Infinito Announces $42.5 Million Convertible Debenture Financing Involving Debt Restructuring And up to $8 Million in Further Convertible Debt



    Trading Symbol: TSX-V: IG

    CALGARY, Feb. 1 /CNW/ - Infinito Gold Ltd. (the "Company") announces that
it has agreed to terms to raise, on a non-brokered private placement basis, an
aggregate of up to CDN$50.5 million upon the sale of secured convertible notes
(the "Notes") to Exploram Enterprises Ltd. ("Exploram") and Auro Investments
Ltd. ("Auro") (collectively, the "Holders"). The Holders have agreed to a
subscription of an initial aggregate principal amount of CDN$42.5 million in
Notes and to subsequent drawdowns on the Note held by Exploram up to CDN$8
million, subject to certain conditions. Under such subscriptions for Notes,
the Holders shall also be issued, concurrently with the issue of the Notes,
one detachable common share purchase warrant (a "Warrant") for each share that
can be acquired on conversion of the Notes. The proceeds of $42.5 million
shall be used to retire all outstanding Notes and Debentures of the Company
totaling $37,500,000, to pay interest on such outstanding debt of
approximately $910,000 with the balance for working capital and corporate
general and administrative expenses.
    The Notes mature five years after their date of issue and are convertible
at any time up to maturity into shares of the Company. The conversion price
for the initial $42.5 million subscription of Notes is $0.204 per share, being
the 20-day volume weighted average price of the shares of the Company for the
previous 20 trading days (the "20-Day VWAP") and the conversion price for
subsequent drawdowns will be the 20-Day VWAP at the date of drawdown. If,
after the Notes are issued however, the Company issues shares for cash at a
price below the conversion price of the Notes (a "Subsequent Issuance"), the
Holders shall be entitled to concurrently convert into shares at that lower
issue price an aggregate principal amount of the Notes as is equal to the
amount of the Subsequent Issuance. Shares issued for cash upon the exercise of
stock options, interest payments on the Notes or on conversion of principal of
a Note with a lower conversion price do not trigger this right.
    The Notes bear interest at 15% per year, payable quarterly, except that
after March 31, 2010 the Holders have the discretion to require interest to be
paid monthly. The first interest payment is due on the earlier of the first
drawdown of a project development debt financing for the Company's Crucitas
Project and September 30, 2009. (The Company announced in August of 2008 that
it had signed an engagement letter giving BNP Paribas an exclusive mandate to
act as lead arranger on the project development financing for the Crucitas
Project (the "Project Development Financing"), but financing work has been
suspended pending resolution of the Costa Rican legal challenge in respect of
the grant of a change of land use permit for the mine announced on October 21,
2008.) Interest is payable in cash or shares of the Company, at each Holders'
election, such shares to be issued at the 20-Day VWAP at the time the interest
payment is due.
    Each Warrant issued concurrently with the issue of Notes, or a subsequent
drawdown, is exercisable for a period of five years and entitles the Holder to
acquire one share of the Company at a price equal to the conversion price of
the concurrent Note. Since the Company has agreed to issue one Warrant for
each share that can be acquired on conversion of a Note, concurrently with the
issue of the initial $42.5 million in Notes the Company shall issue
208,333,334 Warrants.
    The Company's obligations under the Notes will be secured by: (i) a
general security agreement over all of the Company's assets and a pledge of
the shares of each of the Company's direct subsidiaries; (ii) a guarantee of
the Company's obligations under the Notes by each of the Company's
subsidiaries; and (iii) a pledge of the shares of any indirect subsidiary of
the Company.
    The Company has the right to prepay the principal amount of the Notes, in
full or in part, at any time after three years from the issue date of the
Notes, subject to each Holders' right to convert before prepayment. Prepayment
is subject to other conditions, including that the 20-Day VWAP prior to
prepayment must be 15% greater than the conversion price of the principal
amount of the Note to be prepaid. The Notes will include negative covenants,
positive covenants and conversion right adjustments that are standard for
transactions of this nature. The Notes also contain events of default to be
expected in financings under these circumstances, including a breach of the
terms of the Notes, bankruptcy, insolvency or receivership proceedings, a
change of control of the Company, a change of business of the Company's Costa
Rican subsidiary, a failure to obtain and maintain regulatory approvals in
respect to the Crucitas project, a failure to make the initial drawdown under
the Project Development Financing before September 30, 2009 and a court
decision that impairs or prevents the ability to construct the Crucitas
project.
    The Company has agreed to pay a cash structuring fee to the Holders of 3%
