Arctic Glacier (TSX: AG.UN) is in default of its second-lien loans, which means its first line creditors will likely come knocking.
On August 2, 2011, the company invoked a conversion to equity clause upon the maturity of its convertible debentures. The company issued 311 million units in exchange for $90 million face value of convertible debt, leaving those debtholders with trust units at a rate of 29 cents a pop. Miraculously, the units managed to stay at the 20 cent range for a couple days before plummeting to the 10 cent level as investors dumped units.
The company’s financial troubles continue as they still have a significant debt load from other creditors. It appears quite imminent that the unitholders, having faced an approximate 90% dilution, will finally be wiped out at the end of this process. After subtracting the debentures that were converted, the company has about $190 million in debt and annual cash flows have declined significantly to the point where they can no longer afford this leverage.