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Huldra Silver Inc (2)
Symbol HDA
Shares Issued 27,794,594
Close 2014-08-08 C$ 0.075
Market Cap C$ 2,084,595
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Huldra Silver sets out plan to settle debt, restructure

2014-08-08 18:28 ET - News Release

Mr. Garth Braun reports

HULDRA SILVER PROVIDES UPDATE ON CCAA PROCEEDINGS AND RESTRUCTURING PLAN

Huldra Silver Inc. has developed a plan of compromise and arrangement whereby, subject to receipt of requisite approvals, the company intends to compromise and settle its outstanding obligations, exit creditor protection under the Companies' Creditors Arrangement Act (Canada) (CCAA), restructure its affairs, and focus on recommencing the company's business operations. On Aug. 8, 2014, pursuant to the company's proceedings under the CCAA, the Supreme Court of British Columbia granted an order authorizing the filing of the plan pursuant to the CCAA and Business Corporations Act (British Columbia) (BCBCA) and approving the procedure proposed by the company for calling and holding a meeting of the creditors of the company to consider and approve the plan. The court also granted an order further extending the expiry date of the stay of proceedings and period of creditor protection for the company and its subsidiaries under the CCAA proceedings from Sept. 2, 2014, to Nov. 7, 2014. As previously announced in the company's news release dated June 10, 2014, in conjunction with the proposed restructuring, the company seeks to complete a secured convertible debenture financing in several tranches for total gross proceeds of up to $8-million.

Plan of compromise and arrangement

Further to the company's news release dated June 10, 2014, the company entered into a letter agreement dated June 3, 2014, and amended June 24, 2014, with Concept Capital Management Ltd. (CCM) and Waterton Global Value LP, whereby the parties have proposed a restructuring of the affairs of Huldra pursuant to which, among other things: (i) the company intends to complete a secured convertible debenture financing for total gross proceeds of up to $8-million; (ii) the company intends to compromise and settle its debt owing to its creditors under the CCAA proceedings; and (iii) the company intends to satisfy its obligations to certain creditors outside of the CCAA proceedings, including the amounts owed to Waterton pursuant to the debtor-in-possession (DIP) loan advanced to the company in connection with the CCAA proceedings.

The plan sets out the company's proposal for compromising and settling the debt owed to the company's creditors under the CCAA proceeding. Under the plan, the company has separated its creditors under the CCAA proceeding into two classes, the creditors that have secured claims against the company and the creditors that have unsecured claims against the company. In total, under the CCAA proceeding, the company owes approximately $7,569,741 (unaudited) to its secured creditors and approximately $13,126,703 (unaudited) to its unsecured creditors. As noted, the amounts owed under the DIP loan, estimated to be approximately $5,088,495 as at Sept. 15, 2014, and such other amounts that are excluded under the provisions of the CCAA are not being compromised and settled under the plan.

The plan contains the following proposal for the compromise and settlement of the company's prefiling obligations under the CCAA proceeding:

  • Secured creditors may elect to receive: (i) a combination of a cash payment representing approximately 24 per cent of the amounts owed and common shares of the company in settlement of the balance of the amounts owed; or (ii) only shares of the company at a deemed price of five cents per share in settlement of the entire amount owed.
  • Unsecured creditors may elect to receive: (i) a cash payment in the amount that is the lesser of $1,000 and the amount owed to such unsecured creditor; or (ii) only shares of the company at a deemed price of five cents per share in settlement of the entire amount owed.

The per-share issue price of five cents for the shares to be issued on settlement of the debt owed to creditors is on a postconsolidation basis, and is subject to approval of the TSXV Venture Exchange.

On closing of the shares-for-debt settlements contemplated by the plan, assuming that all secured creditors elect to receive a combination of cash at 24.67 per cent of the amount owed to them and shares for the balance, and that all unsecured creditors with claims in the amount of $5,000 or less accept cash settlements and all other unsecured creditors accept shares, the company anticipates that, on an undiluted basis, the issued and outstanding shares of the company will be held as follows: approximately 7 per cent held by the current shareholders of the company, approximately 28.3 per cent held by the secured creditors and approximately 64.7 per cent held by the unsecured creditors. In addition, the company expects that the issuance of shares in settlement of the outstanding debt will result in the creation of both Waterton and CCM as control persons of the company, with Waterton expected to hold approximately 27 per cent of the total issued and outstanding shares on an undiluted basis and CCM expected to hold approximately 24 per cent of the total issued and outstanding shares on an undiluted basis.

Approval for restructuring plan

The closing of the transactions contemplated by the restructuring remains subject to receipt of the requisite approvals, including, without limitation, approval of the court, the secured creditors, the unsecured creditors, the exchange and, if required, the shareholders of the company. The successful emergence of Huldra and its subsidiaries from the CCAA proceedings and the full implementation of the restructuring are expected to be subject to numerous conditions and approvals. There can be no assurance that all required conditions will be met and all required approvals obtained, or that the company will ultimately exit creditor protection.

