Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
Dicker: Next section is representativeness of the class - was the class fairly represented and did the majority coerce the minority? Dicker: turnout is fact specific [whatever that means]. Dicker drawing his lordships attention to a previous case (another company). This was to do with asbestosis claims, which was a solvent scheme. [goes quiet while judge catches up]. Concerns at that (asbestosis) hearing are being brought up: low attendance being a main one. The judge in that case said this is a big problem (low attendance) because it's difficult to know what claims there may be from those who did not attend. Judge in that case said the number who voted was small vs. number who could vote but it's not unusual. In another case, only 15% turned up [difficult to follow but Dicker is bringing up old cases that were ENDORSED based on low attendance/voting].
Dicker: Customers asked about FCAs concerns and AMGO answered these concerns during the creditors meeting. Back to chairman's report... Chairman grouped 11 questions with sustained discussion and debate to challenge answers by AMGO re. FCA. Lots of questions about impact including to other stakeholders [Assume someone asked about bond/shareholders benefitting]. The chairman summarised the position [judge being left to read a lot himself] - customers asked about DIVIDENDS... Holdings Plc would be contributing to the scheme by giving 15% for the next 4yrs. So, 2 x scheme creditors asked about level of impact to shareholders. [ok, difficult to follow this bit but the issue of shareholders benefitting from SOA appears to have been brought up]. Dicker: creditors given an opportunity to ask questions before and during the meeting incl. questions about the FCA. Final section of this part re. statutory majorities: it was recorded that 74877 scheme creditors, £230M by claim value, voted for the SOA [so, our 95%]. 4.3% by number went against the scheme. [may have missed a bit there but we all know this from the RNS]. Claims were valued for voting purposes at £230M in favour, £10M against. But the voting structure the company adopted permitted every customer to vote. No assessment was made as to whether customers had a valid claim. [Mr Dicker is basically going through the alternatives... basically, Mr Dicker is telling the judge why he should accept the creditors meeting outcomes etc. No news/details for us here really].
Report of the meeting has been filed with the court... Judge turning to it... Judge confirms he has read it. Dicker: draw attention to 1). 156 scheme creditors or proxies attended by web and 21 by phone. Some may have joined by both. This excludes AMGO attendance. 2). conduct and outcome: dealt with written questions (184), 19 categories summarised and AMGO provided answers. 3). AMGO presentation 12/05/21 updated on FCAs position to oppose and this was explained in the Q&A session. One of the questions/themes raised - do you have a response to the concerns raised by the FCA [lots of breaks in speech by Dicker so tricky to follow]... Dicker has asked judge to read the next 3 paragraphs himself so it has all gone quiet...
Dicker: asking his lordship if he "picked up" that Mr Fisher appeared on behalf of RPC (independent scheme assessor) to collate creditors concerns for the court. 4). Conduct at the meeting... judge interrupts. There may be specific points from explanatory statement that need to be revisited in terms of LEVEL OF CONTRIBUTIONS and what has been said to creditors. This is being parked for now. Back to conduct... meeting was remote, held in accordance with the justice presiding. 1 error, it was assume creditors could see each other.
Judge at previous hearing said "no requirement to fracture the class" i.e. it was accepted at the last court hearing and no creditor has raised an objection since then. Dicker: not proposing to say more re. classes [judge quiet]. Convening the meeting (point 2 I guess): various steps are summarised, 3 minor points to draw to lordships attention 1). preregistration wasn't available until 9th Apr 21, Dicker: saying creditors had 4 weeks to pre-register to attend scheme meeting. 2). Hard copy proxy form in bundle allowed creditors to direct proxy in a specific way. Dicker didn't draw the last court's attention to this but the proxy form provided was discretionary. 3). [difficult to follow] lots of adverts put in papers but none in northern ireland, however, lots of people from NI voted so the court should waive this defect [and the others] as they're relatively minor. 3). explanatory statement: considerable effort made to draft the statement to make it clear and understandable. There needs to be a line drawn between digestible/clear and providing something more detailed/less digestible Judge at last hearing didn't approve content as that was not his function but judge Norris said "no glaring deficiencies with it.. care has clearly been taken... company has prepared easily accessible material, etc". Dicker: Judge Norris said that he invited company to give some thought to adding FAQs to scheme website [to paraphrase]. Judge Norris (last hearing) sees no defect. Dicker: videos were uploaded to scheme website and additional FAQs posted.
