Ram Power, Corp. Announces Private Placement and Recapitalization Transaction

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

RENO, NV and VANCOUVER, April 20, 2015 /CNW/ - Ram Power, Corp. (TSX: RPG) (the "Company" or "Ram Power") announced today that it has entered into a definitive agreement (the "Transaction Agreement") with Goodwood Inc. ("Goodwood") in respect of an equity financing and recapitalization transaction (the "Transaction").  The Transaction has been negotiated on an arm's-length basis, represents the successful culmination of an extensive review of alternatives by Ram Power's independent directors and, in the view of Ram Power and Goodwood, will have the effect of substantially recapitalizing Ram Power and placing it on a solid financial footing going forward.

The Transaction Agreement provides for: (i) a private placement offering by the Company (the "Private Placement") of up to 18,598,500,000 subscription receipts (the "Subscription Receipts") at a price per Subscription Receipt of CDN$0.004 ("Subscription Price") for aggregate proceeds of up to approximately US$60 million, each Subscription Receipt entitling the holder to receive, without payment of additional consideration, one pre-consolidation common share in the capital of Ram Power (a "Common Share") for each Subscription Receipt held, upon satisfaction of certain release conditions (the "Escrow Release Conditions"), such Private Placement being expected to be completed on or about April 30, 2015 with the proceeds being held in escrow pending satisfaction of the Escrow Release Conditions; (ii) the conversion ("Conversion") of Ram Power's outstanding CDN$53,016,338 aggregate principal amount of 8.5% senior secured debentures (the "Debentures") plus accrued and unpaid interest up to, but excluding, the date of the Conversion, into approximately 10,899,578,092 pre-consolidation Common Shares (assuming, for illustrative purposes, that the Conversion occurs on April 30, 2015), at a conversion price of CDN$0.005 per Common Share (the "Conversion Price"), the completion of such Conversion being an Escrow Release Condition; and (iii) assuming the Private Placement is completed in full, the issuance to Goodwood of approximately 1,000,040,000 pre-consolidation Common Shares by way of the Fee Shares (as such term is defined below).

The Transaction Agreement also provides that, in connection with the completion of the Conversion and the exchange of Subscription Receipts into Common Shares, the name of Ram Power will be changed to "Polaris Infrastructure Inc." and the Common Shares of the Company will be consolidated at a ratio of 2,000 pre-consolidation Common Shares for each post-consolidation Common Share (the "Share Consolidation").    

The Debentures are not currently convertible or exchangeable for Common Shares of Ram Power. In accordance with the March 27, 2013 indenture governing the Debentures, as amended (the "Debenture Indenture"), holders of more than 66 2/3% of the currently outstanding principal amount of Debentures have today approved by written resolution amendments to the Debenture Indenture providing for the Conversion, and the Company has today entered into a second supplemental indenture giving effect to these amendments.  Under such second supplemental indenture, a copy of which will be filed on SEDAR, the Conversion will occur contemporaneously with the other Escrow Release Conditions being satisfied. 

The Transaction Agreement also contemplates the entering into of certain amendments to the US$245 million credit facilities (the "Credit Facilities") of the Company's wholly-owned subsidiary, Polaris Energy Nicaragua, S.A. ("PENSA"), which owns and operates the operating geothermal energy project located in the northwest of Nicaragua near the city of Leon (the "San Jacinto Project").  The contemplated amendments to the Credit Facilities include a revision of the payment schedule (including increasing the term of the Credit Facilities by four years), a reduction in the amount of capital required to be funded into each of the debt service reserve account and major maintenance reserve account on an ongoing basis, a potential reduction in the interest rates of up to 1.5% over three years (provided certain conditions are met), the deletion of certain hourly output covenants and the postponement of certain financial covenants, all of which are expected by Ram Power to result in it being in a position to begin receiving distributions from PENSA in 2016.  The Company also expects that the effect of these changes will result in total debt service in 2016, inclusive of both principal and interest payments, being reduced to approximately US$22 million. The entering into of a binding agreement giving effect to these amendments, which were negotiated among Goodwood, the Company and the lenders under the Credit Facilities and are currently documented in a non-binding term sheet, constitutes another Escrow Release Condition.

