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Gold/Mining/Energy : Royal Oak-RYO
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To: scott who wrote (917)4/15/1998 10:45:00 AM
From: Madharry  Read Replies (2) of 1706
 
Scott, you are much more lucid than other negative people on the thread, and your comments have merit. I am unfamiliar with Canadian bankruptcy law, But IMHO Witte is a very tough negotiator and I would think that the senior debt holders would like their interest payments to continue. If they don't like the terms of the deal, In the US a voluntary bankruptcy would probably be a very good solution for the shareholders as opposed to the bondholders, because the preferential financing to complete the mine would certainly be approved as would any claims by suppliers to complete the mines. On the other hand the senior debt holders would not get any interest payments for a while. In the meantime the mine gets built and the price of gold may go up. So if Canadian law is anything like US law in this regard, I see the senior debt holders as not having as much leverage as you think because in the event of a voluntary bankruptcy the shareholder equity does not get diluted right away but the price of the senior debt probably goes right into the toilet at least for awhile. Therfore I see the senior debt holders putting up the good fight but ultimately agreeing to this deal because like the shareholders they have no choice.

What I do not understand is how a stock as liquid as RYO can have bid -ask spread of 1/16. COuld you shed some light on this?

One last thought to those who question the feasibilty of this mine: Doesn't the fact that the price of the bonds are holding up so well tell you that there are some sophisticated entities outside of the company who believe the mine is economic?
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