Dicker: deal with issues with compliance to companies act, representativeness of class/turnout, fairness "need to spend some time on that" and "blot on the scheme" [whatever that means]. Will go through in order, quickly so they can get on with discussing fairness. Compliance with companies act: 5 points to mention... 1). class composition, scheme creditors vote as a single class. RPC raised some points as independent scheme assessor. Court assessed this at convening hearing. Judge confirms he read judgement. Dicker: reminds judge of how it was dealt with at that hearing and says it was "accepted by the court" [to paraphrase, adding some other positive comments].
In those similar cases, had the Scheme Co. not gone through, the companies would have likely gone bust. Scheme creditors will be entitled to submit claims in 6 month period and then barred. Creditors will be entitled to a pro-rata claim and will release AMGO and other scheme companies from liabilities. The scheme fund: It is explained there are 3 parts - 1). AMGO will pay £15M to scheme fund. 2). there is a further potential sum (balance adjustment) - the idea here is that AMGO Ltd assumes customers claims will be set off against balances owed i.e. the £85M loan book will be adjusted if claims are upheld. Company is assuming £85M of adjustments will be required. If it is less than £85M then AMGO will contribute a further amount: up to [I think] 38.85p in the £1 capped at £20M. 3). AMGO will pay 15% of profits before tax for each of the next 4yrs. This was increased from 5-15% following FCA feedback. Those are the 4 scheme fund elements. Level of distribution given, approximately 10p in the £1, depending on how many claims are lodged and upheld. Important to note that estimate does NOT include 2 & 3 above. 10p in the £1 references the cash contribution (1), future contributions will be over and above that. Judge is quiet so far. Dicker: this should be compared to the alternative [admin, which is zero]. Dicker: turn to matters from sanction hearing...
Dicker: GJ has stated that there are 2 non retail shareholders of significance... The founder (JB) disposed of his shares over a period last year at 1% with a result they are no owned by a spread of people incl. people who are themselves customers of AMGO *he thinks* [bold]. to that extent customers with redress complaints may benefit from the company surviving [he's been reading the board] or suffer again if they don't [to paraphrase]. Dicker: proposing to move on from that at this stage. Dicker: has dealt with the alternative [insolvency], which is why AMGO proposed the SOA, which has been developed over the last 6 months and has involved the FCA and all documents have been shared with the FCA and AMGO have done their best to resolve FCA's concerns. Level of contact with the FCA has been extensive and unprecedented. Dicker: will come to FCA concerns "later" but most have been resolved already and AMGO is grateful to the FCA for this process. Dicker: wants to raise the formal point of the incorporation of the scheme co. it was only incorporated in Jan 21. The structure used is familiar and entered a deed poll for scheme liabilities. Contribution and cooperation agreement whereby AMGO ltd provides financial support to scheme co. JDUDGE: wants to clarify the scheme. The new vehicle assumes liabilities and releases AMGO Ltd from their liabilities. Dicker: ultimately yes but the scheme vehicle assumes liabilities with scheme companies but the judge is right in that it will release AMGO ltd from liability. Same structure that was used for the Instant Cash Loans case, etc, etc
Dicker: this view has been expressed to the FCA and is something they have been aware of. The FCA said they weren't minded to play any part in the scheme process [until now]. Dicker: whatever the position may be in relation to this in AMGO's submission; it clearly wasn't enough for the FCA to come back to them and tell them it was unacceptable at the time and appear at the previous hearing. i.e. FCA were happy to leave it to creditors/court [strong rebuttal from Dicker - pulled it back a bit there]. Dicker: it has only been raised very recently. Judge is quiet...
