Western Energy Services Corp. Announces Restructuring of Credit Facilities and Private Placement of $3 Million of Convertible Debenture Units



    
    /NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
    UNITED STATES/
    

    CALGARY, Aug. 14 /CNW/ - Western Energy Services Corp. ("Western" or the
"Company") is pleased to announce the following developments:

    
    -   Western has entered into a conditional letter agreement with HSBC
        providing for, among other things, a further advance of $1,325,000
        and an interest only repayment period until September 30, 2009 and a
        reamortization of the Company's senior debt facility (the
        "Restructured Senior Facility");

    -   Western is proceeding with, subject to the conditions noted below, a
        private placement offering of units ("Unit Offering), consisting of,
        in the aggregate, up to $3 million principal amount of convertible
        secured subordinated debentures (the "Debentures") and 30 million
        share purchase warrants (the "Warrants");

    -   The restructuring of the current bridge loan facility (the "Bridge
        Loan") originally made available to its subsidiary, Western Energy
        Services of Texas Corp., which is guaranteed by Western.
    

    The Unit Offering of the Debentures and Warrants will be placed with a
syndicate of investors lead by 1063645 Alberta Ltd. ("106 Alberta"), a company
controlled, directly or indirectly, by Mr. Jon Waddell, a director of the
Company. Mr. John Halliwell, also a director of the Company, will participate
in the Unit Offering. The Debentures will mature twenty-four months from the
date of issue (the "Issue Date"), bear interest at an annual rate of 7.0%
which interest payments will be subordinated to the interest payments to HSBC
under the Restructured Senior Facility. The Debentures will be convertible
into common shares of Western ("Common Shares") at the option of the holder at
any time prior to the maturity date at the conversion price of $0.10 per
Common Share for the first eight months from the Issue Date (the "Initial
Period"), $0.15 per Common Share for the eight months following the Initial
Period (the "Subsequent Period"), and $0.20 per Common Share for the eight
months following the Subsequent Period. Each Warrant shall entitle the holder
thereof to acquire one Common Share upon payment of the exercise price of
$0.10 and shall expire 24 months from the issue date.
    The proceeds of the Restructured Senior Facility and the Unit Offering
will be used for retirement of secured, long-term debt in the amount of
US$1,406,000 and general corporate purposes. The Debentures, the Warrants and
any Common Shares issued upon conversion of the Debentures or exercise of the
Warrants will be subject to a hold period of four months and one day from the
closing date of the Unit Offering. The closing of the Unit Offering is subject
to certain conditions, including securing of the approval of disinterested
shareholders as described below and agreement with the current unsecured
creditors of the Company to retire a portion of the Company's unsecured
obligations in an amount sufficient to satisfy the conditions of HSBC,
including working capital covenants, as required by HSBC prior to financing
being made available under the Restructured Senior Facility.
    Western is also pleased to announce the restructuring of the current
bridge loan facility (the "Bridge Loan") originally made available to its
subsidiary, Western Energy Services of Texas Corp., which is guaranteed by
Western. The accrued interest on the Bridge Loan will be capitalized and added
to the principal amount of the Bridge Loan for a total outstanding amount of
$2.7 million. Additionally, the interest rate on the Bridge Loan will be
decreased from 12% to 7% per annum and the maturity date will be extended to
August, 2011.
    The Unit Offering constitutes a related party transaction under the
policies of the TSX Venture Exchange ("TSXV"), which incorporates by
reference, Multilateral Instrument 61-101 ("MI 61-101"). Under MI 61-101, the
Unit Offering is a related party transaction because such transaction is with,
or securities are being issued to, directly or indirectly, directors of the
Company. Unless an exemption is applicable, the related party rules require a
formal valuation and minority approval in respect of a related party
transaction. MI 61-101 contains an exemption from the requirement to obtain
shareholder approval and a formal valuation if an issuer's independent board
members, free from any interest in the transactions and unrelated to the
parties involved in the transactions, have recommended the transactions, and
the independent members of the board of directors resolve that the Company is
in serious financial difficulty, the transactions are designed to improve the
Company's financial condition, and the transactions are reasonable for the
Company in the circumstances.
    The Company is relying on an exemption from the requirement to seek
shareholder approval for the Unit Offering on the basis of the Company's
financial hardship. The Company's independent director has concluded that the
Company is in serious financial difficulty, the proposed Unit Offering is
designed to improve the Company's financial condition and the Unit Offering is
reasonable for the Company in the circumstances. Western is proceeding with
the Unit Offering due to the amount of the Company's outstanding senior and
subordinated debt and the near term maturity of each loan. The Company has
been unsuccessful to date in refinancing the existing senior credit facility
and the subordinated debt facility. Despite the Company's best efforts, the
current financial environment has made it difficult to refinance its debt
obligations and/or sell underutilized assets to significantly reduce
outstanding debt.
    The Company's independent director has determined that at present, and
without the Unit Offering, the Company is in serious financial difficulty such
that the completion of the Unit Offering will considerably improve the
Company's financial situation. As a result of these factors and considering
the current financial environment, the independent directors has approved the
Unit Offering.
    The Policies of the TSXV also require shareholder approval to be obtained
where a private placement will result in the creation of a new control person.
As Mr. Waddell will hold, directly and indirectly, greater than 20% of the
Common Shares (on a fully diluted basis) following the issuance of the
Debentures, Mr. Waddell will be a control person of Western under the policies
of the TSXV. Given that the Unit Offering is also a related party transaction
under MI 61-101, the TSXV requires Western to obtain such shareholder approval
on a disinterested basis. The Company intends to obtain such approval by way
of written consents from at least 50.1% of its disinterested shareholders.

