Page 1 T INSOL GLOBAL INSOLVENCY PRACTICE Instructions for Module C May 11 to 15 2015 Faculty: Dr. Janis Sarra, UBC Presidential Distinguished Professor and Professor of Law Faculty of Law, University of British Columbia, Vancouver, Canada, [email protected] Introduction and Methodology: Module C of the Global Insolvency Practice Course is composed of a “Workout Simulation in Global Comparative and International Insolvency Law”. This single module accounts for 30 course units. This module represents a minimum of 36 hours preparation and contact time. In actual practice, the intensive nature of the exercise requires most of this time to be spent on-line in contact with fellow participants during the week of May 11 to 15, 2015. Module C will formally commence with two “live” court hearings on May 11, 2015 (May 12 in Sydney and Hong Kong), which you will attend in person in New York or London, or appear by multi-city video conference. Issues before one or both courts will include determination of the centre of main interest in the proceedings and post- commencement financing. The motions will be argued in the back-to-back hearings for a session of no more than 4 hours in total. The two courtrooms are linked by video-conference as well. If you do not intend to travel to London or New York for the hearing, you must arrange video conferencing facilities to participate (please note that skype is not acceptable for this part of the Module) and where two or more participants are located in the same area, it would be helpful to have them at one location. We appreciate that this first session is a logistical challenge, given the diverse time zones, but it is important that you participate. UBC Faculty of Law will coordinate with the technical person at each video conference centre to undertake a practice video connection, once you provide us with a contact name. First hearing in London before: Sir David Richards, Justice of the High Court, Chancery Division, Royal Courts of Justice, London, U.K. Monday May 11, 20:00 BST (15:00 EDT). Second Hearing in New York before: The Honorable Robert Drain, Judge of the United States Bankruptcy Court, Southern District of New York, U.S. (Courtroom is in White Plains New York) Monday May 11, 17:00 EDT, (22:00 BST). The remainder of the simulation is via the internet, hosted by the University of British Columbia on an asynchronous basis (meaning that you log on regularly for the entire week, making motions, negotiating, etc.). There are six judges involved, from as many jurisdictions, each with an on-line courtroom, plus one “appellate”
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T
INSOL GLOBAL INSOLVENCY PRACTICE
Instructions for Module C
May 11 to 15 2015
Faculty: Dr. Janis Sarra, UBC Presidential Distinguished Professor and Professor of Law Faculty of Law, University of British Columbia, Vancouver, Canada, [email protected] Introduction and Methodology: Module C of the Global Insolvency Practice Course is composed of a “Workout Simulation in Global Comparative and International Insolvency Law”. This single module accounts for 30 course units. This module represents a minimum of 36 hours preparation and contact time. In actual practice, the intensive nature of the exercise requires most of this time to be spent on-line in contact with fellow participants during the week of May 11 to 15, 2015. Module C will formally commence with two “live” court hearings on May 11, 2015 (May 12 in Sydney and Hong Kong), which you will attend in person in New York or London, or appear by multi-city video conference. Issues before one or both courts will include determination of the centre of main interest in the proceedings and post-commencement financing. The motions will be argued in the back-to-back hearings for a session of no more than 4 hours in total. The two courtrooms are linked by video-conference as well. If you do not intend to travel to London or New York for the hearing, you must arrange video conferencing facilities to participate (please note that skype is not acceptable for this part of the Module) and where two or more participants are located in the same area, it would be helpful to have them at one location. We appreciate that this first session is a logistical challenge, given the diverse time zones, but it is important that you participate. UBC Faculty of Law will coordinate with the technical person at each video conference centre to undertake a practice video connection, once you provide us with a contact name. First hearing in London before: Sir David Richards, Justice of the High Court, Chancery Division, Royal Courts of Justice, London, U.K. Monday May 11, 20:00 BST (15:00 EDT). Second Hearing in New York before: The Honorable Robert Drain, Judge of the United States Bankruptcy Court, Southern District of New York, U.S. (Courtroom is in White Plains New York) Monday May 11, 17:00 EDT, (22:00 BST). The remainder of the simulation is via the internet, hosted by the University of British Columbia on an asynchronous basis (meaning that you log on regularly for the entire week, making motions, negotiating, etc.). There are six judges involved, from as many jurisdictions, each with an on-line courtroom, plus one “appellate”
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judge if needed. There is also a “country” advisor to whom you can direct questions in the week prior and during the simulation if you cannot locate an answer about the practice of a particular jurisdiction. When you post a motion, the judge in the particular court of the jurisdiction in which you are making a motion will wait 6 hours before ruling, in order to give parties an opportunity to reply or make submissions on any motion. One month prior to the simulation, you are being emailed the public facts for the simulation, additional private facts known only to you or a party you have a contract with, the role you are assigned (debtor company, financier, turnaround expert, creditors, etc.) and basic financial statement worksheets. The public document will also be on the Fellow website under Module C. You will also be given access to the website “e-courtrooms” and “e-negotiation rooms”. I am available all of Monday April 13 to answer questions about the simulation by email or, if needed, by telephone. The objective of the module is to successfully negotiate a strategy for dealing with the insolvency of a cross-border business enterprise group. Building on the information and skills acquired during Modules A and B of the course, participants will use their familiarity with the UNCITRAL Model Law, Chapter 15 of the U.S. Bankruptcy Code, the EU Insolvency Regulation, etc., and the relevant country legislation and case law on corporate rescue and liquidation, to represent and negotiate on behalf of interested parties. This module constitutes the practical element of this course and the enhanced competence requirement for a practitioner wishing to demonstrate the use of knowledge and skills gained during the course in the context of a simulated international insolvency case. Important Dates to Remember (dates are EDT):
1. April 10, 2015: Send Janis Sarra ([email protected]) confirmation of whether you will appear in person in New York or London. If not, please send the city from which you will join the video conference, the name, phone number and email address of the IT person who will do the multiple city video test in advance and will be the technical person on the day of the hearing.
2. April 11, 2015: Receive access information to the Module C web facility and try logging on to ensure you have access. (Please make sure INSOL and Janis have your current email address). You are given the public facts and corporate organizational chart. You can access the negotiations rooms as well.
3. April 13, 2015: Receive financial worksheets and private facts known only to you and any counterparty. Janis on-line all day to answer questions regarding the simulation. Questions will be answered to entire cohort unless they pertain to the private facts.
4. May 5 to 8, 2015: Preparatory negotiations and discussions for simulation; preparation for live court hearings.
5. Friday May 8: Submit any motions before the courts that will be heard on the Monday, using the posting facility in the court room, i.e. US courtroom or UK courtroom.
6. Monday, May 11, 2015: live court hearings in London and New York (also by video-conference). (May
12 in Hong Kong and Sydney)
7. May 11 to 15, 2015 workout simulation (Module C) occurs.
8. May 15 at 16:00 EDT simulation ends, parties are to make a final report to all the courts they have
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proceedings in by 16:00 EDT (May 16 in Hong Kong and Sydney).
Module C Assessment: Assessment of course participants is by successful participation in and completion of the exercise. The e- learning platform allows Professor Sarra to assess the time spent and quality of work, as she has access to all the rooms on internet facility. She will also ask the judges for their impressions of the participants’ roles in the courtrooms. Where you engage in in-person discussions, it is important to post the results in an e-negotiation room for purposes of assessment of your participation. Dr. Sarra should be advised of any telephone calls, as she will periodically listen in, for assessment purposes. Assessment criteria: Demonstrated understanding of relevant law (30%), including
• Choice of law issues • Centre of main interests (COMI) • Effective use of proceedings under restructuring statutes • Priority of claims • Director liability issues • Reviewable transactions • Orders of the court in respect of cross-border protocols
Demonstrated understanding of practice considerations, the facts and possible strategies (30%), including
• Need to secure post-commencement financing • Understanding of the complexity of cross-border proceedings • Demonstration of negotiation skills • Need to secure ongoing trade supplies • Negotiation of protocols, where appropriate • Scope of the role of insolvency professionals • Governance issues
Demonstration of team skills (20%), through assessment of
• Interactions in private negotiation/strategy rooms • Effective division of work • Collaboration with parties of similar economic interest • Co-operation in developing strategies
Time contributed to the workout proceeding (20%), including assessment of both quantity and quality of contribution in the court rooms and negotiation rooms. Learning Outcomes: By the end of this module, the course participant should be able to: • Acquire and apply an understanding of the dynamics of cross-border workouts • Consolidate and apply learning (regulatory, accountancy, etc.) • Enhance skills in team work in terms of aligned interests in the workout • Understand the financing and control issues raised by cross-border proceedings The Parties
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1. Solid Gold Inc. and Solid Gold Copper Enterprise Ltd., US – Scott Butler [email protected]
2. UK Gold Financiers plc, and Solid Gold UK plc - Scott Aspinall [email protected]
3. Gediegenes Gold – Charlotte Moller [email protected]
4. Digging it Up Ltd. – Zahir Cassim [email protected]
5. Solid Gold Canada Ltd. – Julie Nettleton [email protected]
6. Jean-Claude Tortell – Andrew Morrison [email protected]
7. Lawyer for Jean-Claude Tortell – John Mairo [email protected]
8. Ouro Sólido incorporado – Andrea Harris [email protected]
9. Global Private Equity Fund – Ian Mann [email protected]
10. Eagle Capital Inc. – Tara Cooper Burnside [email protected]
11. Solid Gold Canada Miners’ Pension Fund Trust - Matthew Byrnes [email protected]
12. North and South American Mining Workers’ Union – Scott Abel [email protected]
13. Ernst & Young Insolvency Professionals - Ben Jones [email protected] (assisted by Anthony Idigbe [email protected])
14. Bank Syndicate – Tim Graulich [email protected]
15. Equipment manufacturers, trade supplies creditors - Robert Schiebe [email protected]
16. Brazil Refine Ltd. Solange de Billy Tremblay [email protected]
17. Brazilian Government - –Reinhart Philips [email protected]
18. Noteholders (secured and unsecured) - Vincent Vroom [email protected]
19. Valuable Metals Group, Securitization Lenders – Sigrid Jansen [email protected]
20. Kiwi Investments Inc. - Ruta Darius [email protected]
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The Courts:
We are very honoured to have the following seven judges working with us during Module C, participating as the presiding judge of the court in their jurisdiction:
United States Bankruptcy Court, Southern District of New York, New York, US Judge Robert Drain
High Court, Chancery Division, Royal Courts of Justice, London, United Kingdom Mr. Justice Sir David Richards
Ontario Superior Court of Justice, Commercial List, Toronto, Canada Regional Senior Justice Geoffrey Morawetz Heilbronn Insolvency Court, Germany Mr. Justice Eberhard Nietzer
High Court of New Zealand, New Zealand Mr. Justice Paul Heath Court of São Paulo, Brazil Mr. Justice Daniel Carnio Costa Appellate court for all countries: Mr. Justice David Tysoe
The Advisors:
Course participants are to assist one another in terms of explaining procedures and practice in the jurisdictions involved. A number of practitioners and one judge, several of whom are INSOL Fellows, will serve as advisors for any technical questions in respect of insolvency proceedings in specific jurisdictions. Fellow candidates will first try to access the information themselves, but have these experts available where they cannot find the information or want to better understand the nuances of practice in particular jurisdictions.
