Trying to repair the damage caused by its failed hedging program,
The company bought 1 million oz. through the bullion markets at an average price of US$300 per oz. The remaining 300,000-oz. reduction comes from the closing-out of other positions by the company’s hedging counterparties. The moves will be used to close-out delivery contracts for an equal number of ounces (T.N.M., Oct. 25-31/99).
The purchase and close-outs are expected to generate a net realized liability for Cambior of US$33 million, which will be reflected as a non-cash, pretax charge to earnings in the third quarter.
Under the terms of a standstill agreement announced in late October, the above-mentioned liability will be treated as a demand loan to Cambior by its counterparties. The determination of more specific repayment arrangements will form part of further negotiations.
The financial parties have agreed to defer Cambior’s gold delivery obligations under all hedging contracts that mature during the standstill period, which expires Nov. 26, 1999.
Cambior’s obligations under the standstill agreement included commitments to: grant a security interest in its Doyon mine and related assets; convert London Inter-Bank Offer Rate borrowings under its loan facility agreement into U.S. Base Rate borrowings (resulting in higher interest payments for Cambior); renegotiate certain hedging-related provisions; submit to independent technical, financial and environmental reviews; not to incur additional indebtedness during the standstill period without consent; not to pay dividends; not to sell material assets during the standstill period; not to modify its gold-hedging position subject to such agreed measures as may be implemented to improve Cambior’s aggregate position under its hedging contracts; and pay standstill fees and related expenses to the counterparties.
Cambior has appointed Bunting Warburg Dillon Read as its financial advisor.
Be the first to comment on "Cambior to lose US$33 million from hedging"