Jaguar: 34 per cent of Canadian Royalties debenture holders against Jien offer

November, 4, 2009 - 07:07 pm THE CANADIAN PRESS

TORONTO - Jaguar Financial Corporation (TSX: JFC) said Wednesday Jien Mining Ltd. will likley have to amend conditions of its $192-million takeover offer for Canadian Royalties Inc. (TSX:CZZ) because of resistance by debenture holders.

Jaguar, a small, Toronto-based merchant bank that has been leading the revolt against terms of Jien's offer, said it has now received "verbal confirmations" from 34 per cent of debenture holders that they will not tender to Jien.

"If these debenture holders do not tender to the Jien offer, as they have indicated to Jaguar, the minimum tender condition of 66 2/3 per cent in the Jien offer will not be met," Jaguar said.

That means that Jien will not be able to amend the current debenture indenture pact to remove the right of debenture holders to receive the 101 per cent of principal repayment owed to them upon a change of control.

"Jien has indicated that it will not increase the price or vary any terms of the Jien offer," Jaguar said. "However, if Jien wants to acquire CZZ, it must now consider increasing the consideration paid to debenture holders.

Jaguar has previously outlined options that Jien could choose, including a two-tiered payment alternative. Under this option, Jien would make the 80 per cent principal amount payment it has offer to those debenture holders who have tendered to the offer.

The others would get the 101 per cent payout, something that Jaguar says would cost an addition $12.3 million at most.

Debentures already tendered reportedly include those held by FTQ, Colonial and the Caisse.

In a friendly takeover bid last month, Jien offered to pay 80 cents per share for the 102 million common shares of the Quebec base metals company, along with $800 per $1,000 of principal amount of debentures issued by the Val d'Or, Que.,-headquartered company.

But Jaguar, which holds seven per cent of convertible debentures due at the end of March 2015, described Jien's offer as oppressive and disrespectful of the basic priority of creditors over common shareholders.

Canadian Royalties responded by accusing Jaguar of disseminating misleading information," saying there was no guarantee that debtholders would receive the full value of their principal, particularly if the company was insolvent.

Jaguar shares were unchanged at 8.5 cents Wednesday on the Toronto Stock Exchange, while Canadian Royalties shares were up one cent at 64 cents.