"We believe that farming out an additional share of the project to an experienced deep water operator is the best way to maximize shareholder value going forward," he said. "Such a transaction should make available additional capital that would be helpful to continue our exploration program for the basin," Leonard added.
Based on what I read in these statements, Bank of America is a financial adviser to HDY to assist the company in maximizing shareholder value with a potential sale.
Any time there is a sale of assets, there are tax ramifications. HDY has had losses for many years so some of the taxes on a gain or profit from a sale would be negated by previous losses. I supect there are not enough losses to offset the sale of 37% of the concession. Many times the highest price will not net the most return to the seller after taxes.
I think Bank of America will be involved in how to structure a deal for the maximum dollar return to HDY after taxes and still move the Guinea project forward in an expedited manner.
There may be a tax advantage to having deferred payments. There may be a tax advantage to having a full carry with no cash paid to HDY. A deal could be structured somewhere in between with some cash and a full carry.
We do not know if the transformational deal is dead. I think transformational deal is still in play. I assume HDY needs money to complete this deal.
My thought is this transformational deal could become involved with the sale of a percentage of the concession. There could be some tax advantages to doing this. This is assuming that the
transformational deal would be a similar (like/kind) asset. This is usually done with an intermediary (someone that makes a prenegotiated secondary deal in between the buyer and the seller). The Bank of America could maybe be that intermediary
This type of deal would work like this:
HDY has or will negotiate the purchase price for the transformational deal. HDY could then let the potential JV partner or intermediary buy the transformational deal by assigning the option to purchase from the seller to them.
HDY and the joint venture partner negotiate a deal for HDY to sell a percentage of the Guinea concession. The joint venture partner then lets the intermediary buy the negotiated deal from HDY.
The intermediary buys the negotiated percentage of the concession from HDY by trading the transformational deal and hopefully some cash as was negotiated by all parties.
The intermediary then sells to the Joint Venture partner the percentage of the Guinea concession as previously negotiated by all parties for cash or cash and the transformational deal as previously agreed to by all parties.
In the end, HDY could end up with the transformational deal by selling some of the Guinea asset without paying tax at this time if the deal is structured correctly under the sale or exchange of "like kind" property part of the tax code.
I think something like this could happen. It sure would be a waste to pay corporate income tax on the sale of a portion of the Guinea asset at this time