Isn't the whole idea of subsidiaries is to isolate the assets of the parent company from each other in the event something exactly like this happens? And Burnstone was a subsidiary, wasn't it? And a subsidiary whose assets were worth the same as or more than it's liabilities. Hollister should come out of this minimally affected. Shouldn't this lead to a debt free Hollister with an eventual market cap of about 120 to 220mil when trading resumes? Comments encouraged - no hucksters please.
To address your questions - yes, the main idea behind using subsidiaries is to manage risk and Burnstone is owned by GBG's subsidiary Southgold Exploration Ltd.. Theoretically, GBG had the option of simply letting Southgold fail and go to its secured creditor and pressing on with Hollister, but this was never a prudential option as the value and potential value of Burnstone seems to clearly exceed Burnstone's secured debt.
As to the ramifications of a total sale of Burnstone, GBG would be required to repay the DIP loan (35million), the Burnstone facility (150 million), and the unwound hedges debt (26.5 million). So, 211.5 million would definitely have to go to debt. Beyond that it is up to the judge and difficult to predict. GBG would still have the Hollister facility debt and red kite debt (50.5 million and 25 million respectively and declining, as they still make payments on these debts.) and the convertible debentures of 126.5 million. The debentures mature on 11/2014 and have an 8% cost to carry. My best guest is that a judge would simply let them carry that debt and require that they get/keep up to date with the interest payments, but I don't have enough knowledge to make an educated guess there. (Debt amounts come from the 3rd monitor's report.)
I think you are focusing on the least likely sale scenario. In my opinion, a merger or sale of Hollister are equally likely, followed by a JV on Burnstone, and lastly, the sale of Burnstone. For me, this is a post Q2 trade against the liquidity crises. Management shouldn't care about me, they should and hopefully do care about the long term holders with higher cost basis. The only way to make them hole is with a merger or a sale of Hollister to capitalize Burnstone and then, try again to make a success of it.
ain't company will be obligated to pay hollister debt first upon hollister sale before any remainings go to service burnstone debt which will be insufficient to it any ways to come out of this BR/CCAA? unless company succeeds in JV burnstone along with Hollister sale at the same time?
convertible debentures and corporate cross guarantees to worry about too....If Burnstone =0 net, then Hollister 250 minus debentures 150=100 divided by 500 mm shares is .20/share....I would hope Burnstone is more than net 0...........
If I bought the mine, I would do it under a totally new company and not GBG. That way I wouldnt have hundreds of millions of outstanding shares. I would open the new mining company, and issue new shares and take a bunch of it as bonus to my already overpaid salary. Then dig holes for a bit and then do another share issue and receive my bonus. Dig some more holes.......GBG did this for over ten years! Ha! Sukkers!