RE: Generally21 Jun 2019 09:55
Thanks for sharing your expertise Broomfielder, much appreciated.
To my lay investor's mind, it's hard to conceive that ORM could get squeezed out in these circumstances. ORM seem to suggest that delay and failure of the northern starter pit is trivial, but they shouldn't be so casually dismissive of this ("a small pit representing only the first few months of mine production, has returned lower grade than forecast due to localised complexity within this peripheral remnant zone"), if in fact it could realistically lead to debt loan default and potentially loss/dilution of its project share.
I thought and still hope that unless they'd contractually accepted risks such as delay from northern starter pit failure, they'd be legally protected within the documents governing all this. For example, might the covenant waiver be automatic because northern starter pit failure was reasonably foreseeable and plan B was pre-agreed?
One also wonders about the make up and what the relationship/hierarchy is between these various Oaktree companies, eg working with each other, or in competition, and how that impacts on their approach. I think you're suggesting the debt provider may be the bigger cheese here, although if it's a level playing field, my starting point would be to presume they're separated by some kind of Chinese Walls within the Oaktree set up, and each want success independently of the other, and success for each of them individually is more important than sacrificing ORM and one (or more) of themselves (eg the Oaktree equity provider(s)) for the success of the other and hence the Oaktree umbrella organisation generally. There's probably general legal duties for each player to act in good faith, and not to club together and stitch ORM up too, I would imagine. And it would be nuts if the debt provider arm of Oaktree could call a default of a rigid financial covenant given by Saloro, and step in and squeeze ORM out, because of decisions, like starting in the wrong pit, effectively made by Oaktree's equity arm (as senior JV partner within Saloro).
Like you say much will depend on the detail in the governing documents which we don't have access to.
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