The Transaction Agreement also provides that, once all other Escrow Release Conditions have been satisfied: (a) the board of directors of the Company will be reconstituted to consist of the following five directors:  Marc Murnaghan, Jorge Bernhard and Jaime Guillen (each of whom will be a newly appointed director of the Company), and Antony Mitchell and James Lawless (each of whom is an existing director of the Company);  and (b) Marc Murnaghan will be appointed as Chief Executive Officer of the Company.  Biographical information regarding Messrs. Murnaghan, Bernhard and Guillen is included at the end of this release.       

Details of the Transaction

The Transaction has been structured and negotiated on an arm's-length basis between the Company and Goodwood, a Toronto-based investment dealer and investment management firm.  Goodwood will be investing in the Private Placement with capital from certain investment funds that Goodwood manages, and has also coordinated obtaining commitments for the Private Placement from other institutional and other investors.  Upon the closing of the Private Placement, and as a fee for services related thereto, the Company will pay to Goodwood, or as Goodwood may otherwise direct, such number of pre-consolidation Common Shares (the "Fee Shares") that is equal to 8% of the aggregate gross proceeds from the Private Placement, other than proceeds arising from purchases of Subscription Receipts by investment funds or accounts managed by Goodwood or by certain other specified investors.  Assuming the Private Placement is completed in full, it is expected that an aggregate of approximately 1,000,040,000 pre-consolidation Fee Shares will be issued at an issue price of CDN$0.004 per share.        

In November 2013, Ram Power engaged Dundee Securities Europe LLP ("Dundee") to provide financial advice to Ram Power in connection with the completion by Ram Power of a strategic transaction.  In lieu of a portion of the fees that would otherwise be payable to Dundee for the financial advice it has been providing to Ram Power, upon closing of the Private Placement, Ram Power will issue to Dundee 125,000,000 Common Shares (the "Dundee Shares").

Ram Power currently has 371,200,614 issued and outstanding Common Shares. Assuming completion in full of the Private Placement, satisfaction of the Escrow Release Conditions, Conversion of the Debentures (assuming, for illustrative purposes, that the Conversion occurs on April 30, 2015), and the issuance of the Fee Shares and the Dundee Shares, 30,623,118,092 pre-consolidation Common Shares (equal to 8,250% of the currently issued and outstanding Common Shares) will be issued in connection with the Transaction.

Assuming completion in full of the Private Placement, satisfaction of the Escrow Release Conditions, Conversion of the Debentures (assuming, for illustrative purposes, that the Conversion occurs on April 30, 2015), and the issuance of the Fee Shares, the Company will have, following the Share Consolidation, approximately 15,497,159 Common Shares issued and outstanding, consisting of 9,299,250 post-consolidation Common Shares issued upon the exchange of the Subscription Receipts, 5,449,789 post-consolidation Common Shares issued upon the Conversion, 500,020 post-consolidation Fee Shares, 62,500 post-consolidation Dundee Shares and approximately 185,600 post-consolidation Common Shares resulting from the consolidation of the currently issued and outstanding 371,200,614 pre-consolidation Common Shares.   Immediately following the satisfaction of the Escrow Release Conditions, the Common Shares issued as part of the Transaction will represent approximately 98.8% of the Common Shares of the Company that are then expected to be issued and outstanding.

The only entity or person who is expected (to the knowledge of the Company) to own or exercise control and direction over more than 10% of the issued and outstanding Common Shares of Ram Power upon completion of the Transaction (i.e., immediately following the Conversion, the exchange of the Subscription Receipts for Common Shares and the issuance of the Fee Shares), is Goodwood, which is currently expected to then exercise control and direction over approximately 11.4% of the outstanding Common Shares.  To the knowledge of the Company, upon the conclusion of the Transaction, there will not be any shareholder that beneficially owns, or exercises control and direction over, directly or indirectly, 20% or greater of the issued and outstanding Common Shares. 

