Interesting for sure.

The 9 months the note holders want would work if they would cooperate in allowing fung to get the financing. I'm not sure how Fung and Crystallex can secure financing without securing the money with the arbitration award. The noteholders have already said they won't allow this to happen in the letter from them to Kry a month before the CCAA filing.

Let me give an example of what may have transpired.

Fung tries to negotiate an extension with the note holders over the years. They tell Fung no problem except they want most of the award and we want you and the board out. Fung says no. You can decide if it was because he and the board would be booted, because the existing shareholders would get next to nothing or a combination of both.

Fung looks for financing elsewhere and finds interested parties. They are willing to lend the money but also want part of the award. We can use 30% or 49% or what ever number. Either way it is far less than what the note holders are willing to do. Still not great for shareholders but better than $0.

Fung goes back to the note holders and tells them they have found financing that will pay them the full $100 million plus interest as laid out in the agreement. To do this the new debt holders want to have the loan secured so they need the note holders to agree to this and they will get their money.

The problem is Kry can't secure the loan because their agreement with the note holders which doesn't allow any new debt to be senior to theirs. Shouldn't be a problem if all the note holders want is the money they are owed.

The note holders refuse knowing Kry can't get a loan without securing it. The note holders letter to Kry the month before filing says Kry can't secure any financing that is senior to theirs. How do the note holders think they will get their pay out on Dec. 23 2012 if they won't allow Kry to get the financing done. Answer is they don't!

This forces Kry to file for CCAA protection so that any financing is done with the courts approval to eliminate the chance of lawsuits against Kry, the BOD or the new debt holders.

The note holders want more. They want the award and the only way they can get it is to force Kry into bankruptcy and hope they get a judge who will allow them to be treated as if they are secured creditors. Unfortunately for them and fortunately for us the Judge and monitor haven't been fooled.

This is why in my opinion they have allowed Kry to do a DIP. The DIP the note holders are proposing won't finance Kry through arbitration. It would allow Kry to purse new financing to pay off the note holders. Luckily the court and monitor both realize that Kry can't find a new loan with out securing the loan. So basically the note holders want to delay a real financing and eliminate any real bidders in an effort to take the award.

JJ