Lynn's Email to Li'loilady ... TRANSLATION: The Deal Won't Happen

[Stavros]

This is Michael Lynn's email to Li'loilady in the CVR Thread:    http://shareholdersunite.com/mybb/showthread.php?tid=10644&page=2

It deserves it's own THREAD for discussion.

It is clear from Lynn's email that there will be no deal because they have no clue how US Retail and Institutional IOC Shareholders will be able to own and trade 410,000,000 OSH Shares!

Look at OISHY > > > Average Volume = 531 ADRs per day; equivalent to 5,310 shares of OSH.

My two Brokerages told me that I cannot hold Aussie Shares in my account.

So, I would get 101,000 Shares of OSH (10,100 ADRs). Y'all will also get ADRs. HOW THE HECK DO WE SELL THEM AT 531 ADRs PER DAY????​

The CVRs are another story. They're scrambling right now to figure out what they are!

THEY DON'T EVEN KNOW.

Mark my  words:

If they ever put out an Information Circular it will say

1. You get one CVR for each share of IOC that you own.
2. The CVR will have ZERO value until the day we tell you the outcome of our Certification.
3. You will then be paid in A$.
4. You will be required to convert the A$ into US$ yourself (for which you will pay a 2% Transaction Fee).
5. The money you get for the CVRs will be considered as Ordinary Income with a ZERO Basis . . . ie, all profit to you.

QUOTE

Li'l:

I received a response from Michael Lynn regarding this and the AUD—>USD exchange rate problem. I'm guessing he doesn't know the CVR classification yet. An Information Circular about this (and more?) is expected by month end. It looks like they're hoping, but not certain, that ADRs will be available on the NYSE for the awarded OSH shares.

His email:

"With regard to the classification of the CVR (tradeable/securitised or contractual CVR) I expect that an explanation will be contained in the Information Circular which is likely to be published around the end of the month.

At the election date (yet to be determined), it is expected that the election form will have a box to tick for either all OSH shares, cash, shares & cash or OSH ADRs. If you select OSH shares and once they have been issued you decide to sell them; because they are listed on the ASX you would get AUD and then convert at the applicable exchange rate to USD to get the money back into the US.

Assuming the American Depository Receipts (ADR) program is available and you selected the ADRs you would get one OISHY ADR for every ten OSH shares. The ADR program has an AUD:USD conversion factored into the ADR price.

If you sold those ADRs you would get USD directly. All of this should become clearer in the Information Circular. You don’t have to do anything with this just yet.

I trust the information supplied (even though it is preliminary) is helping you to consider the deal favourably.

Regards Mike Lynn"

END QUOTE

[2126]

.

1. The money you get for the CVRs will be considered as Ordinary Income with a ZERO Basis . . . ie, all profit to you.

I don't necessarily agree with this characterization. An 'event-based' CVR (which the IOC/OSH CVRs will be--as their value will be based on the occurence of an event: certification appraisal) are generally considered 'securitzed' if there is some way to trade them. OSH has stated that they are pursuing listing the CVRs on the ASX. If they are listed, the CVRs will most likely be considered by the IRS as "boot" to the cash/shares received from OSH in the deal (ie. 8.05 X each IOC share--to be received either as OSH shares, cash or ADRs). Thus, the cash received from redemption of the CVRs will share the basis of the original IOC shares (shared basis with the value of the cash/shares of the initial portion of the transaction).

If the CVRs are considered as a "contract" right, rather than 'securitized', they may be considered as ordinary income, but that issue is very unclear as the IRS has not made any direct ruling on this particular issue. A very good argument could be made that the IOC CVRs are still 'boot' to the original transaction, despite not being listed as a security, due to the complex nature of their genesis (ie. sale of a Canadian corporation listed on the NYSE to a PNG corporation listed on the ASX, with certification event for the CVRs including appraisals from a company selected by a French corporation).

Also, the terms of the deal delineate that the CVRs are based on US$ ($6.05 X #Tcfe over 6.2, as certified by the average of the two certifiying appraisers).

[Stavros]

My view, 2126, the fact they don't know yet indicates to me that OSH will not be able to list the CVRs.
Finding out the answer, and reporting the outcome to IOC Shareholders, is not rocket science.

That's why I say they will have ZERO value until the minute the Certification outcome is revealed.

On top of that, the IRS goes out of their way constantly to make "rulings" that result in higher tax burdens to Shareholders.

[Libtardius Maximus]

Anybody that would vote yes on this deal without first knowing the final certification number of OSH-IPI is just plain nuts. Demand the answer next Tuesday.

[AU74]

Anybody that would vote yes on this deal without first knowing the final certification number of OSH-IPI is just plain nuts. Demand the answer next Tuesday.

Agree 100%.  My fear is that they (IOC, OSH, TOT, XOM, and anyone else who had access to the data room) already have a pretty damned good idea of what the number will be and it's a whole lot lower than we have been led to beleive.

Think about it.  If any of the people who saw the data believed the number would be much higher then 6.2 T, they would have bid up the PPS above where it is now, by hook or by crook.

[Libtardius Maximus]

Anybody that would vote yes on this deal without first knowing the final certification number of OSH-IPI is just plain nuts. Demand the answer next Tuesday.

