Mr. Lou van Vuuren reports
GREAT BASIN GOLD TO OBTAIN $35 MILLION LOAN CONSEQUENT UPON CCAA COURT ORDER
Great Basin Gold Ltd. has agreed to a comprehensive term sheet from its
existing bank lenders for a $35-million working capital loan which was
approved as a debtor-in-possession (DIP) loan by order of the British
Columbia Supreme Court pursuant to a Companies Creditors Arrangement
Act (CCAA) filing made on Sept. 19, 2012 (Vancouver registry 126583). The DIP loan will be a
postcommencement financing under the previously announced business
rescue (BR) provisions of the South African Companies Act, which were
commenced on Sept. 14, 2012. CCAA is a Canadian insolvency statute
which will allow the company a period of time to seek buyers and
partners for its two gold mining projects and/or corporate level
financiers in an effort to return Great Basin Gold to solvency.
The DIP loan has a term of six months, extendable for up to three months, and
is subject to certain fees, interest and costs. It contemplates that
the company will dispose or sell down its interest in its two gold
projects or otherwise refinance or recapitalize over certain periods
within the term of the DIP loan. The DIP loan will be subject to a
superpriority lien on the assets of Great Basin Gold, and will also
have the benefit of liens and claims over the assets of its Nevada and
South African subsidiaries. As part of their security package for the
DIP loan, the DIP lenders will also receive from Great Basin Gold's
U.S. holding company a guarantee of the obligations of its South
African subsidiaries' obligations under an existing South African
credit facility. The DIP loan has received the lenders' credit committee
approval, and it is now principally subject to negotiation and execution
of definitive documentation and other customary closing conditions. The
DIP loan proceeds will be used, subject to the concurrence of a
business rescue practitioner in South Africa and KPMG LLP, the
CCAA-appointed monitor in Canada, to affect an orderly suspension of
operations at Burnstone, continuing care and maintenance of Burnstone
assets, and for working capital at Hollister. Hollister is expected to
continue profitably producing gold at the rate of 6,000 to 7,000 ounces
per month for the foreseeable future, and no insolvency filings are
currently expected for the Nevada operations.
Lou van Vuuren, interim chief executive officer, commented on the recent developments: "We believe the DIP loan will be in the best interest of our work force
and other key stakeholders, as its proceeds will be use to ensure the
proper treatment of our Burnstone employees, and the responsible care
and maintenance of this valuable project, while Hollister operations
will be enhanced by some additional working capital. We are confident
that given the industry interest we are seeing in these two assets, we
will see one or more realization or recapitalization transactions
complete within the term of the DIP loan."
We seek Safe Harbor.
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