Gran Colombia Gold Considers Offering Shares for Defaulted Bond

Gran Colombia Gold Corp., which missed a Dec. 31 bond payment, is looking into the possibility of converting debt into equity as one option to pay back bondholders.

Colombia’s second-largest gold producer has spoken with bondholders since missing interest payments on secured and unsecured notes, and aims to pay them back in full, General Counsel Peter Volk said.

“All options are on the table,” Volk said in a telephone interview from Toronto. “Options that make note holders whole, or as whole as we possibly can. If note holders accept 20 percent in equity, or 40 percent, from a legal perspective that is part of what makes them whole.”

Toronto-based Gran Colombia Gold said Jan. 9 it missed the interest payment on its senior unsecured silver-linked notes due 2018. The miner also said it didn’t pay interest last month on its senior secured gold-linked notes due 2017 and doesn’t expect to pay within the 30 business day grace period. The company has had liquidity problems since purchasing mines in northern Colombia in 2010.

Gran Colombia Gold hopes to eventually make all interest payments, and would consider the views of current equity holders, Volk said. A preliminary proposal will probably be presented to note holders, mainly hedge funds and private equity firms, by the end of February, Volk said.

Depending on the results of a consulting company’s report, the gold miner may decide to defer spending at its Pampa Verde project and concentrate on removing production bottlenecks at its Segovia mines, he said.

Mineros SA is Colombia’s largest gold producer.

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