Petropavlovsk investors approve board’s refinancing plans

Chairman Peter Hambro praised shareholders for voting for the company’s plans

Shareholders in cash-strapped Petropavlovsk (LSE: POG) have given the go-ahead for the company management’s controversial refinancing plans, ignoring a last minute, alternative proposal from the gold miner’s largest shareholder Sapinda.

At an extraordinary general meeting (EGM) yesterday, nearly 89% of shareholders who voted on the company’s proposal – which comprises a 157-for-ten rights issue to raise £155m, and a new $100m convertible bond – did so in its favour. In all, 43.8% of the company’s investors participated in the vote. The company needed 75% of shareholders voting to give their approval.

In an exclusive interview with MoneyWeek ahead of the vote, Peter Hambro, Petropavlovsk’s chairman, warned the company’s thousands of small shareholders that failure to vote in favour for the management’s refinancing proposal would lead to the company entering administration and their entire investment being wiped out.

But Sapinda, which has a 10.35% stake in the company, has been highly critical of the management’s proposal, saying it is “too biased in favour of bondholders over shareholders”.

The Amsterdam-registered fund said it would only vote in favour of the management’s plan if all parties (company management and 75% of bondholders) agree to a follow-on private placement with Sapinda and other current shareholders of $100m at 3p per share.

The investment fund also wanted the parties to allow for the option to take the issue up to $125m if necessary to meet demand from current shareholders.

As well as engaging in a war of words with the company, Sapinda earlier this week slammed Petropavlovsk bondholders owed $310m for dismissing the investment fund’s proposal, charging them with attempting to “frighten” shareholders into supporting a refinancing deal that is “good only for the bondholders themselves”.

Following the EGM, Hambro said: “Our shareholders have voted decisively in favour of these refinancing plans that secure Petropavlovsk’s future. We are particularly grateful to the large number of private investors who responded to our requests and made the effort to vote for the proposals.

“This vote means the board can now move ahead to complete the company’s refinancing and then fully exploit the enormous underlying value of its assets.”

Sapinda meanwhile said: “We invested in Petropavlovsk because we think Peter Hambro and Pavel Maslovskiy have built a good company with strong prospects.

“We are currently the largest shareholder in the company and will evaluate our options.”

Mid-morning, Petropavlovsk shares were managing to stay above the 5p rights issue price at 5.43p, down 0.21p or 3.8%, valuing the company at £10.8m.

Having risen to the dizzy heights of 1,365p in April 2010, the company’s share price has slumped 99.6%.

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