Revised Jien offer provides for no effective price increase to Canadian
Royalties debenture holders
ONLY PRICE INCREASE IN REVISED OFFER IS $0.20 PER SHARE FOR THE SHAREHOLDERS EXPLAINS WHY CANADIAN ROYALTIES DIRECTORS GAVE NO RECOMMENDATION TO DEBENTURE HOLDERS AND BMO GAVE NO FAIRNESS OPINION CANADIAN ROYALTIES DIRECTORS REMAIN STUNNINGLY AND MYSTERIOUSLY SILENT ON TREATMENT OF DEBENTURE HOLDERS
No Effective Price Increase in Revised Offer for Debenture Holders
It is important to examine the convoluted structure of the Original Offer by Jien from the point of view of the Debenture Holders to determine the effective pricing for the debentures. The Original Offer provided for the payment of 60% of the principal amount, subject to a two-thirds tender condition. If a majority, or about 50.1% of the debentures, were tendered, Jien's stated intent was to amend the Indenture to provide for redemption of the debentures not tendered at 101% of the principal amount.
This structure was illogical because it incentivized Debenture Holders to wait for the 101% repayment, and not tender for 60%. At the same time, it was important for enough debentures to be tendered under the Original Offer to meet the 50.1% tender condition for an expected waiver of the two-thirds condition by Jien. This structure was coercive and resulted in conflicting priorities for the Debenture Holders.
Jien stated that if 50.1% of the debentures were tendered, Jien may waive the two-thirds tender condition and take up and pay 60% of the principal amount for the debentures tendered. Jien also signalled that it then would redeem the debentures not tendered for 101% of the principal amount.
The effective pricing of the Original Offer to the Debenture Holders was 80.46% of the principal amount of the debentures represented by the average of a payment of 60% of the principal amount for 50.1% of the debentures and a payment of 101% of the principal amount for the remaining 49.9% of the debentures.
The Revised Offer at 80% of the principal amount does not increase the consideration offered to Debenture Holders. The Revised Offer simply makes explicit the offer to pay 80% of the principal amount in the debentures, which was effectively the same implicit pricing in the Original Offer.
Vic Alboini, Chairman and Chief Executive Officer of Jaguar stated: "From the point of view of the Debenture Holders, the effective price of the Revised Offer is not an increase from the Original Offer. The Original Offer was determined to be financially unfair by BMO and was rejected as inadequate by the CZZ directors. With no effective change in price for the debentures, the Revised Offer must continue to be considered financially unfair to the Debenture Holders. The only price increase in the Revised Offer is from
The directors of CZZ are
"The Revised Offer must be increased to provide a payment of 101% of the principal amount to the Debenture Holders. These directors have a fiduciary duty to the Debenture Holders, and will be held personally accountable for the 21% shortfall owing to the Debenture Holders under the Revised Offer," added
Harvest Energy Trust Directors Provide Example of Proper Discharge of Fiduciary Obligations to Debenture Holders
On
"In accordance with the terms of the indentures governing Harvest's convertible debentures, KNOC will make an offer to purchase all outstanding debentures for a cash consideration equal to 101% of the face value thereof, plus accrued and unpaid interest, within 30 days following the effective date of the Arrangement."
The Harvest Board appears to have properly considered the fairness of the KNOC offers to both their shareholders and debenture holders when deciding to support the agreement with KNOC.
In stark contrast, the CZZ Board has mistakenly not considered the interests of the Debenture Holders in supporting the Revised Offer, refused to provide a recommendation, refused to insist upon a fairness opinion for the Debenture Holders and has chosen to remain silent.
About Jaguar Financial Corporation
Jaguar is a Canadian merchant bank that invests in undervalued small capitalization companies in a variety of industry sectors.
The
For further information: For further information: Vic Alboini, Chairman & Chief Executive Officer, (416) 644-8110 - or - Kyler Wells, General Counsel & Corporate Secretary, (416) 644-8177
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