Sunshine May See Ownership Change Struggling Mining Company Wants To Swap Stock For Debt

Creditors may own the majority of Sunshine Mining and Refining Co. after a debt restructuring, officials said Friday.

Sunshine is asking creditors to accept stock in lieu of payment, because the troubled mining company doesn’t have the means to pay about $40 million in debts.

The amount of stock hasn’t been determined, said Chief Financial Officer Bill Davis. But it would be an amount that would give noteholders control of the company, he said.

Issuing a large amount of new stock is likely to depress the price of Sunshine’s shares, which are already trading below $1.

However, “we think it’s better than bankruptcy,” Davis said.

The Boise-based company employs about 260 people at the Sunshine silver mine near Kellogg, Idaho.

Sunshine officials have been meeting with creditors for several months, trying to avoid a Chapter 11 reorganization.

The company was unable to pay $27 million in bond payments due in March. A default on those payments would also trigger a default on an additional $15 million in bond payments due in November 2002.

Bondholders agreed to extend the payment date until May 24, to give Sunshine time to negotiate an agreement. Davis said the company hopes to strike a deal with bondholders by that date.

A New York businessman, Paul E. Singer, controls three companies that hold the majority of the bonds due in March. The other bonds are held by a New York hedge fund, Davis said.

In related news, Sunshine reported a $4 million net loss during the first quarter. The loss included a $1.4 million interest payment on the outstanding bonds.

Davis also said the company has submitted a plan to the New York Stock Exchange for staying listed.

The company has fallen below listing requirements in two areas - minimum share prices of $1 and market capitalization of $50 million or more.

Sunshine shares closed at 50 cents Friday, and market capitalization has fallen to the $20 million range.

Converting company debt into shares would help Sunshine meet the market capitalization requirement, Davis said. The company would then ask shareholders to approve a reverse-stock split to boost share prices, he said.

The second part of the plan is raising capital to put the Pirquitas Mine in Argentina into production. The company hopes to turn the mine into a low-cost silver and tin producer. But Sunshine could not get funding last year to build the mine and refinance its debts.