Creditors voted to approve Yukon Zinc’s restructuring plan this week, and reactions are ranging from disappointment to resignation.
The plan will see some creditors paid back the full amount they’re owed, and others paid just 11.5 cents on the dollar.
The results of Wednesday’s vote show that 267 of the 273 voters chose to approve the plan, with just six voting against.
That high number of yes votes is not entirely surprising, since anyone to be repaid in full and anyone who chose to take the best offer available (11.5 cents instead of 7.5) was automatically assumed to have voted for the plan.
But the plan also had to receive approval from creditors representing at least two-thirds of the unsecured debt. In the end, creditors representing just 69.3 per cent of the debt voted for the plan, meaning it actually passed by a fairly narrow margin.
That also suggests it was a few of the larger creditors who voted against the plan.
Don Halliday, president of Hy’s North Transportation, was not among them. He’s owed $551,000, but said he voted for the plan to ensure he would get 11.5 cents on the dollar.
Still, he said he doesn’t think the plan is good for anybody.
“They owe me a whole bunch of money, and I owe it to a whole bunch of other people in the Yukon,” he said. “It is what it is, I guess. It’s business.”
His dispute with Yukon Zinc is not yet resolved, however. His company and two others, including P.S. Sidhu Trucking Ltd., have outstanding lien claims against Yukon Zinc that will now have to be resolved in court.
If his lien is valid, Yukon Zinc will have to pay him back the full he’s owed.
Jim Tredger, the Yukon NDP’s Energy, Mines and Resources critic, said the deal put creditors “between a rock and a hard place,” forcing them to choose between a small repayment and nothing at all. He said the government needs to find a better way to protect local businesses.
He suggested the Yukon could consider a security bond for creditors, similar to a reclamation bond. If a mining company were to fail, the government could use that bond to repay businesses.
But John Sandrelli, a B.C.-based lawyer specializing in insolvency and bankruptcy, said if the government were to introduce such legislation, it would make the territory less attractive to mining investment.
Sandrelli said he doesn’t believe there’s anything “inherently offensive” about the plan Yukon Zinc and JDC Canada put forward.
But he did say that some academics argue the Canadian creditor protection process is “somewhat unfair to smaller creditors” because it’s difficult for them to work together to get the best deal they can.
In the United States, he explained, the court appoints committees to represent creditors in the vast majority of creditor protection proceedings. But in Canada, that rarely happens.
“Those applications just don’t seem to get brought and aren’t part of our landscape here,” he said.
He said that in this case, because the major secured lender was the parent company, having a committee for the creditors likely would have been helpful.
Still, parent companies get to hold most of the cards in these situations because they hold most of the debt, argued David Ullmann, a Toronto-based bankruptcy and insolvency litigator.
“They still have spent millions of dollars… that they’re not getting back at the moment,” he said.
In this case, JDC Canada is owed roughly $602 million.
But Ullmann acknowledged that the process can seem callous when it appears to pit the interests of a big company against those of small, local businesses.
“That’s the arithmetic versus people’s actual lives,” he said. “It can seem like cold comfort.”
The vote has likely closed the book on Australian junior MinQuest’s bid to buy the mine.
“At a personal level, it is disappointing that it doesn’t look like it’s going to happen in the way we hoped,” said Jeremy Read, the company’s managing director.
He said he still hopes to reach a deal with Yukon Zinc to use the mill at the Wolverine Mine to process ore from the nearby Fyre Lake project.
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