provided/exists
11. Doesn't know where the unpaid deliveries are or why the cash is so low
12. "Wellington is interested as are other major shareholders" in recap/financing
13. several offers received
14. the VA has "accelerated the indebtedness of the CN" [due now instead of 2019]
15. he doesn't know if the terms mean the shares can issue but it can be paid out
16 daily conversation with the brasil management team ie CEO CFO
17 they have access to debt and equity markets,
18. directors made an exhaustive process for fresh debt & equity, hit hurdles as they couldn't accept terms offered due to bad wolves blocking, EGM, ASX requirements (what does that mean?)
19. the operation can meet its immediate obligations (ie there has been no default of the debt payments or other payments)
19. Rothschild continued engagement as financial adviser
20. investigating claims re ASIC, claims, compo claims
21. 3 models being looked at ST MT & LT or C&M of mine pending NP rise (BS as its profit producing now)
22. MBN was "heavily geared to NP & BRL, low NP posed challenges to operational cashflow" (this is the PC answer)
23. directors resigning is quite normal
24. assessing its financials, structure, & its ongoing viability and obtaining a valuation proposal to the creditors committee
Payout of the CN Facility
I asked several questions to Mr Jones on the CN. The solicitor for the CN holders got a crook neck on them and seemed not to like my questioning. The result is that-
- the VA doesn't know if the shares issue but they can be paid out in full
- if the CN is paid out in full, no shares of 1B or 500M will issue and they will no longer be a creditor
- the CN is a total debt of $48M not $115M as speculated on here
- a group of funders may pay out the CN in full, its an option (one that BNYM seems doesn't want)
- questions as to a buyout by shareholders of the creditors was an option (raised by ross)
- third parties are to propose offers also
Refinancing deal of $30M scuttled
A deal of US$30M was offered and stopped at signature stage. Seems being negotiated for months since May well before the AGM even. Seems that the CN holders blocked it. So directors said baleez and called in the VA to resolve this impasse rather than end up in Court anyway.
It is clear that there was or is a fight between the US$30M offerees (likely BCEE & Wellington) and the CN holders and they believed accepting this deal would have breached CN terms due to cross collateralised terms and some sort of right of pre-emption. Seems like the good wolves v bad wolves is playing out here on a larger scale.
Wellington of Boston (good wolves) have clearly stepped on the toes of BNYM of New York (bad wolves, CN monopolist who wants its 1B cheap shares), the board tried to sidestep BNYM and they blocked them hence VA.
A good sign - all sides want the mine to carry on, a refinance and no insolvency where they lose 90% of their investments, the stage is set for all offers now or a liquidation with US NHS losing the most.
Options stated are:-
1 recap, payoff CNs & relist forcing buyers/sellers on market
2 go into liquidation and sell it off to the highest bidder for say $200M
3 DOCA 2.0 - CN amended & diluted, refinance agreed, $30M funded as previously proposed by W/BCEE good wolves, CN holders get shafted
4 If the VA accepts a bid for $200M then US NHs get the $100M CN back but lose $400M on the shares in MBN converted from debt and we HC rebels get paid in full.
5 If the VA accepts $100M then they get their $100M but lose $500M and we lose our $7M shares like they do.
6 If the VA accepts a bid of $600M then no one loses anything and shares go to 50c and HC rebels get a massive payday. BNYM accepts $200M that means they lose
My Analysis - seems option 1 or 3 are the only options for all, as the bad wolves will not allow the good wolves to fund it and eat their lunch but due to the VA the bad wolves have no choice and will get wiped out or diluted that's why they have engaged solicitors. The VA holds all the cards, if you don't come to terms I will sell it and you all lose $400M. That's why he is getting a valuation, the higher the better. Seems from this our HC rebels fate is tied in with the current US NHs as we get more than they will as they bought in at 50c and we mostly bought in at 10c post DOCA.
We are in a stronger position than I thought. We as the 3rd group can influence them to resolve their dispute. W BCEE want CEO CFO brasil mine as usual, but CN holders want massive shares and their $500M back. If we have a class action that affects the brasil team and the ASX listing & an ASIC investigation then this changes the dynamic totally as the wolves will not get either of what they want.
This seemed a rigged PR event that they were all listening to quietly, my analysis is:-
- one creditor (the biggest & largest) running the show for all US NHs
- one creditor controls the creditors committee
- the US NHs have joined forces
- Wellington & BCEE have rocked the boat and offered $30M which the US NHs wont accept
- so now they all face off at the cliff while we watch who will jump first
- Wellington wants to recap, the USNHs don't want to lose their CN shares, but by doing this they have now lost the CN which is dead and buried and now is a current debt of a mere US$48M and their shares are worth a mere $65M AUS on the ASX (in fact 0 as of now)
- the US NHs by blocking the good wolves recap attempt now face a loss of US$400M hence why they are the only creditor in the room and engaged solicitors in Perth for litigation and didn't ask any questions.
- the bad wolves who shafted the OZ holders in the DOCA 1.0 in 2014 are now facing down the barrel of karma back to them and them being shafted of $400M of their shares and their whole CN!
- seems to be poetic justice here
- Wellington face the loss of CEO CFO and mine if ASIC charges them on a shareholders class action but also face losing their $20M cash buying on unsecured shares
Summary-
$30M funding offers knocked back due to wolves arguing with each other, while we LTHs thought of as irrelevant yet we are in a much better position than US NHs who took shares for debt in 2014. None of them want the mine to stop or to kick out the brasil team, that's where we come in to force their hand with a class action.
Seems like it screams out for a DOCA deal and the VA can make it happen by shafting the CN holders represented by BNYM and taking the money of W & co of $30M cash. Or he gets a valuation of $300M-$400M and sells the whole lot off and CHholders & US NHs lose $400M haircut from those 2014 bonds.
This is madness, they surely will take the $30M, give US NHs some benefit also, then appoint new board members and stop wasting money on lawyers. Its Boston v New York NBA games all over again with us as the supersub.
I am stunned, I thought this maybe over, but i am more confident than ever now. Money is being thrown at the VA will nilly.
I will email the VA and his staff with our MBN class action claims which will make the wolves think about the end game.
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