CALGARY, Aug. 24, 2016 /CNW/ -
We are an informal committee of concerned debentureholders of Twin Butte Energy Ltd. ("Twin Butte"), formed to oppose Twin Butte's proposed transaction with Reignwood Resources Holding Pte. Ltd. If implemented, the transaction would result in the payment of $140 per $1,000 of principal value for debentureholders or $11.9 million, while $22.4 million is paid to out of the money equity. If such equity consideration was rightfully paid to debentureholders it would result in a substantially higher value to debentureholders of up to $404 per $1,000 of principal value per debenture. We have retained Macquarie Capital Markets Canada Ltd. as our advisor and Bennett Jones LLP as our legal counsel.
It is a fundamental principle of Canadian law that equityholders of an insolvent company should not be compensated on account of their equity until after debt has been paid in full. An arrangement that provides for any payments to equity violates this fundamental principle. We believe the arrangement has been structured to protect insiders on the board and in management who hold substantial equity claims. Management will receive compensation pursuant to a change of control provision while retaining full employment following the transaction, and is expected to receive a cash payment pursuant to the 1,080,050 share awards issued by Twin Butte in the second quarter of 2016.
As evidenced by the fact that the company did not obtain a fairness opinion with respect to the debentures before proposing the arrangement, as was provided with respect to equity, it's clear that from the outset Twin Butte has had no regard for the interests of debentureholders. When it failed to gain sufficient support and was forced to postpone meetings of security holders, Twin Butte secured a fairness opinion on the debentures that is purely conclusory from a dealer rather than Peters & Co. and National Bank that were intimately involved in the process. These are the same two firms that led the December 2013 offering for the debentures that you currently own. The debenture fairness opinion fails to explain how it can be fair to debenture holders to pay anything to equity when debentures are not being paid in full.
We have had multiple discussions with key stakeholders, including Twin Butte's Special Committee, Reignwood's representative, Twin Butte's financial advisor, Peter's & Co, and National Bank on behalf of the lending syndicate. They remain entrenched in their position and resolutely refused to address our fundamental concerns.
We have analyzed a number of transaction alternatives that may result in increased consideration for the debentureholders. We would like to discuss these alternatives with you as soon as possible, to take advantage of a brief window ahead of the special meeting to implement such alternatives. Your support is important to increase the strength of our united front and provide the best opportunity for a meaningful increase to the consideration you will receive as a debentureholder. The debentureholders deserve a better deal.
To maximize our leverage so we can get a better deal, we plan to vote NO to the Arrangement at the special meeting of Twin Butte securityholders which will now be held on August 29, 2016. In addition, the debentureholders are prepared to direct the indenture trustee to take formal enforcement steps to protect their rights. To ensure your voice is heard, and to strengthen our hand in dealing with Twin Butte and Reignwood, we are asking for your support. The most tangible way to express your support is to execute the attached form of proxy.
We would welcome an opportunity to speak with you about these developments, and we would welcome your support.
On behalf of the Informal Committee of Concerned Debentureholders of Twin Butte,
Bockhold Investment Management Group
SOURCE Murray Bockhold
For further information: Macquarie Capital: Sandy Edmonstone, (403) 260-8463, [email protected]; Chase Edgelow, (403) 539-8526, [email protected]; Bennett Jones: Will Osler, (403) 298-3426, [email protected]; Robert Staley, (416) 777-4857, [email protected]