United Kingdom: Samantha Bewick, KPMG, London, UK, [email protected]
United States: D. Farrington Yates, Dentons US LLP, [email protected]
Canada: Jane Dietrich, Cassels Brock [email protected] New Zealand: Matthew Kersey, Russell McVeagh, Auckland, New Zealand, [email protected]
Germany: Jan Bunnemann, DLA Piper, [email protected]
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INSOL appreciates the assistance of the University of British Columbia Faculty of Law in hosting the electronic platform for the simulation, in particular webmaster Allyson Woodrooffe. Professor Sarra would also like to acknowledge the assistance of Jean-Daniel Breton, Michelle Dunn, Ben Garner, and Edith Hitt of Ernst & Young, Montréal, Canada, and their colleagues, in their invaluable help with the financial information. Thank you to Greg Crowe, CEO of Entrée Gold for checking the mining terminology. The facts and figures in this simulation should not in any way be taken as information relating to a real restructuring case. Our very sincere thank you to Dentons LLP, Canada, and in particular, John Sandrelli, Managing Partner, and Dick Woo, IT Manager, for their very helpful assistance with the videoconferencing facilities.
The simulation involves two live hearings involving motions in two different court hearings, one before the UK court and one before the US court. Issues before one or both courts will include determination of the centre of main interest in the proceedings and post-commencement financing. The motions will be argued in the back-to-back hearings for a session of no more than 4 hours in total on May 11 2015 (May 12 2015 Sydney and Hong Kong).
FIRST HEARING
First hearing before: Sir David Richards, High Court U.K. London Mon May 11 at 20:00 GMT (8 pm) 2 hours max
White Plains, US Monday May 11 at 15:00 EDT (3 pm)
Vancouver, Canada Monday May 11 at
12:00 PDT (noon)
Cayman Island May 11 14:00 EST (2 pm)
Hong Kong Tuesday May 12 at 3:00 HKT
Sydney, Australia Tuesday May 12 at 5:00 AEST
SECOND HEARING
Second hearing before: Judge Robert Drain, US Bankruptcy Court White Plains, New York at 17:00, May 11 17:00 EDT (5 pm) 2 hours max
London UK Monday May 11 at 22:00 GMT (10 pm)
Vancouver, Canada
Monday May 11 at 14:00 PDT (2 pm)
Cayman Island May 11 16:00 EST (4 pm)
Hong Kong Tuesday May 12 at 5:00 HKT
Sydney, Australia Tuesday May 12 at 7:00 AEST
Addresses for Hearings New York:
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Judge Drain's Courtroom United States Bankruptcy Court 300 Quarropas Street White Plains, New York 10601 Courtroom 118, on the first floor of the courthouse
The White Plains courthouse is a short train ride, approximately 40 minutes from Manhattan. The participants would take a Metro North Harlem line train from Grand Central to White Plains. The courthouse is in walking distance of the White Plains train station.
Address for London:
Sir David Richards “courtroom” Allen & Overy Offices One Bishops Square, London, U.K., E1 6AD
Please contact Heather Callow at INSOL [email protected] if you need precise directions.
IT Contact Information for video-conferencing: Vancouver (coordinating site for all video-conferencing sites): Dick Woo, Dentons [email protected] and Johnson Zhao White Plains New York Courtroom: [email protected]; [email protected] London “Court room”: Victoria Hawkins ([email protected] and Dominika Buze [email protected], phone 0203 088 4400. Cayman Islands: Jack Fleming, Cayman IST Manager, Mourant Ozannes [email protected] Hong Kong: IT contact, Benny Lam, [email protected] Sydney: IT contact: Jonathan O'Keeffe, Technical Support, Henry Davis York, phone: +61 2 9947 6533, [email protected]. Also [email protected]. Appearances in Person and by Video Conference at first hearings:
In London (in the courtroom): Andrea Harris, Sigrid Jansen, Benjamin Jones, Charlotte Moller, Vincent Vroom,
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Rein Philips, Julie Nettleton, Robert Schiebe
In New York (in the courtroom): Tara Cooper-Burnside, Scott Abel, Scott Butler, Timothy Graulich, Anthony Idigbe, John Mairo, Zaheer Cassim, Matt Byrnes, Ruta Darius, Solange de Billy-Tremblay By Videoconference from Sydney: Scott Aspinall
By Videoconference from Hong Kong: Ian Mann
By Videoconference from Grand Cayman: Andrew Morrison
After the live hearings, the rest of the week-long simulation is o n - l i n e . There are “public” court rooms in the UK, US, Canada, Germany, Brazil and New Zealand. Everyone will have access to these courtrooms, but since they are formal court proceedings, please conduct yourself appropriately when making submissions or interventions. The Judges only have access to these court rooms and not the negotiation rooms. You can, if you determine it is appropriate, seek recognition for a main or non-main proceeding in Germany, Canada, Brazil or New Zealand in the e-courtroom of that country. There are also private nego t iat io n rooms, as set up and listed at the end of this document. For example, the debtor companies will have their own room without anyone else having access. These e-negotiation rooms are what you use to develop strategies. There are also e-negotiation rooms that are limited to the debtor companies and particular parties, for example, the debtors and the bank syndicate, so that there can be negotiations. If you want an additional negotiation room, please advise Dr. Sarra at [email protected].
Please note, Professor Sarra will monitor all the discussion rooms; however, she will not intervene in the discussions and it is up to you as participants to successfully run the insolvency proceedings. She will be available to help answer specific questions the entire week.
Components of Simulation:
• The simulation involves six jurisdictions, the majority, signatories to UNCITRAL Model Law. The jurisdictions have been chosen to reflect financial significance, geographic regions, language barriers and time zone challenges.
• There are 20 advocates for “parties” to the proceedings in the selected countries. A couple of people represent more than one party - you can assume that they have fulfilled all appropriate consent requirements regarding possible conflicts of interest.
• Parties should work together where interests align across jurisdiction because of nature of the claim.
• Individual parties will be given additional facts that are not public, regarding their resources,
capacity to compromise claims, or other issues relevant to the workout process. The timing of when or if parties will disclose these facts is part of the challenge of a restructuring process.
• Parties will have to determine the nature and type of proceedings required, including main
proceeding and non-main or secondary proceedings.
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• The simulation commences with parties undertaking some initial strategy talks, via the negotiation rooms.
• The proceedings formally commence at the hearings before the US and UK courts in which the debtors
seek recognition of proceedings and post-commencement financing. The Judges are aware that some course participants are not lawyers. The following may assist in terms of addressing the courts:
o Please take careful note that judges are addressed differently in different jurisdictions:
For example, in the UK, “Your lordship” or “My Lord”, in the U.S., “Your Honour”. The proper way to address the court is to commence your presentation with "My Lord (your Honour), this application concerns ..."… or "I submit, my Lord (your Honour), that the applicants' case has no basis in law. Other helpful phrases are: ("Your Lordship (your Honour) may wish to consider ...."/ "If your Lordship (your Honour) is satisfied on that matter, I have no further submissions to make").
Most important is to be polite and respectful.
• At least two issues will be before the court at the hearings:
1. A dispute regarding choice of laws: dispute between debtor corporations and secured lender
(Bank Syndicate) in respect of foreign main proceeding/centre of main interest.
2. Selection of post-commencement workout financing lender and priority sought, and the issue of control provisions of the workout lender; the Bank Syndicate as pre-existing secured lender brings a motion opposing the post-commencement financing sought.
• Parties need to determine their position on both issues and make submissions at the hearings.
• Parties argue the motions before the court (2 hours each), using facts and existing case-law.
Submissions are to be 5-6 minutes maximum, using relevant statutes and caselaw. All parties should make a submission, even if brief.
• The Court makes a ruling, either at the hearing or in writing the same day (posted in the e-
courtroom), setting the stage for the negotiations for a workout plan.
