On the surface it seems very strange, and the situation is made even stranger because the court — in this case the Court of Queen’s Bench of Alberta — didn’t provide a reason.
Instead all that was said was that the application to have all of Twin Butte Energy’s debenture holders pay the fees incurred by the ad hoc committee to their financial adviser, Macquarie Capital, “is hereby dismissed.”
On the other hand, the fees incurred by the legal adviser to the ad hoc debenture group — a group that led the charge last August to reject a proposed takeover because they deemed the offer to be unfair — will be paid. The fees will be paid on a pro-rated basis by the holders who in late 2013 invested $85 million in the debentures.
Since that offer from Reignwood Resources was rejected last August, another suitor, Henenghaixin Operating Corp., has acquired Twin Butte — an offer that was approved by FTI Consulting, the receiver, last January.
The offer meant the banks will receive a full payout on their loans outstanding (in all they pocketed $200.6 million) and will see the debenture holders receive substantially more than was anticipated under the original, but rejected, offer.
Depending on how things unfold, the payout to the debenture holders could be 3 to 4 times what they were scheduled to receive under the Reignwood offer. By any measure that’s a great result.
The situation is strange because of the large role played by Macquarie Capital after Twin Butte went into receivership. (The adviser was also busy prior to receivership: it and the ad hoc committee proposed a debt/equity swap and an equity deal via a rights offering. If implemented, the company would probably have avoided receivership and all security holders including the shareholders would have received something.)
According to an affidavit filed by John Maguire, a debenture holder, Macquarie found the buyer. In his statement, Maguire said he was informed by Macquarie that “it has extensive background with the bidder that ultimately made the bid for Twin Butte’s assets, having successfully completed three corporate or asset sale transactions with that party.”
Maguire’s affidavit says Twin Butte’s new owner did not participate in the sale process conducted before it entered receivership. Instead it “only became involved in the process after the appointment of Macquarie Capital as financial adviser to the ad hoc committee.”
Clearly Macquarie, which has completed two previous transactions with the new buyer and which signed a performance-based contract, performed its tasks with considerable skill.
Without that work, it’s difficult to know how debenture holders would have fared. (What’s known is that those who didn’t support the AdHoc committee are getting a free-ride.) The seventh report from the receiver said Macquarie’s total fees (counting success fee) are in the range of $1.7 million to $2.9 million. The receiver, which presented a different view of Macquarie’s role opposed the request to pay Macquarie.
Two selling agents, Peters & Co. Limited and CIBC World Markets Inc., were appointed by the receiver to round up buyers once Twin Butte was placed in receivership. Presumably their task was to find a new buyer.
It’s not known how much those two firms received for their work. In reports filed by the receiver there is an item called professional fees, a catch-all that includes fees paid to the receiver, Norton Rose, its legal adviser, plus “success and work fees paid to the selling agents.” Given that the new buyer was found by Macquarie, it’s tough to know how much success the two agents enjoyed.