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Agnico Eagle Mines Limited Message Board

g_luck777 3 posts  |  Last Activity: May 4, 2015 4:29 PM Member since: Sep 9, 2009
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  • Reply to

    Resolution question?

    by jtm551 May 4, 2015 12:33 PM
    g_luck777 g_luck777 May 4, 2015 4:29 PM Flag

    Exactly. Well said.

  • Reply to

    Resolution question?

    by jtm551 May 4, 2015 12:33 PM
    g_luck777 g_luck777 May 4, 2015 4:27 PM Flag

    JTM,

    Yes, unfortunately; I have a higher cost basis in ANV. To be clear, we MIGHT be offered shares, however, its also very possible that common equity (shareholders) get cancelled outright, in which case we get absolutely 0. it really comes down to whether debt holders are willing to . My base case scenario is that we will get a significantly diluted position in the new healthier (less indebted) company. "Jrwlkn"'s, response above is a very plausible scenario. As he pointed out, the note holders are truly in control and can technically tell the common to go pound sand since the business has no way to pay. I put zero weight on the $1-$2 values being thrown around. Those are based upon book value assumptions, but the debt holders will rightly argue that the "gold in the ground" is not a liquid asset (since it still has to be dug up) and thus deserves to be heavily discounted. As such, my opinion on your last question is that we ultimately just get significantly reduced shares and have to sell at whatever the share price is at the time. it should be pointed out, that if ANV is properly recapped and not just set up as a milk cow, the company will be much healthier and it is then possible the share price can rise over time. it will be a deep hole to dig out of though and will likely require a long time horizon.

    Once we entered BK, common shareholders lost all voting privileges, so you can't really vote against. we get what were given at this point. Its been my experience that Equity committees are just a formality. the Judge listens just for the sake of hearing all stakeholders, but the debt contracts are usually so strong with covenants etc. that we have no say now.

    As a total aside, (to be clear I'm not saying this about ANV) IF the re-cap is done well, there can occasionally be an opportunity for an attractive investment AFTER everything is settled. In my opinion, ANV has good assets, it was just always hamstrung by far too much leverage and poor management.

  • Reply to

    Resolution question?

    by jtm551 May 4, 2015 12:33 PM
    g_luck777 g_luck777 May 4, 2015 12:57 PM Flag

    ANV is in chapter 11 BK, not chapter 7. The company is not being liquidated, thus there will be no check issued. The numbers being thrown around are assumptions on what the share price COULD be, IF shares are preserved. the Equity committee will essentially make arguments about shareholder equity and book value,
    market value of properties etc. The note holders (in the catbird seat) will make the argument that book value etc. don't matter because the "assets" (gold in the ground) are impaired etc. BOTH sides are mailing assumptions.

    In short, as shareholders, we are hoping for not too many shares being converted or worst case cancelled. IMO, the note holders will end up getting a generous equity stake in ANV in exchange for extinguishing a portion of the subordinated debt. If you are interested in this type of stuff, look up "distress for control" debt investing. its a classic strategy employed by some specialized hedge funds in which the fulcrum debt (the last line of debt with some value) is purchased at steep discounts, with the ultimate goal of "foreclosing" (so to speak) on the business and gaining a substantial equity interest in the new recapitalized (more healthy company). for clarity, in these scenarios, the current shareholders are the ones that get hosed. if we are lucky we get to retain an extremely diluted share of the company and if the re-cap is done well, we will own a much smaller share of a much healthier company. I took a beating too. Im not selling here, but this isn't my first rodeo, and I'm not naive enough to believe all of "$2" per share in book value nonsense. Those assumptions will get heavily discounted.

AEM
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