• Other motions for recognition of proceedings or other matters in Germany, Canada, Brazil or New Zealand, where appropriate, are made in the e-courtrooms.
• Negotiations for a multi-jurisdictional workout then occur through the e-negotiation rooms.
• Motions for direction or resolution of disputes can be made to the relevant court during the
proceedings. These motions are “heard” through public courtrooms of the relevant jurisdictions, where parties can seek a ruling or direction of the court.
• Please note the following: o Any motion must be in writing, including the motions at the first day hearings.
o After the initial two hearings, any submissions to the courts must be made in writing.
o Any motion or submission must commence with the name of the party and whether it is a
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motion, response, seeking directions from the court, etc. For example, “Motion by the debtor company Solid Gold Inc. seeking post-commencement financing”.
o The motion or submission must not be more than one page in length (maximum).
o Once the l ive court hearings are completed, when a motion is made in the e-courtrooms,
other parties will have up to 6 hours to respond with a submission to the court. A party should respond by writing, for example, “Response by the Bank Syndicate to the Motion for…”
o If the moving party wants to make a final reply, it should do so just before the 6 hours is up.
o The court that has the motion before it will then rule after the 6 hours. The time lag is to allow
for time zone differences and to recognize that course participants have other work demands.
o A draft motion about the dispute regarding post-commencement financing for the first hearing is attached to get you started. There are samples of forms, applications or protocols that are posted for your information on the INSOL materials website; however, given your page limit, these documents will be only of limited assistance.
Please note: each judge is giving very valuable time for this simulation, and we have access to them for only 5 days. It is important that your efforts be highly timely during this period. Consider each day from May 11 to 15, 2015 to be roughly one month in real time. Remember that most successful insolvency restructurings involve extensive and constructive negotiations, calling on the courts to make orders only where necessary.
For purposes of ease of public disclosures for publicly traded companies, there is one discussion room that will be a combination of EDGAR, SEDAR, disclosure with the FSA, etc. Those companies that are publicly traded must remember to disclose material changes as required under securities and financial services legislation in the jurisdictions in which they operate. One posting will cover all jurisdictions. The debtor companies are privately held unless these facts set out that they are listed on a public exchange.
• Do not forget to determine whether, under the law you are considering, workers must be consulted
regarding any reorganization.
• The format allows for joint-hearings of two or more courts, if the parties request it and the respective courts agree (in which case, a new joint courtroom would be set up).
• Insolvency professional Ernst & Young reports regularly to the court in jurisdictions where such
reports are the norm.
• Judges in the simulation have access to public court rooms, but not the negotiation rooms.
• Time limits of simulation: The proceedings end at 16:00 EDT on M a y 1 5 , 2 0 1 5 . Hence pressure to find a restructuring strategy that will prevent liquidation or seek renewal of the stay order.
Post-Simulation:
The Judges provide feedback to teams on both motions and strategies (through e-learning platform) and there is a de-briefing by Professor Sarra.
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Practical Benefits of Simulation:
• Participants demonstrate understanding of cross-border workout dynamics and issues. • Participants exercise judgment about the difference between caselaw to support position and need to
negotiate rather than litigate all issues. • Participants develop an enhanced understanding of the role of the court in supervising proceedings
and issues of choice of laws and comity. • Participants develop practice skills in dispute resolution, including negotiation and motions before the
court. • Participants enhance accountancy skills in the context of a cross-border workout. • Participants identify issues and complexity of relationships that require successful workout
negotiation. • Participants gain an appreciation of inherent conflicts of interest, including tensions between parties
to the workout. • Potential impact of legislative reform options in various jurisdictions is clarified.
Preparing for the Simulation:
• Read the facts.
• Review the materials from Modules A and B that can assist you.
• Very important: For the debtor companies, you must decide where to file insolvency proceedings and what to file and make those motions by May 8, 2015 at 17:00 EDT.
• Very important: The Bank Syndicate must make its motion by May 8, 2015, 17:00 EDT; you must
object to the debtors’ choice of post-commencement financing lender.
• If there are facts that are missing that you absolutely need for the simulation, you can request them of the insolvency professional Ben Jones, who will consult with Professor Sarra.
• The judges and thus the “courts” will not be available until May 11, 2015. The objective of the
exercise is to see how far you can take proceedings for a workout in a short time frame.
Partial list of considerations to commence with:
The debtor companies should: • Determine how to proceed in insolvency proceedings, including COMI and non-main or secondary
proceedings that need to be filed
• Make the appropriate filings in the respective courts
• Determine the nature and engagement of the insolvency professionals, and engage them
• Provide notice of proceedings
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• Successfully secure post-commencement financing and have it approved by the court(s)
• Negotiate, if necessary, the terms of cross-border protocols
• Secure, if necessary, director and officer (D&O) indemnification
• Develop a strategy for covering administration costs of any proceeding
• Begin to develop, to the extent possible, a restructuring or liquidation strategy.
The other parties should: • Determine their position on appropriate jurisdiction and proceeding
• Determine where their interests are aligned with other parties
• Bring any needed motions
• Develop a strategy for dealing with the debtor companies to maximize their own return
The insolvency professional should provide advice initially to the debtor companies, and then serve as the insolvency professional (trustee, monitor, administrator, etc.), depending on the type of proceeding initiated and jurisdictions involved.
You are not expected to complete a restructuring plan in five days, but you are expected to have a developed strategy to carry the proceedings forward in whatever jurisdiction or jurisdictions you determine are a necessary part of the insolvency proceedings. If you are able to devise a viable workout plan for approval of a court, all the better. You are expected to give the court(s) in which there are main proceedings or non-main proceedings a report on progress in the restructuring within the last hour of the simulation. This report can be delivered on behalf of all of you or by individual parties.
THE FACTS -
1. Solid Gold Group (“Solid Gold” or “the Corporation” or the “Debtor Companies”) is a multinational group of
business enterprises engaged in the exploration, development of production of gold, copper and other minerals internationally.
2. Solid Gold is a global producer engaged in the acquisition, exploration, development and operation of
properties in the United States, Canada, Brazil, New Zealand and Australia. The principal products and sources of cash flow are derived from the sale of gold, silver, copper, lead and zinc. The Corporation continues to investigate and negotiate the acquisition of additional mining properties or interests in such properties. The Corporation’s principal product is gold doré with the refined gold bullion sold primarily in the London spot market. In addition to gold, the Corporation also produces silver, copper, lead and zinc primarily from concentrate produced at the Blanco Mine and Los Amigos Mine, which is sold to third party refineries. The Corporation’s mines in Canada and US are also significant sources of revenue. The
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Corporation’s mining, exploration and development activities are subject to various levels of federal and state laws and regulations relating to the protection of the environment, including requirements for closure and reclamation of mining properties. The Corporation’s total liability for reclamation and closure cost obligations at March 31, 2015 was $2.7 billion USD. Reclamation expenditures for the year ended March 31, 2015 were $100 million USD.
3. Solid Gold has properties and subsidiaries at the exploration and development (E&D) stage, as well as in
production. As is typical for E&D, the company has incurred considerable costs in undertaking initial exploration. While it has raised the majority of capital through the public markets, it does have an outstanding secured loan from its bank syndicate.
4. While overall the corporate group’s assets and long-term prospects are healthy, the debtor companies are
facing a significant liquidity crisis, given the high cost of bringing projects into production and due to some environmental liability issues. Cash flow forecasts prepared by the companies indicate that they will require approximately $225 USD million to satisfy obligations through to the end of May 2015, assuming the companies operate without creditor protection in the U.S., Canada, Europe, Brazil and New Zealand. The Companies have drawn approximately $734 million USD of their $750 million USD bank facility and the Companies have been advised by the Bank Syndicate that they will not be able to make further draws on the facility. The Companies are not expected to be able to access new sources of financing absent filing for insolvency protection and obtaining access to secured post- commencement financing.
5. Solid Gold Inc. is the parent corporation for all entities within the corporate group, and is sole or
significant shareholder for the Canadian, Brazilian and New Zealand entities. It is incorporated in New York, with head offices in New York and London and trading on the NYSE, TSX and London Stock Exchange. Its activities are primarily holding investments in its subsidiaries and overseeing the activities of the subsidiaries, as well as operating some centralized functions, as described below. It has two headquarters, located in New York and London. Its New York office houses the CEO, many E&D professionals, and production oversight administrative staff. Its London headquarters houses the CFO, financial control and administration, and budget and financial operations.
6. Solid Gold Inc. has a significant founding shareholder, Jean-Claude Tortell, holding 28% of the voting shares.
The remaining voting shares are held by: UK based Global Private Equity Fund (15%), US based Eagle Capital Inc. (9%); Solid Gold Canada Miners’ Pension Fund (8%); Kiwi Investments in New Zealand (5%); and the remaining shares widely held. Tortell is a director of Solid Gold Inc. and chair of its board. He is also a director of Solid Gold Canada Inc. Tortell has residences in Toronto, Canada and Auckland, New Zealand, and divides his time equally between them. The residences are valued at $4 million and $8 million respectively, the latter registered as co-owned by Tortell and the New Zealand entity “Digging it Up Ltd.”.
7. UK Gold Financiers plc is a London UK entity, 100% owned by Solid Gold Inc., which operates the
Corporation’s futures, currency exchange and other derivatives purchase and sales.
8. Solid Gold UK plc. (“SGUK”) is incorporated in London, U.K. and acts as the main internal financing structure for the corporate group, incorporated in 2003 to better manage the financing needs of the Corporation. It acts as a vehicle to raise public debt; acts as the public investment vehicle, offering debt to the public as a listed public company registered with the TSX (symbol SGUK) and the AIMS market in the U.K. It has 30 employees. It also holds a 25% interest in the Jolie Copper Gold Project.
