Twin Butte Responds to Open Letter to Debenture Holders

CALGARY, Aug. 25, 2016 /CNW/ - (TSX: TBE) – Twin Butte Energy Ltd. ("Twin Butte" or the "Company") wishes to respond to the claims made in a press release from Mr. Murray Bockhold yesterday, which included a number of inaccurate statements. The facts have been previously disclosed to all stakeholders and re-iterated to Mr. Bockhold (Bockhold Investment Management Group) and Mr. Edmonstone (Macquarie Capital) in a meeting held with members of the special committee of the board of directors of Twin Butte.

The facts are as follows:

  • The Company announced it was entering into a strategic alternatives process in December 2015.
  • The Company's bank syndicate determined in January 2016, primarily due to the reduction in forecast commodity prices, that the Company's credit facilities were being reduced significantly, requiring repayment of the Company's $85 million non-revolving credit facility by April 30, 2016.
  • The Company, with support of Peters & Co. Limited. and National Bank Financial, ran a fulsome strategic alternatives process involving over 450 potential counterparties, which culminated in the Company entering into the arrangement agreement with Reignwood Resources Holding Pte. Ltd. the ("Purchaser") and Reignwood Resources Trading UK Limited on June 23, 2016 after extensive arm's length negotiations between the Company and the Purchaser.
  • Subsequent to April 30, 2016 the Company's bank syndicate has provided multiple extensions of the maturity date of the Company's $85 million non-revolving credit facility. The Company is currently operating under a forbearance agreement with its bank syndicate pursuant to which the bank syndicate has agreed to forbear from exercising its rights and remedies for default under Twin Butte's credit agreement subject to certain conditions including that the Company's previously announced plan of arrangement (the "Arrangement") with the Purchaser is completed by September 26, 2016.
  • The offer received from Reignwood Resources Holding Pte Ltd. ("Reignwood") was structured by Reignwood and their advisors and was non-negotiable. As the offer from Reignwood was the only offer received that preserved value for all stakeholders, including the Company's debentureholders and shareholders, as well as its other creditors, including the bank syndicate, the board of directors accepted Reignwood's offer. No other offers received during the process provided any compensation for debentureholders or shareholders.
  • The consideration under the arrangement provided a 20% premium to debentureholders and a 5% discount to shareholders based on the 20 day VWAP of the debentures and shares, respectively on announcement of the Arrangement on June 24, 2016.
  • A proposal to convert debentureholders into equity shares was provided by Mr. Bockhold and Mr. Edmonstone to Reignwood's advisors and they have informed Twin Butte that they will not entertain such proposal. In fact, Reignwood is firm that there will be no changes to their current offer.

In the event of an adverse vote by either the debentureholders or the shareholders, the Arrangement Agreement may be terminated and the Arrangement abandoned at any time.   The Company would also be in default under its senior lending facility, entitling the senior lenders to take all steps to enforce their security. Neither the bank syndicate nor Reignwood are willing to make any changes to the arrangement terms.

The Board of Twin Butte has a broad responsibility and fiduciary duty to balance the interests of all stakeholders including the secured lenders, debentureholders, shareholders and employees. In fulfilling these responsibilities, the Board concluded, after examining all alternatives, that the Arrangement represented the most equitable sharing of value between the stakeholders and represented the highest aggregate value available to all of the stakeholders. The Arrangement represents a financial restructuring and the opportunity for the company to continue as a going concern. The Arrangement alternative is vastly superior to the possibility of insolvency, which the Board believes will lead to greater value destruction for all stakeholders.

Mr. Bockhold has made numerous inaccurate assertions in his press release that the company wishes to respond to with facts:

  • [Assertion] Debentureholders should be entitled to up to $404 per $1,000 of principal value of debentures.
    • [Fact] The Arrangement provides value to all of the Company's stakeholders, not just the debentureholders and no other offer is being contemplated by Reignwood. If the Arrangement is not approved the banking syndicate, as the Company's senior secured creditors, may exercise their rights to appoint a receiver and look to liquidate the Company's assets with the goal of maximizing funds for repayment of its secured position in full, first. Twin Butte firmly believes that the terms of the Arrangement in place today is the best offer that will be received, with all subsequent offers representing lower value to all stakeholders.
  • [Assertion] Debentureholders rank ahead of shareholders in the arrangement
    • [Fact] The claim of a holder of an unsecured, subordinated debenture in a realization scenario is misrepresented. The arrangement is not a realization in an insolvency proceeding, but rather an offer from a third party to acquire the claims against the assets of the debentureholders for $140 for each $1,000 of principal amount of debentures. The board of directors, supported by the fairness opinion of Canaccord Genuity Corp., has concluded that the recovery to debentureholders from accepting this offer will be far superior to the recovery from a realization against the assets in an insolvency. In the context of the bids received for the assets of Twin Butte in the strategic process, the board of directors believes that it is highly unlikely that the debentureholders will have any recovery at all.
  • [Assertion]The arrangement was structured to protect insiders and the Board
    • [Fact] The proposed Arrangement represents the only offer received by the Company, that provided any value to the debentureholders and shareholders beyond satisfying the Company's obligations to repay the amounts owing under its credit facilities. In the Board's view, the Arrangement represents the best and only choice to preserve value for all stakeholders. To believe that a superior offer is going to come forward if the Company is forced into insolvency proceedings after the extensive process that was undertaken is highly speculative. The Purchaser views the management and employees of the Company as crucial to the continued operation of the Company as a going concern.
  • [Assertion] The 1,080,050 share awards granted in Q2 went to executive or insiders.
    • [Fact] The executive and insiders have not received any share awards in the past year and these were for staff that had been blacked out during the scheduled January grant.
  • [Assertion] The debenture fairness opinion is not valid
    • [Fact] The fairness opinion obtained by the Twin Butte Board with respect to the debentures is a customary fairness opinion provided in the context of Canadian plan of arrangement transactions, such as the Arrangement. Canaccord Genuity Corp. was chosen as a completely independent advisor to the process and was provided access to all documentation and information to form their own independent, impartial opinion with respect to the Arrangement.

We would encourage all stakeholders to contact Twin Butte or their advisors if they are looking for the facts.

The board of directors of Twin Butte has previously stated, and continues to support its determinations, that: (i) the arrangement is in the best interests of Twin Butte and the Twin Butte securityholders; (ii) Twin Butte securityholders vote in favor of the arrangement; and (iii) the consideration to be received by Twin Butte securityholders pursuant to the arrangement is fair to the Twin Butte securityholders.

Securityholders who have not voted in respect of the arrangement or wish to change their vote may do so by following the instructions set forth on the proxy or voting instruction form provided to them. Securityholders may revoke a previously voted proxy with an instrument in writing, including another proxy, signed by the securityholder and delivered care of Twin Butte to Computershare Trust Company of Canada. In order to revoke a proxy previously delivered by an intermediary or its agent, on their behalf, beneficial securityholders should carefully follow any revocation instructions set forth on the voting instruction form provided to them by their intermediary or agent.

The proxy vote cut-off will be extended until 9:00 am MDT on Monday August 29th which is the starting time for the annual and special meeting of securityholders.

Reader Advisory

Certain information set forth in this press release, including information and statements which may contain words such as "could", "plans", "should", "anticipates", "expects", "believes", "will" and similar expressions and statements relating to matters that are not historical facts, contain forward-looking statements, including but not limited to statements regarding: the anticipated benefits and reasons for the arrangement, the potential consequences if the arrangement does not proceed, and the Company's belief with respect to the value of any future offers with respect to the Company, or its assets. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Twin Butte's control, including the rights of the lenders to exercise any rights or remedies under the credit facility and the value of any third party offer. The foregoing list is not exhaustive. Additional information on these and other risks that could affect completion of the arrangement are set forth in the information circular, which is available on SEDAR at www.sedar.com. In addition to the foregoing, the conclusions set out in the fairness opinions received by the board of the Company are subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by such advisors in connection with such fairness opinions and are made as at the date of such opinions. The fairness opinions were prepared for the sole benefit of the board of directors of Twin Butte and should not to be construed as a recommendation to any securityholder as whether to vote in favor of the arrangement. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The actual results, performance or achievement of Twin Butte could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Twin Butte will derive therefrom. Twin Butte disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

SOURCE Twin Butte Energy Ltd.

For further information: Questions concerning voting may be directed to: Laurel Hill Advisory Group, North American Toll-Free Number: 1-877-452-7184, Collect Calls Outside North America: 416-304-0211, Email: assistance@laurelhill.com; For further information about Twin Butte, please contact: Jim Saunders, Executive Chairman, Rob Wollmann, President and Chief Executive Officer, R. Alan Steele, Vice President Finance, Chief Financial Officer and Corporate Secretary, Tel: (403) 215-2045, Website: www.twinbutteenergy.com

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