No current insider of Ram Power will be participating in the Private Placement. Certain current insiders of the Company will be receiving Common Shares under the Transaction as a consequence of their ownership of, or control and direction over, Debentures, namely funds or accounts managed by Sprott Asset Management Inc. (collectively, "Sprott") and two existing directors of the Company, Antony Mitchell and Murray Sinclair.  None of Sprott, Mr. Mitchell or Mr. Sinclair is participating in the Private Placement.  The existing holdings of Debentures and pre-consolidation Common Shares by these insiders, and their expected post-consolidation holdings upon completion of the Conversion (assuming, for illustrative purposes, that the Conversion occurs on April 30, 2015), are set forth below:  


Principal Amount of  Debentures
Currently Held (1)

Number (%) of Pre- Consolidation
Common Shares Currently Held

Number (%) of Post-Consolidation
Common Shares Held
After the Transaction

Sprott

$10,425,000

41,176,810

(11.1%)

1,092,221

(7.0%)

Antony Mitchell,
Director

$260,625

2,149,327

(0.6%)

27,865

(0.2%)

Murray Sinclair,
Director (2)

$6,255,000

400,000

(0.1%)

643,180

(4.2%)

(1)

Excludes accrued and unpaid interest owing since December 31, 2014.

(2)

Debentures held through Earlston Investments Corp.

The Company has applied to the Toronto Stock Exchange (the "TSX") to list the Common Shares to be issued pursuant to the Transaction for trading on the TSX and closing of the Private Placement is conditional upon receipt of such listing approval.

There is no certainty that the Escrow Release Conditions will be satisfied.  The Escrow Release Conditions include completion of the Conversion, the receipt of all required consents, approvals and other actions required to give binding effect to the contemplated amendments to the Credit Facilities, completion of the Share Consolidation, and the reconstitution of the Company's board of directors and appointment of Mr. Murnaghan as Chief Executive Officer as contemplated above. Until the Escrow Release Conditions are satisfied, the Company will not have access to the proceeds from the Private Placement.  If the Escrow Release Conditions are not satisfied by September 30, 2015, or certain specified triggering events occur prior to the Escrow Release Conditions being satisfied, the proceeds of the Private Placement, together with interest earned thereon, will be returned to the holders of the Subscription Receipts.

Pursuant to the terms of the Transaction Agreement, upon the Escrow Release Conditions being satisfied and subject to any required approvals being obtained by Goodwood Management Services Ltd., Ram Power will enter into a consulting agreement with Goodwood Management Services Ltd., an affiliate of Goodwood, pursuant to which Goodwood Management Services Ltd. will provide strategic advisory services to Ram Power for a period of five years for an annual fee of $100,000.

Financial Position of Ram Power

PENSA is currently in default under the Credit Facilities.  As a result, the Company is unable to receive distributions from PENSA, leaving the Company (a holding company) without an income stream. As at December 31, 2014, the Company had negative US$179.4 million of working capital on a consolidated basis, which is largely attributable to PENSA's failure to satisfy the covenants in the Credit Facilities, which entitles the lenders under the Credit Facilities to accelerate, at any time, the full amount owed under the Credit Facilities. The Company has therefore classified the Credit Facilities as short term debt. The Company also continues to face operating losses, including an aggregate loss of US$23.9 million for the fiscal year ended December 31, 2014.

Additionally, as previously announced, PENSA failed to make the principal and interest payments on the subordinated loan under the Credit Facilities due on September 15, 2014, December 15, 2014 and March 15, 2015 in an aggregate amount of US$1.3 million. The Company was also unable to make the December 31, 2014 semi-annual interest payment on the Debentures, but obtained the approval of registered holders of 66 2/3% of the then currently outstanding principal amount of Debentures to add the aggregate amount of the interest payment (being $2,161,338) to the principal amount of the Debentures.  Given the Company's current financial situation, in the absence of completion of the Transaction, its ability to continue operating as a going concern and to meet its obligations as they come due cannot be assured in the long term.

