/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES/
HALIFAX, Feb. 28, 2012 /CNW/ - (TSX: CLR CLR.DB.B CLR.DB.A):
Clearwater and Glitnir settle all outstanding claims.
Clearwater will realize a gain of approximately $12.4 million or
approximately $0.24 per share in the fourth quarter of 2011 as a result
of the settlement.
Today, Clearwater Seafoods Incorporated ("Clearwater") reported that it
has reached an agreement with Glitnir regarding disputed derivative
contracts, interest rate swaps and damage claims.
BACKGROUND ON THE CONTRACTS AND DAMAGE CLAIMS
On October 7, 2008 the Icelandic Financial Services Authority ("FME")
took control of Glitnir and subsequently placed it into receivership.
Prior to Glitnir's receivership Clearwater Seafoods Limited Partnership
("CSLP", a wholly owned subsidiary of Clearwater) had derivative
contracts with Glitnir including foreign exchange contracts and cross
currency and interest rate swaps.
During the course of refinancing debt facilities in June 2009, CSLP and
Glitnir reached an agreement whereby all outstanding foreign exchange
contracts were closed and the potential liability under these contracts
was capped at $14.0 million plus interest. As of the third quarter of
2011, CSLP had included in current liabilities an estimated $16.5
million, including accrued interest, associated with these contracts.
CSLP also had a number of interest rate and cross currency swap
contracts with Glitnir to hedge the changes in the Icelandic Consumer
Price Index ("CPI") and the ISK currency. As of the third quarter of
2011, CSLP had included in current liabilities an estimated $10.9
million associated with these contracts.
In the fourth quarter of 2009, CSLP commenced litigation with Glitnir in
relation to damages from Glitnir's failure to honor a term sheet for a
proposed privatization in October 2008, the foreign exchange contracts
and the cross currency and interest rate swaps.
Recently Clearwater and Glitnir entered into discussions and ultimately
reached an agreement whereby both parties set aside all claims (the
"Glitnir Settlement Transaction").
DETAILS OF THE GLITNIR SETTLMENT TRANSACTION
The agreement reached with Glitnir provides for the settlement and
release of all outstanding claims amoung CSLP, Clearwater Seafoods
Income Fund ("the Fund") and its successor Clearwater Seafoods
Incorporated, and Glitnir in exchange for an immediate cash payment by
Clearwater of Canadian $14.5 million.
Clearwater will fund the payment using Canadian $5 million funded from
deposits that Clearwater had maintained for such purpose and had
included in other long-term assets and a $9.5 million addition to
Clearwater's existing second lien term loan facility.
POSITIVE IMPACT ON FOURTH QUARTER OF 2011 AND FUTURE RESULTS
As a result of this settlement, Clearwater will record a gain of
approximately Canadian $12.4 million or approximately $0.24 per share
in the fourth quarter of 2011, being the difference between the $14.5
million settlement plus expenses and liabilities recorded at the end of
the third quarter of 2011 for the exchange contracts and cross currency
and interest rate swaps.
Ian Smith, CEO of Clearwater commented "this settlement removes
uncertainty by bringing closure to a potentially lengthy legal
proceeding. In addition, it allows us to simplify our balance sheet
and when combined with our recent conversion from a trust to a
corporation, provides us with a clean and easy to understand capital
Mr. Smith continued "One of our key goals over the past year has been to
focus on simplifying our capital structure. This is important as it
makes it easier for investors and lenders to understand our structure
and enables discussions to be focused on the performance of the
underlying business which continues to be strong with growing sales and
EBITDA and decreasing leverage."
COMMENTARY REGARDING FORWARD-LOOKING STATEMENTS
This news release may contain forward-looking statements. Such
statements involve known and unknown risks, uncertainties, and other
factors outside management's control including, but not limited to,
total allowable catch levels, selling prices, weather, exchange rates,
fuel and other input costs that could cause actual results to differ
materially from those expressed in the forward-looking statements.
Clearwater does not undertake any obligation to publicly revise these
forward-looking statements to reflect subsequent events or
circumstances other than as required under applicable securities laws.
Clearwater is recognized for its consistent quality, wide diversity and
reliable delivery of premium wild, eco-labelled seafood, including
scallops, lobster, clams, coldwater shrimp, crab and groundfish.
Since its founding in 1976, Clearwater has invested in science, people,
technology, resource ownership and resource management to sustain and
grow its seafood resource. This commitment has allowed it to remain a
leader in the global seafood market.
SOURCE CLEARWATER SEAFOODS INCORPORATED
For further information:
Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Treasurer, Clearwater, (902) 457-8181.