Re: Affidavit of Robert Fung sworn December 22, 2011
posted on
Dec 24, 2011 12:37AM
In normal circumstance that when a bankruptcy filing such that debt is more than asset, I would agree with you the shareholder has no value left over. And typically in those situations that new shares will replace old shares so old shareholders received nothing. However, in our case, the only reason that we filed was due to a serve liquidity crisis or I would call it timing of potential cash flow and if we do get a settlement or arbitration awards, the asset value is at least 4x the debt with 500m invested figures. Bob had clearly stated that in the filing and therefore i would image that if his restructure was to get rid of the old shareholders, it will be contradicted to the content of his filing and it will be a surprise to me if the judge will approve it. On the other hand, the old and new note holder will want to maximize the value, that is for sure. However, it requires bob to get a plan that will pass both the majority of the debtor and the judge. If eventually no acceptable restructuring plan comes up, according to the CCAA filing, the Jude can still extend the "Stay" status indefinitely. And if no restructuring plan to pass on in the near future, the current note holder will also like us, to see the company run out of money before we get the settlement or an award, and we have only approximate 2m in the bank and 10m in equipment, so their lost will be as bad as ours as they will get 10 cents out of a dollars from their initial investment, we are in the same boat.
So as long as bob can figure out a fair financial restructuring that will keep everyone happy, then we will be ok. And at last, one thing he mentioned that equity of our company is well diversified by general public with a lot of retail shareholders so I tend to believe that means the overlap of creditor and shareholder is minimal in our case. And according to CCAA that if the restructuring plan has an impact to shareholder, shareholder can vote against it.
As a result, in my opinion, the only viable exit to all stakeholders is bob to come up with a reasonable financial restructure plan that will keep us and the creditor happy, and at the same time that the judge will buy in as that is the reason why CCAA was approved today. Otherwise everyone will face a dramatic lose except for VEN government. Well, there will always be chance like this such that we lose everything, and nothing different from now. but in our case, given the fish is so obviously large and everyone either getting a part of the fish or nothing, I will tend to believe that creditor will understand that as well so that at lease we will get at least some payback. Business is business, creditor has its own business to take care of, not only the retail shareholders. Obviously we will not win the whole amount, but I see why the creditor and bob will need to keep the shareholders in the game because he needs to get approval from the judge as well.