Cambior inks restructuring agreement with lenders

Beleaguered Cambior (CBJ-T) has finally signed a definitive restructuring agreement with its lenders and hedge providers.

The deal brings to a close a 3-month standstill period initiated after the gold miner racked up more than US$33 million in hedging losses when gold prices briefly rallied in early October (T.N.M., Nov. 8-14/99).

Under the new deal, Cambior must repay US$75 million of US$212 million in outstanding loans by June, with the remainder to mature at the end of 2000. Interest will be set at the London Inter-Bank Offer Rate plus 0.75% until June 30.

Cambior must also make additional interest charges of 3.25% per year and pay restructuring fees equal to 1% of the loan and hedge exposure amount, though payment of these charges and fees will be deferred until June 30.

The company estimates that, after June, additional interest on its outstanding loans could add up to US$2 million in extra payments.

The agreement has reined in Cambior’s hedging portfolio. Flexible-forward positions (including spot deferred contracts and call options with initial maturities in 1999 and early 2000) have been reduced and restructured into fixed-forward positions maturing over the next three years.

By Dec. 22, 1999, Cambior’s hedging position had been reduced to 1.8 million oz. gold sold at an average price of US$333 per oz. Naked call positions had been reduced to a total of 784,000 oz. at an average price of US$349 per oz.

During 2000, Cambior’s hedging position is: 370,000 oz. gold sold forward on a fixed basis at US$302 per oz.; 112,000 oz. gold sold forward on a variable basis at US$340 per oz.; and call options on 100,000 oz. gold priced at an average US$340 per oz.

The restructuring agreement also includes restrictions on capital expenditures, hedging activities, additional borrowings from third parties, dividend payments and asset sales. As well, Cambior has agreed to use a substantial portion of any proceeds from asset sales or equity financings to repay existing debt.

The company has created fixed charges on its Mouska, Bouchard-Hebert and Langlois mines in Quebec, in addition to a previous charge created over its flagship Doyon gold mine, also in Quebec. The company says other fixed charges may be created.

With the assistance of financial advisor Bunting Warburg Dillon Read, Cambior intends to continue pursuing “substantial” asset sales or transactions.