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Pegasus Weighing Its Options

Pegasus Gold Corp. is prepared to file for bankruptcy if creditors press their demands for payment of $245 million in outstanding debts.

The Spokane-based gold company on Friday announced that its lenders have notified company officials that they consider the entire debt payable after “accelerating” the $130 million due on a revolving line of credit. The balance comes from convertible subordinated notes.

John Pearson, vice president of investor and public relations, said Pegasus maintains the money is not due until 2002, the date agreed upon in the original lending agreement.

“We are current on that debt because we’ve kept up with interest payments,” Pearson said.

After consulting with company attorneys, Pegasus officials informed lenders they don’t agree with their interpretation of the revolving credit agreement “and have reserved our rights concerning their actions,” Werner G. Nennecker, president and chief executive officer said in a statement. Representatives of the lenders could not be contacted for comment late Friday.

Asked about legal recourse, Pearson said: “Nothing at this point, except that we have notified them of our disagreement.”

Although lenders have said the $245 million is “payable,” they have not yet demanded payment.

“If that occurs, we’d be looking at filing Chapter 11 for protection against them,” Pearson said.

On Dec. 11, Pegasus filed for the equivalent of Chapter 11 bankruptcy protection in Australia, where it suspended operations at the Mt. Todd gold mine in mid-November, resulting in a $353.3 million write-down in the third quarter. The company operates mines in Montana and Nevada, but Mt. Todd represented half of its gold reserves.

Pegasus closed out much of its gold “hedge” and foreign exchange contracts over the past few weeks, raising $74.5 million. It still has forward contracts for $10.8 million in gold to be delivered this year.

, DataTimes

Tags: business

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