Bondholders poised to reject Sherritt’s restructuring plan – by Andrew Willis (Globe and Mail – April 2, 2020)

Lenders to Sherritt International Corp. plan to turn down the nickel miner’s proposed restructuring plan, partly on concerns the deal would set a poor precedent for future showdowns with debt-heavy companies grappling with the impact of the COVID-19 pandemic.

Toronto-based Sherritt borrowed heavily to build mines in Cuba and Madagascar, with some of its projects costing far more than expected. With nickel prices in a slump for more than a decade, Sherritt has made paying down debt a priority for the past five years. In February, the company announced what it called a “comprehensive solution to its liquidity challenges.”

The miner’s debenture owners, a group that includes insurance companies and asset managers, are scheduled to vote April 9 on a recapitalization in which they would exchange $588-million of debt due over the next five years for new paper worth $319-million that matures in seven years.

While most recapitalization plans also involve concessions from equity owners and other stakeholders, Sherritt is focused on reworking its debt, a balancing act among shareholders, and first- and second-tier creditors.

“Why are bondholders, who are already in a second-lien position, being asked to take a 50-per-cent haircut while no other stakeholders are being asked to do the same – not management and the board, both with outsized compensation, nor equity holders?”

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