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Gold/Mining/Energy : Royal Oak-RYO -- Ignore unavailable to you. Want to Upgrade?

To: roger fontaine who wrote (1646)	3/17/1999 9:55:00 AM
From: JERRY GACH	Respond to of 1706

I don't understand why Trilon would turn the financial tap back on. They are going to get ryo if it fails anyway, why waste the money now? Wouldn't the smarter move be to let them slide into bk asap?

To: roger fontaine who wrote (1646)	3/19/1999 6:11:00 PM
From: roger fontaine	Read Replies (2) \| Respond to of 1706

Scotiabank wants to push Royal Oak into receivership Bank owed $5.3M (US): Tells court it has lost confidence in the firm's management By KEITH DAMSELL The Financial Post Troubled Royal Oak Mines Inc. may be pushed into receivership next week by the Bank of Nova Scotia. Scotiabank "has lost confidence in current management" to restructure operations, and wants the Ontario Court to appoint a receiver to take control of the insolvent Washington state gold company, notes a March 17 court filing. Poor gold markets and cost overruns at Royal Oak's Kemess South mining project in British Columbia forced the company to seek protection from its creditors last month. The company has about $600-million in liabilities, including a $5.3-million (US) gold-hedging debt to Scotiabank of Toronto. Royal Oak and court-appointed monitor PricewaterhouseCooopers Inc. were in the midst of preparing a restructuring plan to save the company when Scotiabank delivered its legal broadside yesterday. In addition to Kemess, Royal Oak has two mines in Timmins, Ont., and owns the Giant mine near Yellowknife, Northwest Territories. Royal Oak's proposed March 9 restructuring plan does not have "any likelihood of success," notes the bank's 27-page motion. In addition, Royal Oak's debt continues to grow and the company's request for more time to develop a restructuring plan will "materially worsen (the bank's) position," the filing notes. The bank's drastic move to oust management and potentially sell off its mining assets to the highest bidder follows a long legal battle by Royal Oak to secure emergency funding from secured creditor Trilon Financial Corp. Trilon, owed more than $180-million, agreed to lend the mining company a further $34.7-million as long as it received priority over all other lenders. Despite objections from many creditors, including Scotiabank, the court agreed to give loans from Toronto-based Trilon "super priority," excluding only $4.7-million in debts to Kemess lien holders. Faith in Royal Oak management was tested last week when PricewaterhouseCoopers revealed the company had made $1.2-million in unauthorized payments, including insurance premiums for executives and leasing fees to Trilon. The controversial payments were cancelled, but management continues to demand $100,000 per month be allocated to pay the insurance premiums of six senior executives, including chief executive Margaret Witte. In light of the monitor's report, "the Bank of Nova Scotia does not have any confidence in the ability of current Royal Oak management to develop a successful plan and control costs," notes Scotiabank's filing. The receivership motion, to be debated in court next Wednesday, may hinge on the Ontario Chief Justice James Farley's interpretation of a June, 1998, loan agreement between Trilon and Royal Oak. Royal Oak, facing a cash-crunch to complete the Kemess project, borrowed $180-million from Trilon. Under the terms of the agreement, Trilon contends Royal Oak's lenders agreed to a "six-month standstill period" before they could move to appoint a receiver. Therefore, Scotiabank cannot move to appoint a receiver until June of this year, Trilon notes in a response filed yesterday. Meanwhile, problems continue at Kemess. Mining operations ground to a halt Wednesday following the discovery of an axle problem with five of six large transportation trucks. It is unknown what impact the shutdown will have on cash flow, said Patricia Jackson, a lawyer for Royal Oak. In addition, expenses are rising and production and gold and copper grades remain inconsistent, notes a March 16 update from PricewaterhouseCoopers