In the seven plus years since the Top court ruled round the planned going private transaction at BCE, the roles of directors are becoming harder.
While legal court relieved directors of the duty to maximise shareholder value poor change-of-control transaction, the administrators are actually necessary to take into account the interests of stakeholders.
A live transaction is happening with this particular topic, a transaction that was a tad harder Thursday. The transaction concerns Vancouver-based Taseko Mines, which, monthly back, received a request from 5 % shareholder Raging River for any meeting. Raging River had issues in regards to the conflict resulting from those directors linked to the privately-held Hunter Dickinson Inc., combined with underperformance of Taseko’s shares. Additionally, it put four nominees up for election.
Taseko, which recently filed a case against Ottawa seeking damages in regards to the non-approval from the New Prosperity Project, responded and a May 10 meeting date.
Thursday, Taseko released information it said showed Raging River, had muddied the waters because it happen to be investing in a “large position” in Taseko bonds. Taseko said the undisclosed stake a face price of $21.8 million – Four times its equity stake. The bonds that mature in 2019 possess a 7.Seventy five percent coupon. They trade at $53 per $100 face value.
In Taseko’s view, the dissidents’ financial interests were “now severely at odds with shareholders,” adding “this matter raises serious questions regarding whether Raging River desires to earn money from its bond ownership at the expense of Taseko shareholders in case Raging River’s nominees are elected.”
Taseko based that argument on two factors:
if Raging River’s nominees are elected and when those nominees “can result in the Company to try some kinds of transactions,” then it is bonds “would rank in priority before shareholders for repayment and funds distributions;” andif the nominees were successful and asset divestitures occurred, “the cash proceeds must be employed to repay other debt holders ranking while watching bonds, and thus would enhance the cost of the bonds inside the cost of growth initiatives that may benefit shareholders.”
That’s great stuff – indeed a great summary of the conflict between debt and equity holders – even when it may be construed as fear mongering because of the hurdles Raging River must clear. Taseko’s argument is the fact Raging River, just as one equity holder, has less to attain computer does like a debt holder – should it win.
So just how can directors respond, given that bondholders want full repayment and considering that equity holders, who’ve had a tough ride, are presumably awaiting the upturn in commodities?
If the directors’ duty should be to act inside the best interest in the company also to consider all stakeholders, then is Taseko’s intend to remain this program the best approach? Would Taseko stand a better chance of survival if it were deleveraged?
Thursday, Raging River asserted it “built up a bond position as an alternative method of taking part in the about face the business and provide defense from the present board’s continued mismanagement and self-interested decisions.”
In an e-mail, Raging River said, “like Taseko’s other largest shareholders we hold both shares and bonds. We’re one of the largest shareholders in the company and hold more shares than all the board members combined.”
bcritchley@nationalpost.com