of funds advanced at closing not utilized to retire existing debt, 3% on funds
advanced in subsequent drawdowns and 1% of all funds used to retire existing
debt.
    Subsequent drawdowns on the Note held by Exploram to a maximum of
$8,000,000 may be made at the Issuer' request in increments of between
$500,000 and $2,000,000 subject to specified conditions precedent to
subsequent drawdowns, including the rendering of a favorable ruling in the
Costa Rican legal challenge referred to above.
    The Company requires the $42.5 million to be raised in order to continue
its current operations. On January 31, 2009, $5,000,000 came due to a Holder
under an outstanding secured debenture of the Company and the Company did not
have the funds to repay it. As a result of cross default provisions in its
other outstanding debt that is not payable on demand, the Holders are entitled
to demand repayment of the entire $37,500,000 principal amount of outstanding
debt of the Company, plus accrued interest. The Company has not identified
other sources of an adequate amount of funds to allow it to meet its
obligations.
    The financing is a related party transaction under MI 61-101 as each of
Exploram and Auro are related parties. As such, the Company formed a Special
Committee of independent directors to consider and negotiate the terms of the
transaction. The Company is exempt from the formal valuation requirements of
MI 61-101 as its shares are only listed on the TSX Venture Exchange and the
Company is exempt from the minority shareholder approval requirement under MI
61-101 as both the Board of Directors and the independent directors each
determined, in good faith, that (i) the Company is in serious financial
difficulty, (ii) the transaction is designed to improve the financial position
of the Company, and (iii) the terms of the transaction are reasonable in the
circumstances of the Company. These determinations were based in part upon the
advice of its financial advisors. Due to the potential dilution to minority
shareholders under this transaction, the Special Committee also recommended
that the Company make available to minority shareholders an opportunity to
mitigate the dilutive impact through participation in an offering of units
priced at a comparable level. Accordingly, the Company plans to approach
certain of its minority shareholders to see if there is interest in such an
offering on a private placement basis.
    The Board of Directors has also approved an increase in the authorized
capital of the Company from 250,000,000 to an unlimited number of Common
Shares in order to allow it to complete this transaction. In its circumstances
the Company considers it necessary to close the Note financing as soon as
possible. Completion of the Note financing is subject to approval of the TSX
Venture Exchange.
    Upon completion of the sale of the Notes, Exploram shall advance $34
million and Auro shall advance $8.5 million. Exploram shall also be issued
166,666,667 Warrants and Auro shall be issued 41,666,667 Warrants. Exploram
presently holds 61,154,490 shares of the Company and, upon conversion in full
of its Notes at $0.204 per share and exercise of all of its Warrants, could
acquire a further 333,333,334 shares of the Company. Auro presently holds
5,714,285 shares of the Company and, upon conversion in full of its Notes at
$0.204 per share and exercise of all of its Warrants, could acquire a further
83,333,334 shares of the Company. The Company presently has 121,429,289 shares
outstanding.

    
    Caution Regarding Forward-Looking Information and Statements
    ------------------------------------------------------------
    

    Certain statements in this press release address future events and
conditions and, as such, involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by the statements. These factors include,
among others, the inherent risks involved in the exploration and development
of mineral properties, the uncertainties involved in interpreting drilling
results and other geological data, fluctuating metal prices, the possibility
of project cost overruns or unanticipated costs and expenses, uncertainties
relating to the availability and costs of financing needed in the future, the
possibility that all necessary governmental and regulatory approvals will not
be received, and the availability of a qualified workforce and third party
contractors necessary for the development and operation of a mine. The Company
undertakes no obligation to update these forward-looking information or
statements if circumstances or management's estimates or opinions should
change. The reader is cautioned not to place undue reliance on forward-looking
information or statements.

    INFINITO GOLD LTD.

    John Morgan
    President

    
    "The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release."
    
    CBS\323901\Debt Restructuring 08\1065




For further information:

For further information: INFINITO GOLD LTD., Suite 216, 102 - 8th Avenue
S.W., Calgary, Alberta, T2P 1B3, Telephone: (403) 444-5191

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Infinito Gold Ltd.

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