With the new year upon us I have been trying to figure out where we are in this mess and how we got here.

It seems like there are 2 sides right now. Those that think Kry should have filed for arbitration back in 2008 three years earlier and those who think Kry followed the proper process by filing when they did.

I have been one of the people who felt Kry is in better position for the ICSID fight by waiting to file until every option had been explorer. This choice has brought us to the brink of bankruptcy however. We are under CCAA protection for the time being until it becomes clear if Fung has a deal with new investors or not. I have asked myself what would be different if we had filed in 2008.

In Feb of 2008 Kry did a PP for about 70 million. They received the permit denial a couple of months after the PP. Later in 2008 the noteholders filed their first claim in court based on change of control. The noteholder wanted full repayment of the notes immediately. Even back in 2008 kry didn't have enough money to pay the notes because I believe they had planned to repay the notes out of cash flow from gold mining at LC on their maturity date Dec. 23, 2011.

A few questions comes to mind. What would have happened if Kry did file in 2008 after the first appeal lapsed? Would this then have constituted a change in control? Would the noteholders have been entitled to redemption of the notes immediately. Since Kry didn't have enough money to repay the notes, would the noteholders have taken the same position they have taken in the current court documents which is to threaten legal action and try to discourage Kry from raising more money through debt financing? Would Kry be forced into bankruptcy or CCAA protection like we are today?

Lots of people have posted that if we filed back in 2008 we would have had lots of money for arbitration. Seems like a logical thing to think. We had just raised $70 million so we should have been fine. But what about the noteholders who filed their first action at the end of 2008. Here is the first part of that press release:

TORONTO, ONTARIO -- (MARKET WIRE) -- 12/11/08 -- Crystallex International Corporation (TSX: KRY) (NYSE-A: KRY) today reported that it has now been served with a Notice of Application by Computershare Trust Company of Canada ("Computershare") in its capacity as Trustee for the holders of certain senior unsecured notes of Crystallex due December 23, 2011. Computershare, on behalf of the debenture holders, is seeking a declaration from the Court that there has been a "Project Change of Control" event as defined in the First Supplemental Indenture made as of December 23, 2004 thereby requiring Crystallex to purchase all of the notes of each note holder who has so requested at a price equal to 102% of the principal amount of the notes, together with accrued and unpaid interest to the date of purchase.

So by the end of 2008 we had:

Liquidity and Capital Resources

- Cash and cash equivalents at December 31, 2008 were $34.5 million.

Where the hell did all the money go? That is another issue that should also be explored later when I'm done.

OK back to original question. The note holders want us to file for arbitration immediately because they say there has been a change in control. The note holders want their $100 million and interest immediately. If Kry does this how do they pay the note holders? Is Kry forced to give the arbitration claim to the note holders immediately? I have no idea but I bet Fung and the note holders know that answer.

I have no way of checking what the bonds were trading at when the note holders filed their first claim but again I bet it wasn't at face value. I do know that the notes could be bought this spring for less than $700 per $1000. That is over a 30% discount. I believe they were trading even lower back then.

So lets figure this one out if we can. In 2008 when we have our permit denied after doing everything that was asked of us including paying the bond and taxes to VZ, we could have filed for arbitration. Doing so may or may not have constituted a change of control. My guess it would have and the note holder probably had the same opinion. Where did this leave Kry?

Kry has about 35 million in the bank and some mining equipment to sell. Not enough to pay off the notes at 102% like the note holders want. Don't forget that the notes were trading at a large discount on the open market. How could Kry pay off these notes without going back to the market for another PP north of $100 million? They couldn't.

Given their current position, it is easy to assume the note holders won't let Kry do any more debt financing senior to theirs. Not an unreasonable position when trying to protect their investment. It appears even back in 2008 the noteholders were looking at asking for the arbitration claim, remaining $35 million and equipment if Kry couldn't pay the notes back at 102%.

One thing we should remember is Sept. 15th 2008 or Bloody Monday as many called it. The economic blood bath started that day and continued. Probably not the best environment to look for over $100 million financing for a company that just had it permit denied. Could they have raised the money in 2008? I don't know but I can't see it being any easier back then. What would have happened if we filed for arbitration in 2008? Would this action be considered a change of control, triggered the clause the noteholders wanted forcing Kry to pay them 102% immediately which we couldn't unless we found $100 million months after the start of the global melt down or would we be forced to file for CCAA protection in 2008.

One more point to remember here. The notes were sold and not forced on anyone as far as I know. Kry had originally announced a $60 million debt financing but it grew to $100 million plus some shares. Doesn't seem like a hard sell or arm twisting to me. The people who bought these notes knew they were unsecured when they bought them. I have no idea how many of these original note holders are still holding and how many of the current note holders bought the debt at a greatly reduced price. It is also important to remember that Kry has never missed an interest payment until this last on when they were forced to file for CCAA.

Did Kry do the right thing in waiting to file or should they have filed in 2008? Who would have gained most by filing in 2008? If what I hypothesized above about change of control had happened I don't see the shareholders getting anymore than what we are looking at right now is the noteholders get their way and our shares are cancelled.

How about the note holders? Kry files in 2008 and a judge grants the same request they have asked for in 2011. Now the noteholders have $35 million cash and maybe another $35 million in equipment. What about the balanced owed to them? I suggest they would ask for the arbitration claim as well. Seems like the note holders would have $70 million and the claim. Not bad when you consider the notes were probably trading under $70 million in the market.

The way I see it as a shareholder we have lost nothing but time waiting until 2011 to file. In that period of time there were also many opportunities to sell or trade our shares. I believe our ICSID case is much better by having VZ cancel our MOA. Whether we get any value out of our shares will depend on Fung getting a new financing deal. We will hopefully find that out by Jan. 21st.

Two quick things. If filing for arbitration in 2008 before getting out MOA terminated by VZ wouldn't have triggered the notes we have a different story. It would have meant giving up on mining LC and settling for what now would seem like a good deal but back in 2008 we were all thing 20 million ounces of gold and how can any sane person not want it out of the ground.

The other thing is where the hell did all the money go? Was Kry a bank machine for board members and friends like some have suggested or were these expenses all legit. I will leave that up to some else to tackle.

JJ