"is it legal for the creditor to make money in the BK proceedings?"
Well, yeah, it must be... in the sense that they are fully entitled to recover what they're owed, and there's nothing at all wrong with there being a profit built into what they're owed... since it's legal to make a profit from lending money. Then, FGOC entered into the deal they did, with the lender they did, with the terms it had... which I thought was pretty stupid of them, already well before the shares dipped down below $0.50...
Fairly early in 2008 I'd already determined the property had value and potential enough... and there wasn't even anything overly wrong with their plan to redevelop the mine... but there was still zero reason to have confidence in management's ability to make a go of it...
Note, from May of 08 to May of 09 it dropped from over $0.50 down to around $0.05... which as I pointed out today, was then around the per share value of the debt owed against the asset.
Should the lenders be entitled to recover anything MORE than what they're "legitimately" owed ? No. Clearly not... which then gets you to the point of questioning the legitimacy of the various claims they'd made here that had the debt balloon from $10 to over $20 million... with the "legitimacy" and the "legality" of that being distinctly different things.
The bankruptcy laws, recently re-written by the banks, for the banks, are a big part of the problem in the economy, now... even without the special exemptions from the law and the Constitution they've claimed for themselves under the rubric of "too big to fail". FGOC is a near perfect case in point re the imbalances that persist between the rights and interests of financiers, management and owners of public companies, which are hugely deleterious to the economy... even obviously so, in noting that its taken over 5 years, up to now, just to get Relief Canyon from the control of an "flailing management" to the control of others who are more capable of making it happen without all the theatrics.
But, in this case, in the end result, I don't think Platinum actually DID get $20 million for the mine... rather than something closer to the original $10 million they were owed, more or less... given "discounts" applied in the conversion deal with PGLC. But, again, that discount was applied AFTER THE FACT to benefit PGLC... when the banks was dealing with people who were actually capable of defending their interest against illegitimate claims, which FGOC clearly was not. Clearly, that shows that $10 million was "fair" while $20 million was not... leaving you to ponder the obvious lack of utility in a court system that's dysfunctional.
I noted it at the time that they did it that it was total crap that they'd inflated the debt from $10 to $20 million...
It was already clear enough to me in early 2008 that the bank was angling for the takedown, just from the way they'd structured the timing of the funding versus the plan milestones... which would ensure FGOC would run out of money before they'd ever be able to begin generating revenue...
FGOC management got suckered by the bank... and FGOC shareholders paid the price for that.
There's not a single thing about FGOC management's tenure that reflects credit on any one of the participants. FGOC was grossly mismanaged, with the company pissing away cash on meaningless puffery while failing in things required to get the mine back in operation. The bank clearly was angling to exploit that, encouraging them while fully intending to take the assets when FGOC ran out of money, as the bank knew they would. Then, the inflation of the debt to $20 million was clearly intended to serve no purpose other than to posture an insurmountable obstacle to the existing management, to ensure they'd fail in their efforts to retain an interest. The Chinese almost delivered a functional workaround to that problem... which perhaps would have worked and would have had China and not Platinum benefit from the takedown... but, the Treasury stepped in to prevent that from happening...
It's been nothing but a goat rope ever since... including all the bogosities that occurred prior to, during the BK and after it...
No self respecting judge should have allowed that gross overreach, either, given the judge has a duty to more than those who hold the debt, to allow them to do what they will. That's the sort of abuse of the system that banks routinely get away with... that the law and the judges should prevent... but rarely do.
Still, who FGOC holders have to blame most are the former FGOC management...
And they, no less than Platinum, appeared to decide early on, (IMO, certainly by mid 2008) that the FGOC holders would be thrown under the bus. That the CEO resigned and went off reservation trying to gain control of the FGOC assets for himself in a new company, rather than trying to work with folks like Sagebrush while trying to resolve the FGOC BK... in a way that would work ?
Whatever the value of the assets, it's always true that investors aren't ever directly investing in "the assets" rather than in the effort managing them... and in those responsible for that effort.
So, the key issue for FGOC holders was always the incompetence and lack of integrity of the management... their inability to control the effort and deliver results as promised back in 2008... and their serial failures since then to "do the right thing" in trying to "fix it"...
The key issue all along appears to have been be that getting Relief Canyon "to work" would mean requiring different management...
Platinum clearly recognized that in early 2008, if not before...
Clearly a problem that no one involved here ever cared a whit about the shareholders interest rather than their own...
In hindsight, its quite clear that there really never was a real reason that FGOC ever had to get to BK... other than the ego and self-interest of the management... and the ego and self interest of those running the banks...
FGOC is a good "case in point" to look at as a victim of bad policy choice... as FGOC shows clearly enough what needs to be fixed for our economy to work better.
Shareholders having more power to hold a failing management accountable... and having more respect within the system, in relation to a rebalancing that is necessary between debt and equity ownership interests... might have enabled "fixing" Relief Canyon without it taking 5 years, and without it requiring the loss of investors capital, as occurred here... That's a big pile of capital wasted, even more considering the imposition of lost opportunity costs, and five years wasted with a large number of people not employed in mining gold that should have been...
If you can watch something like FGOCQ for five years... and NOT SEE how bad our policy is, and how it creates, preserves and imposes problems instead of solutions that work ?
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