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HALIFAX, June 23 /CNW/ - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN HLR.DB HLR.DB.A) ("Holloway" or the "REIT") announced that the REIT has today entered into a credit agreement effective as of June 15, 2011 (the "Credit Agreement") with Geosam Capital Inc. ("Geosam", and together with any other person who becomes a party to the Credit Agreement as a lender, the "Lender"), for the advancement of a secured, non-revolving term loan in the amount of up to $20,000,000 (the "Credit Facility"). The proceeds of the Credit Facility, to be provided by way of a single drawdown, will be used solely to repay all or part of the REIT's 8% convertible debentures maturing August 1, 2011.
The Credit Facility has a maturity date of March 31, 2013 and bears interest at the annual rate of 12.5%, payable monthly. It may be prepaid at any time prior to the maturity date, in whole or in part, without premium or penalty. Subject to receipt of all necessary regulatory approvals (including approval of the Toronto Stock Exchange) and conditional upon funding of the Credit Facility, the REIT will issue to the Lender up to 3,000,000 warrants to purchase units of the REIT (the "Warrants") on the basis of 150,000 units per $1,000,000 drawn under the Credit Facility, except that the REIT will be required to issue a minimum of 2,000,000 Warrants to the Lender irrespective of the amount drawn by the REIT. Subject to adjustment as set out in the Credit Agreement, the Warrants will be exercisable for a period of three years from the date of issuance for up to 3,000,000 units of the REIT (representing approximately 7.7% of the REIT's issued and outstanding voting units on a non-diluted basis as at the date hereof) at an initial exercise price equal to $0.40. If the REIT is unable to issue the Warrants in certain circumstances, the REIT will be obligated to pay to the Lender the sum of $1,000,000.
Additional terms of the Credit Facility and the Warrants are substantially as disclosed in the REIT's management information circular dated May 9, 2011 (the "Circular") for the annual and special meeting of unitholders of the REIT held on June 6, 2011 (the "Meeting") and as set out in the Credit Agreement which will be filed on the SEDAR website at www.sedar.com.
As a result of George Armoyan and Michael Rapps being trustees of the REIT and also officers of Geosam (and, in the case of Mr. Armoyan, also a principal of Geosam), the Credit Facility and related issuance of Warrants are considered to be related party transactions under applicable securities laws. Where available, the REIT has relied upon exemptions in respect of the formal valuation and minority unitholder approval requirements under applicable securities laws. The Credit Facility is not subject to the formal valuation requirements under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), and the REIT has relied upon the exemption in paragraph (f) of section 5.7 of MI 61-101 as the Credit Facility was obtained on reasonable commercial terms that are not less advantageous to the REIT than if obtained from an arm's length party. However, the issuance of the Warrants constitutes a related party transaction under applicable securities laws requiring disinterested unitholder approval and a formal valuation of the Warrants by qualified and independent valuators. A formal valuation of the Warrants was completed by Stonecap Securities Inc. (as disclosed in Appendix P to the Circular) and unitholder approval was successfully obtained at the Meeting for the potential issuance of Warrants to Geosam (or a legal entity in which Geosam and one or more other parties have an interest) and/or to a syndicate of lenders that includes Geosam.
Notice to Readers
Certain forward-looking statements are made in this news release, within the meaning of applicable Canadian securities laws. Forward-looking statements used in this new release may contain words such as "may", "will", "should", "believe", "expect", "plan", "anticipate", "intend", "estimate", "predict", "potential", "continue", "future", or the negative of these terms or other similar expressions. Forward-looking statements in this news release, include, without limitation, statements regarding possible future action by the REIT and the receipt of consents and approvals, including the approval of unitholders and the Toronto Stock Exchange. These statements reflect Holloway's current expectations regarding future events and are based on information currently available to management, but involve known and unknown risks, uncertainties and other factors which may cause the outcome or the actual results, performance or achievements of Holloway or any of its subsidiaries to be materially different from any future results, performance or achievements anticipated, expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to, fluctuations in interest rates and currency values, legislative and regulatory developments, legal developments, the occurrence of weather-related and other natural catastrophes, changes in tax laws, failure of the parties to the Credit Agreement to satisfy the conditions set out therein, inability of the parties to obtain required consents, permits or approvals, and those other risks, factors and uncertainties detailed in the section entitled "Risks and Uncertainties" in the REIT's Management's Discussion and Analysis for the year ended December 31, 2010 and "Risk Factors" in the REIT's Annual Information Form for the year ended December 31, 2010 which are available on the REIT's profile on the SEDAR website at www.sedar.com. The preceding list is not an exhaustive list of possible factors. These and other factors should be considered carefully and readers are cautioned that forward-looking statements should not be read as guarantees of future performance, outcomes or results, should not be unduly relied upon, and will not necessarily be accurate indications of whether or not such results will be achieved. Forward-looking information is based on various material factors or assumptions, which are based on information currently available to the REIT. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include: the advancement of the Credit Facility and the realization of the anticipated benefits thereof. Readers are cautioned that the preceding list of material factors or assumptions is not exhaustive. Although the forward-looking statements contained in this news release are based upon what management believes are reasonable assumptions, the REIT cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this news release, and should not be relied upon as representing the REIT's views as of any date subsequent to the date of this news release. The REIT undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.
Holloway is a real estate investment trust focused on acquiring, owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway currently owns 22 hotels with 2,386 rooms.
Holloway's units and convertible debentures trade on the Toronto Stock Exchange under the symbols HLR.UN, HLR.DB and HLR.DB.A, respectively.
SOURCE Holloway Lodging Real Estate Investment Trust
For further information: Mr. Glenn Squires, Chief Executive Officer of the REIT; Ms. Tracy Sherren, Chief Financial Officer of the REIT, (902) 404-3499