9. Gediegenes Gold is a corporation incorporated in Germany, 100% held by Solid Gold UK plc. This entity
represents the principal purchasing structure within the corporate group for mining equipment and
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supplies. Much of the highly technical equipment is German made and there is a strategic advantage to having an entity operating in Germany. It has 100 employees. It also holds a 20% interest in the Jolie Copper Gold Project. Its board of directors is comprised of three directors appointed by the parent company, and two directors appointed as independent outside directors.
10. Solid Gold Copper Enterprise Ltd. is a US registered entity, wholly owned by Solid Gold Inc. It holds a
100% interest in Amadea gold-copper-silver mine in the United States, which is open pit mining. The mine has operated for 20 years and produced approximately 800 million tons of material from the pit. Most of the material remains in tailings or in leach heap piles. The copper was processed from the extracted ore using two processes. Copper oxide ore was processed by heap leaching, either directly with sulfuric acid in vats to produce a copper solution precipitated by passing it over scrap iron, or by leaching successively in acid and kerosene solutions, subsequently electroplating onto stainless steel sheets. Copper sulfide ore from the lower portion of the pit was processed by crushing, and flotation with calcium oxide added to the solution to maintain an alkaline pH. The facility has generated large amounts of waste (tailings), some of which are toxic. The tailings have been placed into ponds made from naturally existing valleys, secured by embankment dams. The US Environmental Protection Agency has issued orders of clean up and containment of the tailings for this project in the amount of $1 billion USD, with a compliance deadline of September 1, 2015.
11. “Digging it Up Ltd” is a subsidiary of Solid Gold Inc., headquartered in Auckland, New Zealand. It
owns 100% interest in the “New Frontiers” copper-gold project in Queensland, Australia, as well as 100% interest in the “Roo mineral target” in New Zealand, which may have significant gold deposits but the initial testing has yet to be undertaken. The New Zealand entity employs 500 people, including E&D, administrative, technical and managerial employees. The New Frontiers project is located in South
Australia, and consists of one exploration licence totalling 996 km 2. The “Briana target” within the property is defined by a 1 km long gold in residual soil anomaly (>15ppb), with a central core of higher grade soils that occurs above a strong discrete magnetic anomaly. Shallow drilling has found near surface zones of mineralization along two drill fences over the central portion of the soil anomaly, associated with disseminated pyrite and minor quartz veining in fine- to medium- grained micaceous sandstones. Geophysical surveying defined an 800 m long zone with anomalous chargeability and conductivity associated with the mineralization. The entity is currently evaluating the data and is planning a drill program to evaluate the extent of the mineralization found near surface and to test for higher grade mineralization associated with the underlying magnetic anomaly. In December 2014, Digging it Up Ltd. entered into an agreement with Valuable Metals Group whereby Valuable purchased 100% of the iron ore rights on tenement #100 in exchange for 6% of future issued capital. The Sydney Hill molybdenum-copper target has confirmed presence of zones of higher grade copper and molybdenum mineralization. The “Roo mineral target” is defined by a 2km long gold in residual soil anomaly (>16 ppb), but its potential value has yet to be tested.
12. Solid Gold Canada Ltd. is the operating entity in Canada, its headquarters is in Toronto, Canada. It
operates all mines and projects in Canada. As of April 1, 2015, it had 5,100 employees, representing mining, E&D, administrative and management employees, of which 4,500 are unionized with the “North and South American Mining Workers’ Union”. Its mining properties are: a 100% interest in the Solid Gold Red Lake gold mines in Ontario; a 100% interest in the Solid Gold Porcupine gold mine; and a 100% interest in the Solid Gold Whistler gold-silver mine in British Columbia, Canada. The entity also holds a 55% interest in a gold- copper project in Nevada, US, Jolie Copper Gold Project, which is at the exploration stage. The Canadian mining rights consist of 300 patented mineral claims held in the name of either Solid Gold Inc. or Solid Gold Canada Ltd., or jointly by the two companies. The properties cover 1,358 hectares, and comprise 290 patented mineral rights, licences of occupation, lease mineral rights, and staked claims. Environmental
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permits are in place for all current operations. Exploration activities have included regional and detail geological and structural mapping, rock, silt and soil sampling, trenching, reverse circulation and diamond drilling, airborne geophysical surveys, ground IP geophysical surveys, mineralization characterization studies and metallurgical testing of samples. Ore zones exhibit large tonnages of medium-grade, low-cost mineable material and also very high grades. Much of the ore is non-refractory, high grades being associated with strong silicification, arsenopyrite development and quartz veining. These higher grade, plunging, equant zones have involved more intense siliceous, arsenopyrite-rich replacement and higher degrees of dilation relative to lower grade examples and planarmineralised zones. The mineral reserves proven and mineral resource estimates are significant.
13. Ouro Sólido incorporado is the entity in Brazil operating the mines and projects. Ownership is 90% by Solid
Gold Inc. and 10% by the Brazilian Government. Ouro Sólido incorporado has 13,000 employees, representing mining, research and development, administrative and management employees, of which 10,000 are unionized with the North and South American Mining Workers’ Union. Its assets include: 100% interest in the Blanco gold-silver-lead-zinc mine in Brazil; 100% interest in the Los Amigos gold-silver mine in Brazil, and 100% interest in the Solid Gold Rojo gold-silver project in Brazil. The Brazilian mines are open pit mining operations with two separate process facilities, an oxide ore facility and a plant to process sulfide ore. The oxide ore is processed through a heap leach/Merrill-Crowe facility that went into production in 2012. The first gold pour for the oxide circuit was on May 1, 2012. The Mines achieved commercial production in October 2013. The mines are comprised of 130 exploitation concessions covering a total area of approximately 122,534 hectares. Concessions were granted for durations of 50 years. A two percent net smelter return royalty is payable to the Brazilian Government on production. Environmental liabilities are those expected to be associated with an open pit mine that is in the early production phases, and includes the open pit, roads and site infrastructure, and waste and tailings disposal facilities. The company holds the appropriate permits under local, state and federal laws to allow for mining operations. The regional geology is dominated by Mesozoic sedimentary rocks intruded by Tertiary stocks of granodiorite and quartz monzonite. Exploration activities have included geological mapping, reverse circulation and core drilling, ground geophysical surveys, mineralization characterization studies and metallurgical testing of samples. From 2010 to 2013, the company completed 24 core and reverse circulation drill holes, including metallurgical, geotechnical and condemnation drilling. The mine plan and financial analysis are based on a detailed production schedule. The life-of-mine plan update in 2012 was based on $1,200 per ounce of gold and operating parameters derived from the 2014 site budget plan and consisting of production schedules, operating parameters and operating costs. Mine production during 2014 was 150 million metric tonnes. The production rate for the period 2015 to 2019 is projected to average 400,000 tonnes per day. The mine will supply sulphide ore to the plant at a rate of 47 million metric tonnes of sulphide ore per year. The total material mined per year will peak at 220 million metric tonnes per year (603,000 tonnes per day). The Company has an operative refining agreement with Brazil Refine Ltd. for refining of doré produced from the mine. Its bullion is sold on the spot market, by marketing experts retained in-house by UK Gold Financiers pls. The markets for the lead and zinc concentrates from the mines are worldwide with smelters located in Mexico, North America, Asia and Europe. Metals prices are quoted for lead and zinc on the London Metals Exchange and for gold and silver by the London Bullion Market Association. The other project contains major mineralized zones totalling 21,548 hectares, and three exploration licence applications covering 5,338.8 hectares. In November 2014, this project received approval of an amended Environmental Impact Assessment (“EIA”) by the authorities. The approval of the amended EIA permits construction of the plant with throughput increased from 1,850 tonnes per day to 4,000 tonnes per day and the concurrent mining of three veins. Veins in the area contain significant silver and gold. The high grade ore-body will be developed as an underground mine. The plant will begin operations in January 2016 and will process 4,000 metric tonnes per day. During the twelve-year mine life,
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it is projected that 4.13 million ounces of gold and 29.35 million ounces of silver metal will be produced. The mining will be undertaken from concurrent underground operations utilizing standard underground mining equipment. The vein zone will be mined by an open pit method using standard drilling, blasting, loading and hauling operations. The plant has been designed for a total throughput of approximately 1,460,000 tonnes per annum. The Brazilian government has recently introduced changes to its mining regime that reflect increased interest in government participation in the mining sector.
14. Solid Gold has been under significant pressure to reduce the indebtedness owing to its Bank
Syndicate, particularly in the past two years. While the identified reserves are positive, the cost of moving the company’s projects to production has resulted in significant pressure from equipment suppliers that have demanded cash terms and from customers who have expressed concerns about the company’s financial condition. The company currently has trade payables in the amount of $300 million overdue as of April 1, 2015 and several hundred equipment manufacturers and trade suppliers are pressing for payment. They have hired representative counsel to facilitate collective debt collection.
15. Solid Gold sells some of its minerals in a refined state on the spot market, but the majority is sold to
refiners, and there are currently outstanding accounts receivable for sales within the past 30 to 45 days. Aside from the spot market, which settles within a few days, Solid Gold Group uses a securitization program as a significant source of its financing for its accounts receivable. The sponsors of the securitization program have expressed their intention to reduce and eliminate their exposure on the securitization program. This securitization program provides accounts receivable financing for trade receivables. The securitization program finances eligible receivables at approximately 70% of their face value and the program currently provides financing of approximately $755 million, including fees payable upon payout. On April 1, 2015, Solid Gold failed to make its monthly payment of approximately $70 million. As a result, the securitization program is in default and one securitization lender has taken steps to take control of accounts receivable collections, adversely impacting the Companies’ cash position.
