'2126' pid='73749' datel Wrote:I've been slowly reading through the 6/24/16 MIC (very slowly as it were as it came out on the exact date of my accident). A few random points:
Under the glossary on page iv and again later under "Certification Subcomittee" it states the IOC portion of the Subcommittee will be "two persons nominated by IOC (Dr. Armstrong and Dr. Hession) neither of whom is an Interoil Director appointed to the Oil Search Board". To me, this alleviates the fear that Hession will be the IOC BOD member to join the OSH Board. This makes sense from a business standpoint to not weight the impartiallity of the Certifiction Committee any more heavily toward OSH. Of course, it could also mean that Hession is simply not currently on the OSH Board, but then no one on the IOC BOD is on the OSH BOD, so that interpretation makes a bit less sense.
On page 42, under CVR Agreement, I note a small difference between the PAC LNG certification definition which constitutes "raw gas", which includes payment for 'non-hydro-carbon compounds' and the CVR certification definition, which corresponds to the Total-IOC definition based on "hydrocarbon gas and condensate." Could someone with more expertise in this area explain why this difference in definition may be important?
Also on Page 42, I note that the date for the PAC LNG/OSH certification has now slipped to the "third calendar quarter of 2016", a period ending on September 30, 2016, well beyond the IOC/OSH Arrangement voting date of July 28, 2016, and well beyond the 120-day period that had been assumed.
With respect to US Federal Income tax consequences: The MIC makes abundantly clear that they have no idea how the redemption of the CVRs will be treated under US tax law. Three things are at the top of the list of unknowns:
1) Holding period of CVR for long- or short-term capital treatment: On page 81, the MIC states that "Any gain or loss so recognized [on the exchange of IOC shares for OSH shares/cash/CVRs] generally will be long-term if the US holder's holding period in a particular block of Common Shares exceeds one year as of the effective date." However, in the very next paragraph, with respect to CVRs, 'A U.S. holder's ... holding period of such CVRs and or Oil//search Security will begin on the date after the effective date." This makes sense for OSH shares, but is unclear for CVRs. If the CVR is redeemed in under one year (which is very likely), then the gain would be short-term, despite having held the underlying IOC shares for over one year.
2. Essentially the same issue holds for 'basis': Again, on Page 81 the MIC states that the recognized "gain or loss {is] the difference bewteen the 'cash, FMV of the CVRs, and any OSH securities received pursuant to the Agreement". Again, in the next paragraph, it is stated that the tax basis of the CVRs or OSH Security will "equal the fair market value of such ... as of the effective period." Again, makes sense for the OSH shares, but not for the CVRs, whose value will be unknown on the "effective date" [which by definition is the closing date of the Arrangement]. By assigning a basis based on the FMV of the CVRs on the effective date, taxable gain will likely be much higher (in most cases, depending on each holder's effective basis) than it would be by allowing IOC shareholders to carry over their unused basis from the transfer of their IOC shares for OSH cash and/or shares.
3. The arrangement provides that the CVRs will be listed on the ASX, which is good. But they will be listed as 'debt securities', which may be bad. I will have to do more research, but I believe that the listing as a debt security may make the argument much stronger for tax treatment of gain on CVR redemption as ordinary income, rather than capital gain or loss..
Hope this makes some sense, I'm taking a lot of medicine, so please excuse any errors. Signing off for now, very tired. Good to be a little back, though. Thanks.
"Also on Page 42, I note that the date for the PAC LNG/OSH certification has now slipped to the "third calendar quarter of 2016", a period ending on September 30, 2016, well beyond the IOC/OSH Arrangement voting date of July 28, 2016, and well beyond the 120-day period that had been assumed."
For me this part is the most alarming of all. In a few days the 120 day timeline will be eclipsed and should it move to the end of Q3 alarm bells should be going off. by now everybody knows what is in the hole. There have been two EWT's done by TOT and four months of work by cert companies. There is no way anyone that holds IOC stock should be asked to vote on the same question that has lingered for 7 years without knowing the results. That is why everyone should vote NO on this crap deal, it stinks for too many reasons. Now I know we are in Q3 but these word games are old, its always something further out. Anyone that reads that can now say well, we said by September 30. It is a tired argument.