Business
Revised Jien offer provides for no effective price increase to Canadian Royalties debenture holders
Revised Jien offer provides for no effective price increase to Canadian Royalties debenture holders
About this update from Cleghorn Minerals Ltd.
[{"type":"text","content":"\n\n\n\nOct. 23, 2009 (Canada NewsWire Group) -- TORONTO, Oct. 23 /CNW/ -- Jaguar Financial Corporation (TSX: JFC) (\"Jaguar\") today stated that there was no effective change in the pricing of the revised offer (\"Revised Offer\") by Jien Mining Canada Ltd. (\"Jien\") for the holders of debentures (the \"Debenture Holders\") of Canadian Royalties Inc. (TSX: CZZ) (\"CZZ\"). As the opinion from BMO Capital Markets (\"BMO\") stated that the original Jien offer (\"Original Offer\") was financially unfair to Debenture Holders, BMO cannot provide a positive fairness opinion on the Revised Offer, which has the same effective pricing for the debentures as the Original Offer. Similarly, the CZZ directors advised the Debenture Holders not to tender their debentures to the Original Offer, but these directors are now mysteriously silent and provide no recommendation to the Debenture Holders on the Revised Offer. Jaguar believes the directors are not providing a recommendation to the Debenture Holders because there is no effective price increase in the Revised Offer for the Debenture Holders.No Effective Price Increase in Revised Offer for Debenture HoldersIt is important to examine the convoluted structure of the Original Offer by Jien from the point of view of the Debenture Holders to determine the effective pricing for the debentures. The Original Offer provided for the payment of 60% of the principal amount, subject to a two-thirds tender condition. If a majority, or about 50.1% of the debentures, were tendered, Jien's stated intent was to amend the Indenture to provide for redemption of the debentures not tendered at 101% of the principal amount.This structure was illogical because it incentivized Debenture Holders to wait for the 101% repayment, and not tender for 60%. At the same time, it was important for enough debentures to be tendered under the Original Offer to meet the 50.1% tender condition for an expected waiver of the two-thirds condition by Jien. This structure was coercive and resulted in conflicting priorities for the Debenture Holders.Jien stated that if 50.1% of the debentures were tendered, Jien may waive the two-thirds tender condition and take up and pay 60% of the principal amount for the debentures tendered. Jien also signalled that it then would redeem the debentures not tendered for 101% of the principal amount.T...