16. On April 10, 2015, Solid Gold announced that it will not make the interest payment due on its 9.75% Senior
Notes due in 2017 in the amount of approximately $20 million. The remaining cash resources will be fully exhausted by June 30, 2015 and the Companies will not be able to operate without access to an insolvency process and some sort of post commencement financing. Solid Gold likely needs a minimum of $500 million in rescue financing in terms of a going forward strategy, as well as deferral of trade payables.
17. An analysis of recent accounts payable sub-ledger indicates that almost 40% in number of the
creditors of Solid Gold with outstanding balances less than $1,000 represented less than 1% of the aggregate dollar value of the trade accounts payable. The equipment suppliers in Germany are currently owed $75 million USD.
18. The North and South American Mining Workers’ Union represents employees in Canada and the U.S. at the
various mines and minerals projects. There are outstanding wage claims of $12.2 million as of April 1, 2015, owed to Canadian employees, and outstanding wage claims in the U.S. of $15 million as of April 10, 2015 as Solid Gold Copper Enterprises Ltd. was not able to meet its payroll of April 10, 2015.
19. The North and South American Mining Workers’ Union also represents the workers in the Brazilian mines.
As of October 15, 2013, there were outstanding wages owing to the workers in the amount of 6 million USD, as the company was unable to meet its last payroll.
20. There has been recent concern expressed by the Brazilian Government that a long-term protection and
exit plan does not exist for the Brazilian projects and that there is potential long-term environmental harm
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to the local community. While it has not yet issued an order, it has advised the company that it may issue an order for failure to product such a plan, with a potential fine of $5 million USD. The Brazilian entity has estimated that it will cost $2 million USD to properly develop such a plan.
21. The Canadian entity provides pensions to its employees under the Solid Gold Canada Miners’ Pension
Plan. The Pension Plan is a defined benefit pension plan registered in T o r o n t o , O n t a r i o , C a n a d a and covers employees in all operations in Canada. Pursuant to the O n t a r i o Pension Benefits Act, an employer is obligated to remit pension contributions required to fund the normal cost of the pension benefits to a fund holder (a term defined in the statute). In the case of the Pension Plan, the fund holder is the board of trustees of the Solid Gold Canada Miners’ Pension Fund Trust. The Pension Fund Trust trustees hold the contribution received by the employer in trust for the Pension Plan members’ pension benefits. As a result, if the employer is insolvent, the Canadian Bankruptcy and Insolvency Act excludes assets of the trust from the insolvency estate. Solid Gold Canada Ltd. is currently in arrears in remitting its mandatory pension contributions to the Pension Plan in the amount of $10 million CDN. If the Pension Plan is wound up on the date of insolvency, the liability for pension benefits to current and retired employees would exceed the market value of the Pension Fund’s assets by $580 million CDN. The board of trustees of the Pension Fund Trust is a claimant in any insolvency proceeding of the Canadian entities. The union also has an interest in ensuring its members as future pensioners are protected.
22. Although most of the US accounts receivable are generated pursuant to contracts entered into
between Solid Gold and 3rd party customers, the Companies internally account for the work performed on each contract at the operating entity that performed the work. The accounts receivable are then sold by the US entity to SGUK, with corresponding inter-company accounts recorded between the US entity and the applicable operating entities that generated the accounts receivable. The Companies’ representatives consider that it would be difficult, if not impossible, to trace back the transactions with a view to reallocating the bad debt expenses, given the large volume of transactions.
23. In anticipation of filing insolvency proceedings, the Companies have received two fully committed offers
for post-commencement financing, one from the Bank Syndicate agent offering to provide post- commencement financing in the amount of $1.2 billion, and another proposal to provide financing by Global Private Equity Fund in the amount of $1.0 billion. In both cases, the financing would be available only if security is granted by a court on a priority basis, and parties need to consider the implications of any outstanding environmental liabilities in particular jurisdictions and any statutory priority arising out of such liabilities. The board of directors has approved the Global Private Equity Fund financing and Solid Gold will seek court approval at the hearing on May 11, 2015.
24. Global Private Equity Fund has agreed to commit to $1.0 billion of Senior Secured Post-
Commencement financing for four months, generally providing for a senior secured term loan facility in the aggregate principal amount of up to $600 million (“Term Loan Facility”) and a senior secured revolving credit facility in the amount of $400 million (“Revolving Credit Facility”). It has a draft term sheet that sets out that the Companies will have interim availability of $600 million under the Term Loan Facility and $150 million under the Revolving Credit Facility from the date the Facilities are approved in an insolvency proceeding in the US, UK and/or Canada. Global Private Equity Fund has required that the Revolving Credit Facility availability be subject to a borrowing base calculation with regard to the accounts receivable and inventory of the Companies. The interest on the Revolving Credit Facility is equal to the higher of adjusted LIBOR plus 8.25% or the Alternate Base Rate (“ABR”) plus 7.25%, whereas the interest on the Term Loan Facility is equal to the higher of adjusted LIBOR plus 8.5% or ABR plus 6.25%. The debtor, Solid Gold Inc., has agreed to the following covenants, subject to approval of a court: the Term Loan Facility shall be prepaid with 100% of the net cash proceeds of all asset sales of property and issuances, offerings or placements of debt obligations; the Companies have to comply with a minimum consolidated Liquidity
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Availability covenant of $50 million and a minimum consolidated EBITDAR covenant; and preparation of a rolling 13-week cash flow forecast, updated monthly.
25. Global Private Equity Fund has also insisted on a term that requires that the debtor companies will make
no motions to any court absent its prior approval. Global also requires that it be appointed to two seats on the board of directors of Solid Gold Inc. immediately, with full indemnification for the directors during the proceedings.
26. Existing lender, the Bank Syndicate was willing to commit to $1.2 billion of additional debt under a Senior
Secured Post-Commencement financing, generally providing for a senior secured term loan facility in the aggregate principal amount of up to $500 million (“Term Loan Facility”) and a senior secured revolving credit facility in the amount of $700 million (“Revolving Credit Facility”), on condition that Solid Gold Inc. and its subsidiaries file insolvency proceedings. The board of directors of Solid Gold Inc. declined this offer in favour of the Global Private Equity Fund financing. The Bank Syndicate would have allowed the Companies interim availability of $500 million under the Term Loan Facility and an initial amount of $100 million to be released under the Revolving Credit Facility from the date the Facilities are approved in an insolvency proceeding in the US, UK or Canada until a final order of proceedings. The Revolving Credit Facility availability would have been subject to a borrowing base calculation with regards to the accounts receivable and inventory of the Companies. The interest on the Revolving Credit Facility is equal to the higher of adjusted LIBOR plus 9.25% or the ABR plus 7.75%, whereas the interest on the Term Loan Facility is equal to the higher of adjusted LIBOR plus 9% or ABR plus 7.25%. The Bank Syndicate would require ongoing access to all financials of the company at all times during the restructuring. The Bank Syndicate opposes the debtors’ motion for approval of post-commencement financing from Global Private Equity Fund on a priority basis and opposes the control provisions that Global is requiring.
27. In terms of recent financial performance, the US operations produced 1,210 million USD of sales in fiscal
2014 (i.e. the year ended March 31, 2015) representing a steady decline of 200 million USD since fiscal 2013. The deteriorating sales resulted from a number of factors including difficult market conditions, uneven copper prices, fluctuating consumer demand (most of the growth is from China), and the growing presence of low cost competitors in South America. Several factors, including higher costs to bring into production and equipment costs and other cost increases, and transfer of debt between facilities contributed to the erosion in EBITDA from 102 million USD earned in 2014 to the current level of EBITDA losses of 13.8 million USD in 2014 before taking into consideration impairment changes. The US entities likely need 250 million in post-commencement financing if Solid Gold is to continue to stabilize its mining development and production and show commitment to the business for customers, local management, employees and suppliers. The cash flow continues to be negatively affected by difficult market. The Canadian operations have faced a deteriorating situation from high production costs, but demand for product remains stable.
28. The following are part of Solid Gold’s public disclosures:
Occupational Health and Safety Policy The Corporation has adopted an occupational health and safety policy that guides the Corporation’s objective of a safe and healthy workplace. The Occupational Health and Safety Policy provides that the Corporation will develop and implement effective management systems to identify, minimize and manage health and safety risks; promote and enhance employee commitment and accountability; provide training and information; strive for continuous improvement by setting targets and measuring results; and provide the resources to achieve a safe and healthy work environment.
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Human Rights Policy
Solid Gold Group has adopted a Human Rights Policy that integrates human rights best practices into business processes and informs decision-making and due diligence processes. The Human Rights Policy provides that Solid Gold shall operate in a way that respects human rights of employees and the communities in which the Corporation operates. The Human Rights Policy is guided by international laws and provides for, among other things, human rights of indigenous peoples in association with Convention 69 of the International Labour Organization.
Environmental and Sustainability Policy
Solid Gold has implemented an Environmental and Sustainability Policy, which states that the Corporation and its subsidiaries are committed to the protection of life, health and the environment for present and future generations. Resources will be focused to achieve shareholder profitability in all operations without neglecting the Corporation’s commitment to sustainable development. The needs and culture of the local communities will be respected. Solid Gold’s properties are routinely inspected by regulatory staff to ensure that such properties are in compliance with applicable environmental laws and regulations. Such properties are also periodically audited by internal staff to ensure that such properties are in compliance with applicable environmental laws and regulations as well as the Environmental and Sustainability Policy and standards. The Sustainability, Environment, Health and Safety Committee of the Board of Directors of each entity is responsible for overseeing the Environmental and Sustainability Policy.