Agree 100%.  My fear is that they (IOC, OSH, TOT, XOM, and anyone else who had access to the data room) already have a pretty damned good idea of what the number will be and it's a whole lot lower than we have been led to beleive.

Think about it.  If any of the people who saw the data beieved the number would be much higher then 6.2 T, they would have bid up the PPS above where it is now, by hook or by crook.

There are all kinds of ways to screw IOC shareholders . You will get promised the upside with A7 and should it have a timeline attached of say a year, there will be inclimate weather, side tracks PNG politics and an assortment of other excuses. But then you will be told the upside is in the OSH shares and it will go on forever like this. The first hurdle is get the shareholders to buy it without knowing what they are buying. Dr. Libor Plus 6 too for that matter, he has some promises that could get tossed as well.

[ArtM72]

Anybody that would vote yes on this deal without first knowing the final certification number of OSH-IPI is just plain nuts. Demand the answer next Tuesday.

That leads us to observe it's pretty damn clear from this thread that the financial aspects of this deal were rushed and remain even to this date incomplete.  So much initial criticism over the deal was dismissed by Hession saying because the agreement was complex due to the CVRs the shareholders did not yet understand. Now we find out that so focused were these guys in getting the deal done they didn't have time to establish a clear pay plan. They didn't consider HOW thousands (?) of American investors would get paid in a buyout of a Canadian company to a PNG company traded on the Australian exchange, or how to structure the deal to mitigate the tax consequences. Personally I've got lots of shares sell at a loss thanks to Pinko yet there remains a very real possibility I'm going to have to pay earned income on the CVRs?

I'm still wondering how much selling pressure there will be on the market for OSH stock...or for that matter IOC stock...as funds unload IOC/OSH because of a wide range of trading restraints. Anybody on Hession's Board of experts bother to ask the question and demand an answer? I'm willing to bet the Board barely considered the Agreement before it was put to vote.

"Why NOW?" Should be the New York chant at the Essex. Demand an answer.

[Libtardius Maximus]

Anybody that would vote yes on this deal without first knowing the final certification number of OSH-IPI is just plain nuts. Demand the answer next Tuesday.

That leads us to observe it's pretty damn clear from this thread that the financial aspects of this deal were rushed and remain even to this date incomplete.  So much initial criticism over the deal was dismissed by Hession saying because the agreement was complex due to the CVRs the shareholders did not yet understand. Now we find out that so focused were these guys in getting the deal done they didn't have time to establish a clear pay plan. They didn't consider HOW thousands (?) of American investors would get paid in a buyout of a Canadian company to a PNG company traded on the Australian exchange, or how to structure the deal to mitigate the tax consequences. Personally I've got lots of shares sell at a loss thanks to Pinko yet there remains a very real possibility I'm going to have to pay earned income on the CVRs?

I'm still wondering how much selling pressure there will be on the market for OSH stock...or for that matter IOC stock...as funds unload IOC/OSH because of a wide range of trading restraints. Anybody on Hession's Board of experts bother to ask the question and demand an answer? I'm willing to bet the Board barely considered the Agreement before it was put to vote.

"Why NOW?" Should be the New York chant at the Essex. Demand an answer.

The answer will be because IOC has no money and no new commercial discoveries. But that didn't prevent Dr. Libor Plus 6 from taking a discovery bonus in OSH stock errr....I mean RSU's. But hey, think of all the upside for OSH pps appreciation! And the CVR too, you will make a lot of money if you just hold on. You get all the upside that was promised with the Total tranny in December 2013. You should be happy!

Meanwhile, OSH continues to pump info to the Aussie media as its a done deal and OSH overpaid. With their trio of "source", "sources close" and "it is understood". Has anyone ever met any one of these three?

[Putncalls]

RJ says:
Last week, the company’s former CEO Phil Mulacek had filed a lawsuit to postpone the upcoming shareholders’
meeting, presumably expecting to lose his proxy fight on the existing timetable. Mulacek had no luck in his attempt at delay. The
court in Canada rejected his lawsuit, ruling that there is no reason to interfere with the meeting as currently scheduled for next
Tuesday, June 14. Our expectation continues to be that Mulacek will lose the proxy fight itself. Recall, ISS has backed management
in the proxy fight, and this tends to be quite influential. And, the simple reality is that management teams tend to win proxy fights
against dissidents. The odds are therefore against Mulacek.

[weaselpuppy]

If this situation with the OSH ADRs becomes an issue, yes I believe there will be a lot of selling pressure. The upward pressure from now to Deal Vote will be the valuation of the CVRs from any leaked OSH-IPI cert info, and rumblings of a sweetener or new bidder. The sweetener possiblity may be affected by how the AGM goes next week. Hold on to your hats.

My focus now is to look at the behavior of the MF/Institutions holding 100's of thousands or millions of shares, to see if they think this ADR situation is a problem. I mean if Cap Re is okeedoke with the deal, they have to have thought about how they will unwind 40+ million shares of OSH at some point, right? Maybe they aren't restricted like individuals are? Hmmm....so many unanswered questions.

Thanks IOC IR!!!