Tahera granted creditor protection

Tahera Diamond (TAH-T, TAHEF-O) will be safe from its creditors until Feb. 14, when its 30-day protection term under the Companies’ Creditors Arrangement Act expires.

The company sought protection after a failed financing left the already struggling diamond miner in fear of going under.

Many who have hung on to Tahera shares this long finally gave up hope on Jan. 16, when the company filed its request. More than 19 million shares changed hands, causing the stock to fall 46%, or 6.5, to just 7.5 each.

The company needs money for winter supplies and for maintenance of the winter road leading to its remote Jericho diamond mine in Nunavut. The mine has had a slew of production problems since it opened in July 2006.

The company also has a fully drawn credit facility for $50 million with Laurelton Diamonds, an affiliate of Tiffany & Co. (tif-n). Loan payments have been rescheduled three times now, with nearly $4.7 million owed on Jan. 31.

Tahera has another $25 million in trade debt, mainly to contractors. That includes mining contractor Nuna Logistics, which is owed more than $14 million and Dyno Nobel Nunavut, an explosives contractor, owed $920,000.

Dyno has filed a $620,000 claim for a lien on a number of Tahera’s mineral claim and mining leases.

The company reported a loss of $45.5 million for the first nine months of 2007 and continued to have negative cash flow in October. In November, Tahera tried to raise $30 million in a rights offering, but the TSX would not permit it to proceed because of the conditional deals made with Laurelton and Nuna to convert debt into common shares.

In mid-December, Tahera restated its prospectus, this time hoping to raise $40 million at 6.5 per unit. It withdrew the offering a month later, however, when it became apparent it would not succeed.

In an affidavit to the Ontario Superior Court of Justice, Tahera chief financial officer Andrew Gottwald said that the company “is in serious financial difficulty.”

He says Tahera has little hope of survival if the company isn’t able to operate outside of formal restructuring proceedings.

“Tahera’s liquidity will continue to deteriorate and its business will soon collapse,” Gottwald writes.

CCAA protection will allow Tahera to continue its day-to-day operations at Jericho until its status changes.

The company says the implications for shareholders are unclear and will remain so until the end of the restructuring process. The restructuring will depend on the terms of the plan approved by the affected stakeholders.

The court has appointed PricewaterhouseCoopers to monitor Tahera’s ongoing operations, assist management with the development and filing of a restructuring plan, liaise with creditors and other stakeholders, and report to the court.