Note holders group of Sherritt claims proper recapitalisation engagement is lacking

This audio is brought to you by Endress and Hauser, a global leader in process and laboratory measurement technology, offering a broad portfolio of instruments, solutions and services for industrial process measurement and automation. An ad hoc group of note holders of nickel and cobalt producer Sherritt International Corporation has expressed concern about the company's claims to be in active discussions with its senior lenders and note holders as the company pursues comprehensive recapitalisation, saying that Sherritt materially overstated the current status of engagement with note holders. Sherritt's financial and operational woes started earlier this year when US sanctions against Cuba came into effect, which impacted Sherritt's joint venture cobalt and nickel operations in the country, as well as its downstream refinery in Alberta. The company has publicly acknowledged constrained liquidity, material going-concern uncertainty and the need for significant new capital to fund the restart of operations and related working capital. The ad hoc group confirms that while they have organised and established a coordinated engagement process, with financial and legal advisers included, there has not been meaningful engagement from Sherritt's side regarding a comprehensive recapitalisation, the ad hoc group's potential provision of new capital or any other alternative recapitalisation proposal. The note holders believe shareholders should understand that an organised creditor constituency exists and is prepared to engage, but that engagement has not advanced in a manner consistent with the urgency of Sherritt's circumstances or the central role that note holder consent is expected to play in any executable transaction. Sherritt mentioned earlier this month it is trying to advance a possible transaction involving Gillon Capital, which it deemed as the most executable path forward, however, the ad hoc note holder group says it has submitted an alternative recapitalisation proposal to Sherritt that warrants evaluation. Having evaluated potential sources of new capital, the ad hoc group has provided Sherritt with an emergency financing term sheet intended to address near-term liquidity requirements and preserve operational flexibility while a broader recapitalisation is advanced. The note holder group is concerned that the current process risks advancing a preferred transaction path while meaningful engagement with holders remains limited. "The ad hoc group will not support a process in which note holders are expected to provide required consents only after material terms have been substantially negotiated and transaction outcomes have effectively been predetermined," the group states. The note holders add that delays in considering all possibilities and communicating accordingly carry real economic consequences, including increasing restart costs, working capital requirements and overall financing needs. The ad hoc group encourages Sherritt and its advisers to engage with them promptly regarding all credible recapitalisation, financing and strategic options, including the group's suggested emergency financing term sheet.