    This news release does not constitute an offer to sell securities, nor is
it a solicitation of an offer to buy securities, in any jurisdiction. All
sales will be made through registered securities dealers in jurisdictions
where the offering has been qualified for distribution. The securities offered
are not, and will not be, registered under the securities laws of the United
States of America, nor any state thereof and may not be sold in the United
States of America absent registration in the United States or the availability
of an exemption from such registration.

    Forward Looking Statements

    This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities laws
and necessarily involve risks associated with the oil and gas energy services
industry, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources, volatility of commodity prices, currency fluctuations, environmental
risks and competition from other energy services providers. The use of any of
the words "expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans", "intends"
and similar expressions are intended to identify forward-looking information
or statements. More particularly and without limitation, this press release
contains forward-looking statements and information concerning the receipt of
all regulatory, corporate and other approvals required in connection with the
Unit Offering, use of proceeds of the Unit Offering and closing of the Unit
Offering. The forward-looking statements and information are based on certain
key expectations and assumptions made by Western, including assumptions
concerning the state of the economy and energy services business and its
expected direction, which expectations and assumptions management of Western
believes to be reasonable at this time. Although Western believes that the
expectations and assumptions on which such forward-looking statements and
information are based are reasonable at the date of this press release, undue
reliance should not be placed on the forward looking statements and
information as Western can give no assurance that they will prove to be
correct. Since forward-looking statements and information address future
events and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors and risks, including the failure to
obtain required regulatory approvals and others. Readers are cautioned that
the foregoing list of factors is not exhaustive. The forward-looking
statements and information contained in this press release are made as of the
date hereof and Western undertakes no obligation to update publicly or revise
any forward-looking statements or information, whether as a result of new
information, future events or otherwise, unless so required by applicable
securities laws.

    
    Neither TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this release.
    




For further information:

For further information: Additional information relating to the Company
is filed on SEDAR at www.sedar.com. Please visit the web site: www.wesc.ca or
contact: Jim McQuarrie, President & CEO at (403) 782-0017. If you would like
to receive future information releases by email please provide your email
address to ir@wesc.ca


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