Mr Dicker: it wasn't the board alone, they had RBC advice, Freshfields, PWC, etc. Judge: can't draw conclusions from that as he hasn't seen any evidence from them of a different scheme [judge going hard on this point]. Judge has seen only the views of the board/GJ. RBC not provided as until Weds last week, the understanding on behalf of AMGO was that the FCA wouldn't appear [FCA appear to have played a blinder - ugh]. Mr Dicker basically saying AMGO haven't had time to prepare due to the FCAs late opposition. Mr Dicker: the board has formed a view and that view has been set out in GJ's statement and his lordship should not consider this hasn't been made in good faith/judgement of the board. Judge: when do they say they'll appoint admin? Dicker: Not sure a date has been identified but it is likely to be soon [to paraphrase]. Dicker: implication is "immediately, within a short period of time, not some months hence, after exploring an alternative scheme". Judge "why not" - basically why not look at another option instead of insolvency [judge seem to not like he is given a binary choice]. How can the board of a public company reach view without demonstrating evidence they have looked at an alternative. Dicker: the views of bond/shareholders has been taken into account but he needs to come to GJ's statements. As for AMGO 2.0: the FCAs position is that they won't discuss 2.0 until the SOA has been resolved. Dicker: this makes it difficult for AMGO to engage with Bond/Shareholders for a new scheme with different terms when one doesn't have clarity as to what new AMGO will look like. This has been the view of the board since it explored the possibility of a scheme in Dec '20.
Mr Dicker saying that the judge would put the board in a difficult position if he told them to go away and reconsider. Saying board members may resign over it [effectively]. His lordship has a consistent explanation that insolvency is the only option and the board are able to make this decision and the judge should accept it [very hard ball]. Judge: there is an element of this being self-fulfilling as the board have an interest in promoting this scheme as they are shareholders and are committed to the SOA going through. Judge has the concern (sword of damocles again) "take this or we go into admin straight away" is not the only alternative with the shares still being of some value [opinion: told you the heating market wasn't good]. Judge says there is the possibility that an alternative scheme COULD be proposed, despite the issues around that. The position being presented is so stark! One wonders how much thought the board has REALLY given to an alternative scheme... [glad we're suspended]. Mr Dickers says Mr Jennison of course gave it thought when the SOA first came up and HAS been reconsidered in light of the FCA opposition. Mr Dicker says this is not the sword of Damocles but if it is, it is circumstance, not choice by the board.
An entirely new scheme seeking to involve bond holders and shareholders is all well and good but the FCA won't give a target so no way of knowing what is to be negotiated. The other negative consequence is that AMGO stopped paying redress claims when the SOA went live. They did this not pay some in preference. This can't go on indefinitely and if the scheme needs revisiting, AMGO will have to delay payments to everyone who is due redress. The PSL was issued in Jan '21 so consumers have had plenty of time to consider [to paraphrase] and have had the timetable and have engaged. Votes in favour being brought up. The other issue is there is no certainty if another 6 months and a load of money was spent that those consumers would be willing to go through all this again. Final point; scheme delay may affect AMGO's recovery ability as consumers position change. Judge: what that amounts to is that there practical reasons for him to assess why proposing a further scheme may be challenging BUT NONE OF THAT WAS EXPLAINED TO CREDITORS. Insolvency was NOT an automatic consequence and there is another possible route i.e. promote a scheme involving shareholders. Consumers were told that if the SOA didn't go through, the board would CHOOSE t go into admin. Judge says "this is a sword of Damocles" i.e. saying AMGO didn't give creditors a choice. Court is entitled to explore this... and see whether this is likely and whether AMGO "really" would go that way as there is clearly some existing value in the shares. There is no immediate cash crunch [judge is getting tough]. Mr Dicker says his lordship is free to question this but Mr Jennison has set out the board's position. [opinion Mr Dicker is struggling a bit here].