Technical Information
The estimated Mineral Reserves and Mineral Resources for the Canadian, United States and Brazilian mines have been calculated in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definitions, adopted by the Canadian Securities Administrators’ National Instrument 43-101 Standards of Disclosure for Mineral Projects. The estimated ore reserves and Mineral Resources for the New Frontiers project have been calculated in accordance with the current version of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”), the Australian worldwide standards.
Forward Looking Statements
The Companies’ annual information form contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian, UK, New Zealand and Brazilian securities legislation. Forward looking statements include, but are not limited to, statements with respect to the future price of gold, silver, copper, lead and zinc, the estimation of Mineral Reserves and Mineral Resources, the realization of Mineral Reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, hedging practices, currency exchange rate fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, timing and possible outcome of pending litigation, title disputes or claims and limitations on insurance coverage. Forward-looking statements are made based on certain assumptions and other important factors that could cause the actual results, performances or achievements of the company to be materially different from future results, performances or achievements expressed or implied by such statements. Certain important factors that could cause actual results, performances or achievements to differ materially from those in the forward-looking statements include,
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among others, gold price volatility, discrepancies between actual and estimated production, Mineral Reserves and resources and metallurgical recoveries, mining operational and development risks, litigation risks, regulatory restrictions (including environmental regulatory restrictions and liability), activities by governmental authorities (including changes in taxation), currency fluctuations, the speculative nature of gold exploration, the global economic climate, dilution, share price volatility, competition, loss of key employees, additional funding requirements and defective title to mineral claims or property. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the integration of acquisitions; risks related to international operations, including economical and political instability in foreign jurisdictions; risks related to current global financial conditions; actual results of current exploration activities; environmental risks; future prices of gold, silver, copper, lead and zinc; possible variations in ore reserves, grade or recovery rates; mine development and operating risks; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities.
Inter-company transactions
29. Solid Gold’s administrative functions are significantly centralized in a few main locations. The information systems are complex and cumbersome, and are designed to provide management with information based on mining project and production units. The Companies’ systems provide information based on business units for reporting on the operations, and on a consolidated basis for external reporting purposes. Obtaining information on a legal entity basis is difficult, as the Companies’ systems do not easily accommodate this level of reporting, since the Companies have seen limited need thus far for detailed entity by entity information. The Companies have started adapting their systems in the past two months to extract information based on legal entities, in addition to the other levels of reporting that are more relevant to management. The administrative processes put in place to manage the business are such that a large number of commercial transactions, including transactions with outside third parties, can give rise to inter-company transactions.
30. Due to the corporate structure and international operations, some inter-company transactions result from
financing vehicles and/or local legal requirements.
Purchase transactions
31. In order to better manage its worldwide purchasing power, control quality and realize economies of scale, Solid Gold has put in place a centralized purchasing system, designed to manage all purchasing of equipment, testing materials. The main purchasing transactions are recorded as follows:
Outside supplier
Account payable Gediegenes Gold
Interco amount Operating entity
Equipment and
Supplies
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32. With respect to the purchases that are made by the U.S. operating entities directly, the transactions are recorded through an inter-company entry in the records as follows:
Outside supplier
Account payable Solid Gold Copper Enterprise Ltd.
Merchandise
Interco amount Operating entity
33. The prices charged by Gediegenes Gold are intended to reflect arm’s length pricing and are supported by transfer pricing documentation prepared by external consultants. The recording of accounts payable and payment of amounts on behalf of affiliates by Solid Gold Copper Enterprise Ltd. do not have a profit component.
Sale transactions – United States
34. In the US, sale transactions give rise to inter-company transactions, in view of the fact that the trade accounts receivable are pooled. The transactions are recorded as follows:
Operating entity
Interco amount
Supplies, services
Solid Gold Inc.
Account receivable Outside customer
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Expenses/Cash disbursements
35. Cash disbursement functions are centralized at Solid Gold’s head office in London. To the extent that the
amount paid relates to an expense or an indebtedness of an operating entity, such as for example the payment of payroll expenses, remittance of sales taxes, payment of property taxes, etc., such payment gives rise to an inter-company amount as follows:
Outside supplier
Cash Solid Gold Inc.
Interco amount Operating entity
Account payable reduction Expense incurred
Cash pooling
36. The entities in three countries use a cash pooling system to reduce the borrowing needs by setting off cash shortages in some entities with cash overages in other entities. The cash pooling system is managed through SGUK, which holds the concentrating account. As such, each transaction through which cash is received or payments are made results in an inter-company transaction, essentially as follows:
Outside party
Cash
Canadian,
Brazilian and New Zealand
entities
Cash
Interco amount
SGUK
The transaction reflects a collection of an account receivable. In the case of a payment, the transaction would be similar, but in the opposite direction.
Cash pooling – United States
37. There is a cash pooling system in effect in the U.S., through which certain inter-company transactions are channelled, essentially as follows:
Operating Cash (notional)
entity Solid Gold Inc.
Interco amount
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Securitization program – United States
38. In the US, Solid Gold participated in an accounts receivable securitization program (the “US
Securitization Program”) pursuant to which accounts receivable held in Solid Gold Inc. or SGUK were sold using a “two-step” transfer structure. The purchase price paid by SGUK consists of cash and a revolving subordinated promissory note issued by SGUK. SGUK, as seller under the second step of the transactions, retained a subordinated, residual interest in the sold receivables intended to first absorb credit losses, if any. The transactions are represented by the following:
Solid Gold
Inc. and US
Accounts receivable Accounts receivable
SGUK
Conduit
subsidiary Cash and interco promissory note
Cash purchaser
39. The US Securitization Program allowed the Companies to use the cash relating to the accounts
receivable that had been sold.
40. If insolvency proceedings are initiated, they will constitute a termination event under the US Securitization Program documents. There is intercompany debt due from SGUK to Solid Gold Inc.
Factoring program
41. In Canada, Brazil and New Zealand, Solid Gold Inc. participated in an accounts receivable factoring program (the “Factoring Program”) pursuant to which accounts receivable generated by SGUK were sold to a factor, under an agreement that provides the factor with full recourse, except in case of non- payment because of insolvency or financial difficulties of the customer. The accounts receivable are sold and assigned to the factor, who then remits the proceeds of the sale, net of the factoring commission, to Solid Gold Inc., in view of the cash pooling agreement. The transactions are represented by the following:
Solid Gold Inc.
Accounts receivable Factor cash Interco promissory note
SGUK
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42. The invoices are all stamped with a notice to pay the factor directly.
43. If insolvency proceedings are initiated, they will constitute a termination event under the Factoring Program documents.
Allocation of common expenses
44. Some expenses are incurred on behalf of several entities. For example, Solid Gold Inc.’s head office administrative functions and professional fees are allocated periodically based on formulas that are reviewed by outside professionals in order to comply with transfer pricing and income tax expense deductibility rules. The allocation of expenses is performed amongst the Companies through inter- company charges and/or a management fee expense, and covers expenses such as information technology, selling, general and administrative expenses (SG&A) and purchase volume discounts. Some common expenses are not reallocated through inter-company charges. Examples of transactions that should give rise to an inter-company reallocation but that are not would include the payment of income taxes. The potential adjustments relating to these common expenses cannot be quantified.
Transfers of assets
45. The Companies sometimes transfer assets amongst themselves. This transfer has often occurred when contracts are transferred from one production unit to another or when new equipment is installed and the previously used equipment is transferred to an entity that can still use the older or less sophisticated equipment. The transfer price is intended to reflect the fair market value of the assets transferred when a cross-border transfer takes place and their net book value when the transfers are between entities in the same country. The transactions by which equipment is transferred or sold amongst the Companies give rise to an inter-company charge, essentially as follows:
Operating entity
equipment
Interco amount
Operating entity
46. The inter-company balances created through these transactions are settled through the cash pooling systems (referred to earlier) by a notional cash transfer, or are settled in cash when the assets are transferred between regions.
47. The Companies sometimes transfer goods and services amongst themselves. The transactions give rise to
an inter-company charge, essentially in the same manner as that described in respect of the sales/transfers of assets. The transfer prices for these transactions are negotiated between the local management of the business units or entities involved in the transaction; and transfer prices reflect fair market value.
Debt Structure
48. Solid Gold has a complex internal debt structure, whereby some entities make loans and advances to other entities within the group. The most significant transactions are represented by loans made by SGUK,
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which has approximately $1.2 billion of accounts receivable from other members of the group. The loans and advances are represented by cash transactions. Gediegenes Gold and Solid Gold Inc. also have sizeable loans and advances due from other entities in the corporate group. The structure of transactions with SGUK is substantially as follows:
SGUK
cash Interco loan
Operating
entity
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49. To the extent that the loans are made by SGUK to an operating entity in the U.S., Canada, Brazil or New Zealand, the cash transfer is notional between SGUK and the operating entity, in view of the cash pooling system. In fact, the cash is transferred to Solid Gold Inc. and applied in reduction of the then existing inter-company debt between it and the operating entity.
Public debt
50. The current financing structure involves SGUK, which makes loans and advances to the various entities in Solid Gold based on financing needs. This structure was put in place in February 2011, through an initial capital contribution of $125 million from Solid Gold Inc. This capital contribution was contemporaneous with an issuance of preferred shares (series 4) by Solid Gold Inc., which yielded proceeds of $130 million.
