Investors and analysts are questioning whether First Quantum Minerals Ltd. (FM) created a breach in terms of $2 billion bonds of Inmet Mining Corp. when it acquired the Toronto-based miner.The bonds carried restricted-payments covenants, which limit the amount of cash an issuer may use for distributions to shareholders such as stock repurchases or dividends.In the C$5 billion ($4.8 billion) acquisition in April, Vancouver-based First Quantum employed a bridge loan to buy Inmet, using the target’s assets to support the financing, then paid off the short-term debt with cash, creating a “strong argument” that First Quantum breached the payments provision, according to a report by the researcher Covenant Review today.“It certainly raises concerns, and we’re currently examining this,” said Kevin McSweeney, portfolio manager at CI Investments Inc., which oversees about $74 billion of assets. “We know that they couldn’t have paid out Inmet shareholders directly. We have questions and doubts about how the company structured these transactions to get around the restricted-payments limits and whether compliance with this covenant was maintained.”
Read the whole article on Bloomberg: Inmet Bondholders Raise Question of Covenant Breach in Takeover - Bloomberg
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