Mr Dicker saying perhaps if the FCA had engaged earlier on this point, there might have been a chance to modify the terms of the scheme. Not now [hard ball]. To do this would take a number of further months and cost a considerable cost. AMGO is bearing the costs and if they needed more months, it would eat into the money available for the scheme. Would have to go back to square one and start again, involving bond holders, etc. As far as shareholders are concerned; would need to identify who is being negotiated with. Company has 8000 shareholders, predominantly retail and they'd need to find a way to deal with that. Judge chips in - they do have some IIs involved, albeit that stake is stated to be small [interesting]. Mr Dicker saying if the judge does not sanction this scheme, there is the prospect of shareholders selling and not being willing to invest further, when a new scheme comes. [so, we are beings considered]. One offer AMGO made to the FCA was to engage with RBC about this point but the FCA declined "for whatever reason". As far as bonds are concerned - they're obviously secured. Bond holders state they are NOT interested in adding to the pot [to paraphrase] and it would need a lot of money spent to do the tax analysis and liquidity.
It is INEVITABLE that if this scheme is not sanctioned that they will go into administration. The judge is now questioning this. Judge can't see anything that explains why AMGO would "immediately" need to be put into admin. It looks like the judge is looking for them to consider an alternative (slight opinion there). The fact that the administration is automatic, the judge doesn't understand. Understands the balance sheet/maths but there doesn't appear to be some immediate/imminent cashflow event that means the company would not be able to continue. Mr Dicker saying the board considers it will NOT be possible to improve the terms of the scheme. AMGO DO NOT KNOW WHAT THE FCA THINK WOULD BE A GOOD DEAL [interesting]. FCA suggesting AMGO renegotiating. Board saying that is not practical and would have other negative consequences.
The FCA does NOT agree that insolvency is the only option. The FCA state they believe there is an alternative scheme. Mr Jennison disagrees and explains his reasoning... AMGO has been clear the alternative is insolvency and refers to the wind down plan [opinion: AMGO are playing hardball - looks like there was no out of court agreement]. AMGO's position is and has been clear and confirms the board has met to discuss the FCA position and the outcome was that the board have ALL agreed that there is no viable option other than to seek administration.
The board has recently reconsidered what would happen if the scheme was not approved... on the 13th of May at a board meeting AMGO confirmed that they WOULD have to go into administration if the SOA goes through and Grant Thornton have confirmed they would be available to handle the insolvency.
Mr Dicker and his lordship back... Back to the PWC letter.... the assumptions made are reasonable based on the AMGO management's experience in the business. PWC believe management have had the right info in front of them to make these statements. PWC agree the models are reasonable based on the company's size and scale. PWC have provided info on how an insolvency might be expected to proceed. "in light of the above PWC agree the £312-325M is likely right with nothing left for unsecured creditors" [to paraphrase a bit]. PWC conclude they're satisfied that AMGO have used the right figures in the model and agree there would be a shortfall [to paraphrase]. Accordingly no dividend would be payable to unsecured creditors.
PWC's view is that assumptions in the outcome statement are "reasonable". Now someone has dialled in with their mic on but has no speakers... about to get kicked out as they're talking away!
£320M would need to be paid to bond holders. Loan book £312->325M from which £37M would need to be deducted in respect of the estimated costs of insolvency. All this has been summarised previously and his lordship has the details. Estimated insolvency outcome from creditors is being pointed out to the judge. There is not expected to be a cash recovery for unsecured creditors, including redress claims. Has been prepared by AMGO + insolvency professionals. If AMGO do not get the SOA then they would likely file for insolvency. Estimated outcome scenarios are being shown to the court. Scenario 1 and 2 have book net asset value showing a shortfall of £36->49M. Results in unsecured creditor recover of £0. PWC provided a letter assessing these outcomes and providing commentary and reasonableness of assumptions in the estimates. PWC prepared solely for company purposes. PWC authorises letter to be made to [everyone] for information purposes and accept no liability, etc. PWC agrees that if AMGO enter insolvency, there is no reasonable prospect of unsecured creditors receiving money.
Mr Dicker going through the background... COVID etc being said to have caused difficulty for AMGO group. New board has been put in place to secure the best outcome for creditors. Board concluded the appropriate course was to propose an SOA. AMGO concluded at that stage that were it not go through, they would go into administration and creditors would get nothing. Reason being that AMGO had bonds and their claim would exceed the assets in the company. [all stuff we know so not sure you guys need much detail here].