51. The funds received by SGUK from the initial capitalization were loaned to the entities in US and Brazil.
Additional transfers of funds by Solid Gold Inc. were made to capitalize SGUK during 2011, the most significant of which is represented by a series of transactions by which: the US entity borrowed monies externally; the U.S. entities were de-capitalized through dividends, resulting in an aggregate dividend payment of $1 billion to Solid Gold Inc.; a portion of the funds received by Solid Gold Inc. through the dividend, or approximately $850 million thereof, was used to capitalize SGUK. The remainder of the $1 billion dividend was used to repay $118 million in external debt owing by Solid Gold Inc. and for general corporate purposes; SGUK then made loans and advances to various operating entities in the U.S. and these funds were then used to repay the monies that had been borrowed from external sources.
52. In total, approximately $1.3 billion was transferred to SGUK to capitalize it in 2012, and these funds were
loaned to the various entities in Solid Gold. The loan portfolio of SGUK as at March 31 , 2015 indicates loans totalling $1.3 billion.
53. The funds that were made available for loans and advances for Solid Gold are limited to the funds from
this initial capitalization of $1.3 billion, plus the interest earned by SGUK on the loans and advances, less an amount of approximately $250 million withdrawn by Solid Gold Inc. in December 2014 through a de-capitalization of SGUK.
54. Over time, the funds from the initial capitalization and interest thereon were redistributed amongst
Solid Gold based on the financing needs of the individual operating entities. The loan portfolio of SGUK at March 31, 2015 can be summarized as follows:
$000's
Loan Total amount Brazil entity 300,000 302,227 Canadian entity 105,985 106,709 New Zealand entity 285,878 290,499 US operating entities 507,780 511,092
1,199,643 1,210,527
55. SGUK has 775M USD in bank debt and 1054M USD in note debt.
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56. The high level of interrelation between the various entities and the volume of transactions make it difficult, if not impossible, to track the transactions between the affiliates on a transaction by transaction basis.
Analysis of the Use of Proceeds from Senior Notes: Senior
notes due 2015 - 2018
57. The Company issued senior notes in May 2010 (“2015-18 Notes”), comprised of the following:
Due date Rate $000's November-15-15 4.875% 200,000 November-15-18 6.125% 400,000
600,000
58. The 2015-18 Notes were issued by SGUK and are guaranteed by Solid Gold Inc. The 2015-18 Notes were issued under a final prospectus. The 2015-18 Notes did not generate cash proceeds, but were issued merely to exchange notes issued in 2008 as a private placement with essentially identical notes registered under the U.S. Securities Act, and freely tradable by persons not affiliated with Solid Gold Inc. The notes replaced by these 2015-18 Notes were issued through a private placement under a confidential offering memorandum. On receipt of the funds in November 2009, these funds were transferred to the US production entity through the issuance of notes.
59. The issuance of the private notes in November 2009 generated proceeds of $593 million.
60. Following the issuance of the 2015-18 Notes, the following debt was retired:
$000's
Due date Rate Face value Call Price November-15-13 8.375% 258,000 268,000 February-15-14 7.750% 300,000 312,000
558,000 580,000
Senior notes due in 2017
61. In November 2012 the Company issued $400 million USD of 9.75% notes due January 15, 2017 (“2017 Notes”). The 2017 Notes were issued by Solid Gold Inc. The 2017 Notes were issued by way of private placement under a confidential offering memorandum dated November 13, 2012. The internal financing restructuring did not involve any transfer of funds. The stated projected use of the proceeds in the offering memorandum was to repurchase up to $125 million USD of senior notes, to repay in full $150 million USD of the 7.75% senior debentures due in December 2012, to repay borrowings under the credit facility and to use the remainder for general corporate purposes.
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62. The Companies entered into a series of separate transactions contemporaneously with the issuance of the 2017 Notes which extended over a period of several days in late December 2012. The financial transactions included:
62.1 The issuance of the 2017 Notes, generating net proceeds of approximately $393 million.
62.2 Additional borrowings of approximately $416 million USD on a short term basis.
62.3 A series of transfers of funds of $150 million USD to Solid Gold Copper Enterprise Ltd. The
transfers of funds from Solid Gold Inc. to Solid Gold Copper Enterprise Ltd. consisted of capitalization transactions.
62.4 Funds were then used by Solid Gold Copper Enterprise Ltd. to repay a p p r o x i m a t e l y
$155 million USD in senior debentures (i.e. $150 million USD in capital plus accrued interest of approximately $5 million). These were 7.75% senior debentures due in December 2012.
62.5 A transfer of funds from Solid Gold Inc. to SGUK of approximately $266 million, to repay a loan
of $308 million CDN.
62.6 Transfers of funds totalling $257 million USD from SGUK to Solid Gold Inc. to de-capitalize SGUK.
62.7 A transfer of funds from SGUK to Gediegenes Gold, of approximately $17 million USD to fund
capital expenditure requirements.
62.8 A repayment of short term borrowings of approximately $500 million USD.
63. In summary, the series of transactions had the following effect: a new issuance of debt comprised of the 2017 Notes, for $400 million, the capitalization of Solid Gold Copper Enterprise Ltd., by $150 million, the early repayment of the internal debt of Solid Gold Copper Enterprise Ltd.; the recapitalization of SGUK with approximately $257 million, funding for Gediegenes Gold of approximately $17 million, a repayment of the borrowings under the credit facility for approximately $85 million, and approximately $145 million in cash flow. The early repayment of the external debt (by 17 days) was to provide an improvement in the debt to equity ratio covenant, as at the November quarter-end.
Senior notes due in 2018
64. In March 2010 the Company issued $450 million of 8.75% notes due March 15, 2018 (“2018 Notes”).
The 2018 Notes were issued by SGUK and are guaranteed by Solid Gold Inc. The 2018 Notes were issued by way of a private placement under a confidential offering memorandum dated March 1, 2010. The net proceeds generated by the issuance of the 2018 Notes totalled approximately $443.8 million. The stated projected use of the proceeds, in the confidential offering memorandum, was to repay in full the 7.20% senior notes due March 28, 2010, in the principal amount of $250 million, and for general corporate purposes.
65. The funds generated through the issuance of the 2018 Notes were intended to be channelled through an
efficient internal financing structure. To put in place the structure, the funds were transferred through a combination of loans and advances and capitalizations, from Solid Gold Inc. to SGUK and then to Solid Gold Copper Enterprise Ltd. This structure was amended in December 2012; and as noted above, this change did not involve any transfer of funds. The net effect of the transactions through which the
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internal financing was restructured, was that SGUK became the principal obligor under the 2018 Notes.
66. The Companies entered into a series of separate transactions contemporaneously with the issuance of the 2018 Notes, the end result of which can be summarized as follows (not necessarily in this order):
- The funds were raised through the issuance of the 2018 Notes, generating proceeds of
approximately $443.8 million.
- An equivalent amount, together with an amount equivalent to a capital contribution of $50 million that had been made primarily by Solid Gold Inc. to capitalize SGUK, was then loaned to Solid Gold Copper Enterprise Ltd. ($493.8 million USD).
- Solid Gold Copper Enterprise Ltd. transferred funds to SGUK to repay a loan of $250 million USD.
67. The remainder of the funds were used as working capital, although funds transited through SGUK and
triggered a series of inter-company transactions (consisting in part of loans and in part of capitalizations), before being returned in part by SGUK by way of a loan to Solid Gold Inc. ($230 million).
Senior debentures due in 2027
68. In 1997 the Company issued $150 million of 6.5% debentures due August 1, 2027 (“2027 Notes”). The 2027 Notes were issued by SGUK and are guaranteed by Solid Gold Inc. The 2027 Notes were issued under a prospectus dated January 15, 1997 and a supplementary prospectus dated July 29, 1997. The net proceeds generated by the issuance of these 2027 Notes totalled approximately $148.6 million. The stated projected use of the proceeds in the prospectus was to repay a portion of the indebtedness under the revolving bank credit facilities.
69. The 2027 Notes were redeemable at the option of the noteholder at par on August 1, 2004. Most of the
noteholders tendered their notes for redemption, and the balance outstanding of these notes is $3.2 million.
Private notes
July 2005 transactions
70. The Company issued private notes in 2005, comprised of the following:
Series Due date Rate US$000's A July-15-15 8.42% 175,000 B July-15-17 8.52% 75,000 C September-15-20 8.54% 91,000 D September-15-25 8.69% 30,000
371,000
71. The notes were issued by SGUK and on receipt, these funds were transferred to the US production entity through the issuance of notes that mirror the characteristics of the notes issued by SGUK. The funds were
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then re-transferred amongst some of the Companies in a series of loans and/or loan repayment transactions as part of the cash pool arrangements.
72. The notes were issued by SGUK based on two Note Purchase Agreements dated July 12, 2005 and
September 12, 2005 respectively. Under the Note Purchase Agreements, the notes were issued by SGUK and are guaranteed by Solid Gold Inc.
November 2008 transactions
73. The issuance of mirror notes by SGUK in 2005 and the series of contemporaneous transactions among
some of the Companies through a series of loans and/or loan repayments, until the funds were ultimately transferred to Solid Gold Copper Enterprise Ltd., represented the set-up of an internal financing structure. This structure was unwound in November 2008. The manner in which it was unwound was as follows: Essentially, funds circulated from Solid Gold Copper Enterprise Ltd., through some of the Companies, and then to SGUK in repayment of the mirror notes, which were then cancelled. The funds were then re-transferred by SGUK to Solid Gold Copper Enterprise Ltd. by way of a loan, for which Solid Gold Copper Enterprise Ltd. issued new notes payable to SGUK, also referred to as “mirror notes”, on terms substantially the same as the old mirror notes. This transaction in November 2008 did not affect the notes issued to the noteholders, but only affected the internal debt structure of the Companies by reallocating loans and advances amongst the affiliates as a result of the internal financing restructuring.
