Allied Nevada Gold Corp. (OTCMKTS:ANVGQ) went for Chapter 11 bankruptcy protection in the second week of March to reinforce a debt-slashing deal with creditors. The company mines and processes yellow metal and silver. The company plans to offer warrants to existing shareholders which can be of some value of the future depending on how the company performs after completing bankruptcy. The move is supported by the holders of senior unsecured bonds. Also, the support is seen coming from secured bank lenders.
The worsening position
Allied Nevada said that the top reason behind its poor performance is the sharp decline in commodity prices in past one year. There were several other reasons that deteriorated the financial condition of the company including an overleveraged capital structure, extensive exposure to currency swap and delay in execution of key projects. As per the filed papers, Allied Nevada reported cash balance of less than $4.5 million. The company expects $78 million as bankruptcy loan that can help the company to support its operations while the restructuring proceedings move forward in court. The documents filed in the bankruptcy court states that the company’s assets are worth over $941 million and debts stands at over $663 million. Pershing Trading Co. LP., Columbia Wanger Asset Management LLC, Van Eck Assoc. Corp. and BlackRock Institutional Trust Co. are major shareholders in the company.
Last year has been a year of troubles for many of the companies whose financial performance are linked with the commodity prices Allied Nevada is no different from them. In the past two years silver prices have declined close to 48% whereas gold price have fallen almost 31%. With the fall in prices, experts anticipated such kind of problems to erupt in this year. Allied Nevada Gold Corp. (OTCMKTS:ANVGQ) needs to deal with several problems including dismal cash position and high debt load.