‘Robin Hood’ rides to the rescue

So-named team aiding Twin Butte debenture holders

For the debenture holders of Twin Butte Energy, which went into receivership in September 2016, the battle to receive fair value is nearing its end. And the holders have millions of reasons to be pleased with what’s transpired: They are almost five times better off by pursuing their fight than had they acquiesced.

Thanks to the recent 13th filing made by the courtappointed receiver (Calgarybased FTI Consulting), the holders now know they will receive multiples of what they stood to receive had they supported the company-supported takeover offer in the summer of 2016.

According to that report, the debenture holders, who in late 2013 invested $ 85 million, stand to receive an additional $ 7.72 million on top of the $ 58.05 million they’ve already received. There is a chance they may get more given that some claims are still the subject of a dispute.

In all, according to the latest report, an extra $1 million or almost is set make its way to the debenture holders. Most of that amount consists of claims made by a former executive and a former employee: In both cases either the courts or a committee of the debenture holders have decided on amounts less than what have been claimed. As well there were $3.52 million in disputed claims.

But based on what has already been paid and what is now being proposed, the recovery for the debenture holders stands at 74.24 per cent of the total claims made by the subordinate debenture holders ($ 88.585 million.) The recovery percentage rises to 77.37 per cent when it is measured relative to the face value of the subordinate debentures.

Subsequent to the latest report, following the settlement of another disputed cl aim, t he r eceiver has moved the percentages even higher, to 76.54 per cent ( of total claims) and 79.77 per cent (of face value.)

To put that recovery into perspective, the debenture holders were offered 14 per cent of f ace value when Singapore-based Reignwood Resources Holding offered

IT TAKES A LOT OF COURAGE TO TAKE ON THE ESTABLISHED CONVENTION.

to buy the company in July 2016. On top of the 14 per cent of face value the debenture holders were also offered accrued and unpaid interest (about three cents.)

That offer — being done by way of a plan of arrangement and which was alongside a proposed payment of six cents a share to common equity owners — was backed by the board, by a fairness opinion ( confined, at least initially to the shareholders with no reference to the fairness of the deal to the debenture holders) and by the views of the two leading proxy advisory firms, Institutional Shareholder Services Inc. and Glass Lewis. There is lots of blame to go ’round.

But the debenture holders were not about to accept that situation that upset the traditional payout hierarchy in which debenture holders get paid in full before the equity holders receive anything. At the meeting called to vote on the transaction, support from the shareholders was 77/ 23 but fell to 32/ 68 from the debenture holders.

But it takes a lot of courage to take on the establ i shed convention. First, the holders have to be upset enough to demand something better, then they have to get organized and then they have to hire bankers and lawyers to assist with the fight. A group of holders retained Calgary- based Sandy Edmonstone and Bennett Jones.

That trio — the holders and the two advisers — fought the good fight that was named Project Robin Hood. It was conducted during a period when a new buyer emerged with a high enough offer to pay in full the banks, the creditors and the advisers to Twin Butte.