Balance outstanding
74. The Note Purchase Agreements provide for the possibility of repurchasing the notes before their maturity date by payment of a redemption amount represented by the principal amount, accrued interest and an applicable “Make Whole” payment. The audited financial statements for fiscal 2013 indicate that a portion of the notes were redeemed in August 2013, as follows:
Series Due date Rate US$000's
Issued Redeemed Balance A July-15-15 8.42% 175,000 3,500 171,500 B July-15-17 8.52% 75,000 15,000 60,000 C September-15-20 8.54% 91,000 36,000 55,000 D September-15-25 8.69% 30,000 - 30,000
371,000 54,500 316,500
Note repayment in August 2013
75. On July 27, 2013, pursuant to a resolution of the Board of Directors of Solid Gold Inc., a decision was made to redeem the remaining outstanding series A, B, C and D notes on August 25, 2013. The certificate issued to the noteholders indicates that the aggregate redemption amount was $376 million. Notwithstanding the fact that the notes were issued by SGUK, the payment of the redemption amount was made by Solid Gold Canada Ltd. The documented agreements between SGUK and Solid Gold Canada Ltd. regarding the re-purchase and redemption of the notes are represented by an agreement dated July 28, 2013 and a letter dated August 25, 2013, through which SGUK transfers to Solid Gold Canada Ltd. the rights and obligations relating to the redemption of the notes, the Canadian entity acquires the notes for an
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amount equivalent to the redemption amount, and it surrenders the notes to SGUK for cancellation, in consideration of the cancellation of an equivalent debt due by Solid Gold Canada to SGUK. The equivalent debt is represented by the “mirror” notes that had been issued by Solid Gold Canada Ltd.
76. Notwithstanding the fact that the documentation appended to the Note Purchase Agreements
specifies a distinct separate banking information for each of the noteholders as the payment routing instruction, the redemption amount was paid as a single payment to CIBC Mellon as a result of an agreement through which CIBC Mellon acts as Registrar, Transfer Agent and Paying Agent for this debt issue.
77. The redemption amount was paid by a single wire transfer of $376 million paid to CIBC Mellon Trust
Company on August 25, 2013.
Source of funds
78. The Companies did not issue new debt to refinance the August 2013 note repayment described above, but decided to use the funds made available under their operating line of credit with the Banking Syndicate. The request for a draw under the credit facility to pay the redemption amount was effected by letters to the Royal Bank of Canada (the administrative agent for the banking syndicate) (RBC) dated July 25, August 15 and August 20, 2013.
79. The credit agreement between the Companies and the Banking Syndicate contained restrictions as to the
use of funds. In July 2013, section 3.6 of the credit agreement provided that:
3.6 Purposes of Advances The Credit Facilities shall be used by the Borrowers for general corporate purposes, including, without limitation, ongoing working capital and operations requirements, commercial paper back-up and, subject to the terms and conditions hereof, to provide funding for Acquisitions, Investments and capital expenditures. No Swingline Loan shall be used to refinance any outstanding Swingline Loan.
80. The credit agreement was modified in August 2013 and section 3.6 was modified as follows to allow the
note repayment under certain terms and conditions described below:
3.6 Purposes of Advances
The Credit Facilities shall be used by the Borrowers for general corporate purposes, including, without limitation, ongoing working capital and operations requirements, commercial paper back-up and, subject to the terms and conditions hereof, to provide funding for Acquisitions, Investments and capital expenditures, but excluding for the purposes of financing any share redemption (including, without limitation, redemption of Sol id G ol d I nc .’s Series 5 Cumulative Redeemable First Preferred Shares) or for the purposes of financing any principal repayments of Indebtedness (other than scheduled instalments, the payments owed at scheduled and unscheduled maturity up to an aggregate amount of US$50,000,000 or the redemption in full of the Private Notes).
Notwithstanding the foregoing, until such time as the Private Notes have been redeemed in full, (i) the Credit Facilities may be used for any of the purposes described in the preceding paragraph
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up to a maximum amount of US$400,000,000; and (ii) the initial Borrowing under the Credit Facilities in excess of US$400,000,000 shall be used solely for the purpose of Borrowings to be used exclusively for the proposed redemption, in full, of the Private Notes.
81. The modification described above, together with the contemporaneous waivers of the financial ratio
covenants under the syndicated credit agreement and a cross-default under the private notes, allowed a draw under the credit facility for the purpose of paying the redemption amount of the private notes. The draw under the credit facility occurred on August 25, 2013.
82. The amount drawn under the RBC credit facility increased from $132.5 million as of July 31, 2013 to a peak
level of $734 million as of August 31, 2013.
83. As part of the modifications to and the waivers under the credit agreement, Solid Gold Inc. undertook the following:
83.1 To provide a guarantee of the indebtedness by each of the North American subsidiaries
(except for few specific entities and entities considered to have a negligible amount of operating assets and EBITDA).
83.2 To provide security by way of a pledge of the shares held by Solid Gold Inc. in Solid Gold
Canada Ltd.
83.3 To provide security by way of first ranking security interest in the personal and real property of Gediegenes Gold (other than the accounts receivable that may be subject to the North American Securitization Program).
83.4 To provide security by way of a first ranking security interest over all inventories of Solid Gold
Inc., and its subsidiaries in North America.
84. To reduce the aggregate commitment of the bank syndicate to $650 million as of October 15, 2013 and $500 million as of November 15, 2013.These guarantees and security agreements were executed, as well as the security interest over the inventory of Solid Gold Inc. However, the security interest in the inventories of the other North American subsidiaries has not yet been executed.
Background reading and sample court applications on INSOL Module C fellow site:
U.K. Cross-Border Insolvency Regulations 2006 and forms
Sample US Chapter 15 Petition
Sample Cross Border Protocols
Statement of Principles for a Global Approach to Multi-Creditor Workouts INSOL International 2001
Sample Canadian initial order CCAA
Sample Chapter 11 U.S. Bankruptcy Code application
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New Zealand Insolvency (Cross-Border) Act 2006
Private e-negotiation rooms and who has access:
1. Debtor Companies only
Solid Gold Inc. and Solid Gold Copper Enterprise Ltd., US – Scott Butler [email protected]; UK Gold Financiers plc, and Solid Gold UK plc - Scott Aspinall [email protected]; Gediegenes Gold – Charlotte Moller [email protected]; Digging it Up Ltd. – Zahir Cassim [email protected] ;Solid Gold Canada Ltd. – Julie Nettleton [email protected]; Ouro Sólido incorporado – Andrea Harris [email protected]
2. Debtor Companies and Ernst & Young Insolvency Professionals Debtors as above plus Ben Jones [email protected] and Anthony Idigbe [email protected]
3. Debtor Companies and shareholders
Debtors as above plus Solid Gold Canada Miners’ Pension Fund Trust - Matthew Byrnes [email protected]; Jean-Claude Tortell – Andrew Morrison [email protected]; Lawyer for Jean-Claude Tortell – John Mairo [email protected]; Global Private Equity Fund – Ian Mann [email protected]; Eagle Capital Inc. – Tara Cooper Burnside [email protected]; Kiwi Investments Inc. - Ruta Darius [email protected]
4. Debtor Companies, Ernst and Young and Global Private Equity Fund
Debtors as above plus Ben Jones [email protected], Anthony Idigbe [email protected],Global Private Equity Fund – Ian Mann [email protected]
5. Debtor Companies, Ernst and Young and the Bank Syndicate Debtors as above plus Ben Jones [email protected], Anthony Idigbe [email protected], Bank Syndicate – Tim Graulich [email protected]
6. Debtors Companies, Ernst & Young and the Union Debtors as above plus Scott Abel [email protected], Ben Jones [email protected], Anthony Idigbe [email protected]
7. Debtors Companies, Ernst & Young, and the Trade Suppliers and Equipment Manufacturers Debtors as above plus Robert Schiebe [email protected], Ben Jones [email protected], Anthony Idigbe [email protected]
8. Debtors Companies, Ernst & Young and Eagle Capital Debtors as above plus Ben Jones [email protected], Anthony Idigbe [email protected],
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Eagle Capital Inc. – Tara Cooper Burnside [email protected]
9. All parties plus Janis (not public, not the Judges)
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Sample Motion
[Please ensure you cut and paste or directly write the motion into the actual posted message instead of attaching as a separate document, as sometimes parties have trouble with attachments]
IN THE COURT OF ….
IN THE MATTER OF
…
BEFORE THE HONOURABLE…..
THE _TH DAY OF 2015
Court File: 2015-001
MOTION
The Applicant Bank Syndicate brings this motion to object to the proposed post-commencement financing facility that is sought by the debtor companies. The applicant is the operating lender of the debtor companies and opposes the debtor companies’ motion to have the proposed post-commencement financing be given a priority over its secured interest. The Applicant has offered comparable terms for post-commencement financing, and given its pre-existing relationship, should be given the first opportunity to provide such financing.
In the alternative, if the debtors’ proposed post-commencement financing is approved, the Applicant seeks to set aside that part of the proposed facility agreement that will grant the lender a veto over the debtors’ ability to bring motions to the court and asks that the court set aside the appointment of two nominees of the lender to the board of directors of the parent company, on the basis that both of these proposed control mechanisms are contrary to the objectives of the U.S. Bankruptcy Code (or cite relevant statute). (Then cite a case or two if relevant).
Applicant: Bank Syndicate
Counsel for the Applicant: [your name]
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