The holders of the Debentures have agreed in the second supplemental indenture entered into today that if the Conversion does not occur by June 30, 2015, being the date of the next semi-annual interest payment due on the Debentures, that such interest payment (approximately $2,253,194) will be added to the principal amount of the Debentures and the number of Common Shares to be issued upon the Conversion will be increased accordingly.

Approximately US$25 million to US$30 million of the net proceeds from the Transaction will be used to increase production capacity at the San Jacinto Project principally through the drilling of two new production wells.  The remainder of the net proceeds will be used for general corporate purposes.  With the drilling program and the revised project loan structure being implemented in connection with the Transaction, management believes the Company is in a significantly enhanced position to generate cash flow for shareholders and operate as a going concern.

Exemption from Shareholder Vote

The Transaction triggers the requirement for approval from the holders of a majority of the currently issued and outstanding Common Shares, excluding the votes attached to the Common Shares held by Sprott, under Section 607(g) of the TSX Company Manual, unless an exemption is applicable, as the Transaction will (i) result in the issuance of Common Shares that is greater than 25% of the number of Common Shares currently issued and outstanding, and (ii) result in the issuance of Common Shares to an insider of the Company that is greater than 10% of the number of Common Shares currently issued and outstanding.

The Company applied to the TSX under the provisions of Section 604(e) of the TSX Company Manual for an exemption from the requirement for shareholder approval of the Transaction on the basis that the Company is in serious financial difficulty (the "Application").  The independent and disinterested members of the Company's board of directors –being Jim Lawless, Fraser Buchan and Daryl Clark, each of whom is free from any interest in the Transaction and unrelated to the parties involved in the Transaction – considered the reasonableness and fairness of the Transaction and unanimously recommended to the Company's full board of directors that (i) the Transaction be approved and (ii) that the Company make the Application. The board of directors subsequently approved the Transaction (the members of the board that would be considered interested parties having declared their interests and abstained from voting) and there was no contrary view or abstention by any independent director on the resolution approving the Transaction. In addition, both the disinterested members of the board of directors and the Company's full board of directors determined that the Company met the applicable TSX and MI 61-101 financial hardship requirements and that the Transaction is reasonable in the circumstances and designed to improve the Company's financial situation.  The Company believes that, upon completion of the Transaction, it will be in compliance with the TSX continued listing requirements and that the Transaction will remedy the deficiencies identified by the TSX in the TSX's de-listing review letter sent to the Company on January 23, 2015.

The Private Placement is expected to close on or about April 30, 2015, and the Transaction is expected to be completed, including the Conversion, the amendment of the Credit Facilities and the exchange of the Subscription Receipts for Common Shares, within the next several months.

Biographical Information

Biographical information regarding Messrs. Murnaghan, Bernhard and Guillen is set forth below.

Marc Murnaghan

Mr. Murnaghan is a partner of Harrington Global Inc., a Toronto-based merchant bank focused on providing development capital to growth companies.  Mr. Murnaghan has over 20 years of experience in the investment banking business and prior to joining Harrington Global Inc. in September 2014, he was Co-Head of the Investment Banking group at Cormark Securities Inc.  Prior to his role as Co-Head of Investment Banking, Mr. Murnaghan ran the Power and Alternative Energy group where he helped raise equity capital for companies in the sector in areas such as solar, wind, hydro, geothermal, biomass, power electronics, battery technologies and fuel cells. Over his career, Mr. Murnaghan has also acted as advisor to companies on strategic transactions, including corporate sales, asset sales and strategic investments.  Mr. Murnaghan is Chairman of Catapult Environmental Inc., a Calgary based company focused on water remediation and disposal.  In addition, he currently occupies the role of Chair of the Board of Directors at Autism Speaks Canada, the leading autism science and advocacy organization in Canada. 