Meetings of the creditors in the CCAA proceedings will be held on Sept. 23, 2014, at Suite 900, 885 West Georgia St., Vancouver, B.C., at 2 p.m. (Vancouver time). In order for the plan to be approved by the creditors, it needs to be approved by a majority in number of creditors in each class and by creditors having claims amounting to at least two-thirds in dollar value of the total creditor claims in each class.

Secured debenture financing

As noted above and in the company's news release dated June 10, 2014, the company seeks to complete the financing for gross proceeds of up to $8-million by the issuance of secured convertible debentures, and CCM has agreed to subscribe for, or arrange subscriptions for, such debentures. The company seeks to issue the debentures from time to time as funds are required by the company, and in such number of tranches as agreed upon by the company and CCM, with the first tranche of debentures being for debentures in the minimum total principal amount of $5-million. The first tranche of the debentures shall bear interest at a rate of 10 per cent per year, which interest shall be payable annually, 50 per cent in cash and 50 per cent by the issuance of shares. The debentures will be repayable in three years. For each $1,000 in principal of debentures, Huldra will issue 1,000 share purchase warrants. The debentures are convertible into shares at a conversion price of five cents per share prior to the maturity date. Each warrant is exercisable into one additional share for four years from the date of issuance at an exercise price of 7.5 cents per warrant share in the first year after issuance and 10 cents per warrant share thereafter. The debentures will rank subordinate to the debt owed to Waterton until such time as this debt is repaid in full. In addition, upon repayment by the company of all amounts owed to Waterton and the cancellation of the 2-per-cent net smelter return royalty on the company's Treasure Mountain mine held by Waterton, the holders of the debentures issued pursuant to the first tranche will be granted a total 2-per-cent net smelter returns royalty with respect to the company's Treasure Mountain mine on substantially the same terms as the royalty currently granted to Waterton, provided that each holder of debentures issued pursuant to the first tranche shall only be entitled to its pro rata share of such royalty based on its individual investment pursuant to the first tranche. The conversion price of five cents per share for the debentures and the exercise prices of the warrants of 7.5 cents and 10 cents per share, as applicable, are on a postconsolidation basis, and are subject to approval of the exchange.

The terms of the debentures offered pursuant to subsequent tranches of the financing, other than the first tranche, including the interest rate, maturity date, conversion price and exercise price of the underlying warrants, have not been determined at this time.

The terms of the financing, including the first tranche, and the closing thereof remain subject to approval of the exchange. The company has requested certain waivers from the policies of the exchange with respect to the financing, including a waiver from the pricing requirement in connection with the conversion price of the debentures and the exercise price of the warrants. There is no guarantee that such waivers will be granted by the exchange, that the securities offered pursuant to the financing will be offered on the terms set forth in this news release or that the financing will close. The company does not expect to pay any finders' fees in connection with the financing. All securities issued pursuant to the financing are expected to be subject to a hold period of four months and one day. In addition, the exchange may impose additional escrow requirements with respect to certain securities issued to insiders pursuant to the financing.

Repayment of DIP loan and Waterton debt

As previously disclosed, pursuant to the restructuring agreement, Waterton has agreed to settle all amounts advanced by it to the company, including the amounts advanced under the DIP loan, as follows:

  • All amounts advanced to the company by Waterton under the DIP loan subsequent to entry into the restructuring agreement are to be repaid in cash from the proceeds of the first tranche;
  • Additional cash payments in the total amount of $6.5-million (the Waterton settlement amount) are to be paid to Waterton as follows:
    • $2.5-million on the closing date of the restructuring;
    • $1.5-million on or before the date that is six months from the closing date;
    • $2.5-million on or before the date that is 12 months from the closing date;
  • The balance of the amounts owing will be settled by the issuance of shares at a deemed price of five cents per share.

In addition, the company has agreed to pay Waterton interest at a rate of 3 per cent per year on the portion of the Waterton settlement amount that remains outstanding after the closing date until such time as the full Waterton settlement amount and the interest thereon have been repaid. Upon repayment to Waterton in full of all amounts owed to it by the company, the 2-per-cent net smelter return royalty that the company previously granted to Waterton with respect to production from the company's Treasure Mountain mine will be terminated and all security interests Waterton has against the assets and property of the company will be discharged.

Huldra's postrestructuring business plan

Following completion of the restructuring, the company intends to focus on transforming its Merritt mill property into a processing facility for mill feed for other gold and silver mining companies, as there are significant costs associated with securing land, purchasing and building a processing mill and a lined tailings facility. Such a facility would provide the opportunity for other companies to avoid the significant capital expenditure requirements necessary to build such a processing facility. In addition, the company intends to resume exploration activities at its Treasure Mountain project.

Other updates

The company would like to clarify that other than the proposed plan, the related letter agreement with CCM and Waterton, which was disclosed in the company's news release dated June 10, 2014, and the ancillary dealings with the company's creditors, the company does not have any arrangements or agreements that are currently in effect with any other party with respect to any transactions or financings. In particular, the company confirms that it is not proceeding with any transaction with Ximen Mining Corp. In addition, the company confirms that further to its news release dated April 16, 2014, the company is not proceeding with the sale of its Merritt mill and related property to CCM in light of the restructuring agreement and the plan.

We seek Safe Harbor.

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