Jorge Bernhard

Mr. Bernhard is a consultant providing services relating to metals trading and risk management. He has sold and traded non-ferrous metals for more than 25 years. He also has substantial experience in developing large scale mining projects in various parts of the world, including jurisdictions similar to Nicaragua, and is fluent in Spanish. In 1992, Mr. Bernhard formed a joint venture with Western Mining Corporation of Australia ("WMC"), serving as partner and Chief Executive Officer responsible for selling all of WMC's nickel and intermediate production worldwide. Mr. Bernhard remained with that business until 2006. Following consistent profitability gains in WMC's nickel and intermediate product portfolios, the partnership was expanded to give Mr. Bernhard responsibility for the sale of uranium, copper and cobalt. Mr. Bernhard also pioneered a successful cobalt price discovery mechanism, which helped define and give clarity to cobalt metal pricing worldwide. Mr. Bernhard began his career as a junior trader at British Metals Corporation and was rapidly promoted. In 1987, Mr. Bernhard launched Sherritt Metals Marketing, a nickel marketing and trading company created in partnership with Sherritt Gordon Inc. Mr. Bernhard was a partner in the joint venture and also served as its Chief Executive Office. Mr. Bernhard served as a director of Dacha Strategic Metals Inc., a then TSX Venture Exchange listed issuer, from November 2012 to September 2014.

Jaime Guillen

Mr, Guillen is the Managing Partner at Faros Infrastructure Partners LLC, an investment firm with offices in United Kingdom and United States.  He has over 25 years of experience in the development, investment, financing, management and divestiture of energy and infrastructure projects. His experience ranges across Europe, North & Latin America, Middle East, and Asia and includes significant dealings with investors, developers, governments and industry players.  Mr. Guillen previously served as the Chief Executive Officer of Alterra Partners, an investment joint venture between Singapore Changi Airport and Bechtel, a United States engineering company. He also previously served as the Managing Director of Bechtel Enterprises in Latin America, President of Bechtel Enterprises in Brazil and Director of Bechtel Enterprises of Mexico – responsible for developing, investing in, and managing infrastructure investments.  Mr. Guillen earned a BS in Nuclear Engineering from Massachusetts Institute of Technology and an MBA from Stanford University.

Disclaimer

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described in this press release in the United States. The securities described in this press release have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, a U.S. Person (as defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

About Ram Power, Corp.

Ram Power is a renewable energy company based in Reno, Nevada, focused on the development, production and sale of electricity from geothermal energy in Latin America, the United States and Canada.

Cautionary Statements                                             

This press release contains certain "forward-looking information" which may include, but is not limited to, statements with respect to future events or future performance. Such forward-looking information reflects management's current beliefs and is based on information currently available to management. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking information in this press release includes, but is not limited to, statements regarding details of the Transaction and related private placements, including the use of proceeds of the Transaction.

A number of known and unknown risks, uncertainties and other factors may cause Ram Power's actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. Such factors include, but are not limited to the possibility that the Transaction will not be completed as contemplated, or at all, because the necessary regulatory approvals are not received or other conditions to completion of the Transaction are not satisfied, and the possibility that we have to allocate proceeds to other uses or reallocate proceeds differently among the anticipated uses due to changes in project parameters or other unforeseen circumstances associated generally with the unpredictability of operations in the geothermal industry. These factors should be considered carefully and prospective investors should not place undue reliance on forward-looking information. There may be other factors that cause actions, events or results not to be as anticipated, estimated or intended and the factors listed above are not intended to represent a complete list of the risk factors that could affect Ram Power. For additional information with respect to risks, uncertainties and assumptions, please also refer to the "Risk Factors" section of our most recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com, as well as our annual MD&A.

The forward-looking information in this press release is based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about the details of the Transaction and the anticipated use of proceeds. These factors should be considered carefully and readers of this press release should not place undue reliance on forward-looking information.

Although Ram Power has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. The statements in this press release are made as of the date of this release and there can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Ram Power undertakes no obligation to update forward looking information, other than as required by law, or comment on analyses, expectations or statements made by third-parties in respect of Ram Power, or its financial or operating results or its securities.

SOURCE Ram Power, Corp.

For further information: Steven Scott, Director of Investor Relations, Ram Power, Corp., Phone: 775-398-3700, Email: sscott@ram-power.com, www.ram-power.com

RELATED LINKS
www.polarisgeothermal.com

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