SPOKANE, WA, June 1, 2012 /CNW/ - Gold Reserve Inc. (TSX VENTURE:GRZ)
(NYSE-MKT:GRZ) (the "Company") announced today that it is notifying
holders ("Holders" or "Noteholders") of its 5.50% Senior Subordinated
Convertible Notes due 2022 (the "Notes") that the Company is modifying
the Notice of Right of Repurchase and its terms which were announced on
May 17, 2012. On May 17, 2012 the Company announced that it had agreed
with Holders of 87.8% of the notes ("Majority Noteholders") to
restructure their Notes, subject to shareholder approval and such
consents as may be required under the Indenture, that will allow the
Company to restructure the Notes with a combination of cash, common
shares, modified terms for the remaining balance of the Notes and a
Contingent Value Right as described further below. The Company is now
offering the terms of that restructuring arrangement to all remaining
Noteholders such that the Holders of the remaining 12.2% of the Notes
now can elect to have their Notes repurchased for 100% cash or accept
the same arrangement as was agreed with the Majority Noteholders.
Proposed Alternative Election of Noteholders
The Company has amended its Tender Offer Statement with respect to the
Right of Repurchase ("Amended Notice") to include an alternative
election (the "Alternative Election") that will be available to all
remaining Holders of Notes to reflect the terms of a proposed
restructuring of the Notes that has been agreed to with its three
largest Noteholders (the "Restructuring"). The Company anticipates
that, subject to shareholder approval, each Holder will have the option
to require the Company to purchase all or a portion of their Notes for
the following consideration for each $1,000 in principal amount of
Notes: (i) $200 in cash, (ii) 147.06 common shares, (iii) $300 of
amended notes which will remain outstanding under the indenture
governing the Notes, as amended, (iv) a Contingent Value Right ("CVR")
entitling the holder to a percentage of an award or settlement of the
Company's ICSID arbitration claim against the Government of Venezuela
with respect to the expropriation of the Company's Brisas Project and
any proceeds from the sale of its mining data, and (v) additional cash
consideration payable based on each Holder's pro rata percentage of
Notes restructured pursuant to the Alternative Election in an aggregate
amount of up to $1 million (collectively, the "Alternative
Consideration"). The maximum CVR net of taxes and other deductions that
will be paid if all Holders elect this proposed alternative transaction
will not exceed 5.81% of an award or settlement and sale of the mining
data. The Restructuring will be subject to the approval of the
Company's shareholders at its annual and special meeting scheduled to
be held on June 27, 2012.
In the event that the Restructuring is not approved by the shareholders,
in lieu of the transaction described above, the June 15, 2012
Noteholder put option (the "Put Option") will be deferred until
September 14, 2012 for Holders, including the three largest
Noteholders, that have made the Alternative Election and the terms of
the Notes subject to the Alternative Election will be amended in
certain other respects as described in the Amended Notice.
Assuming that all Notes other than those held by the three largest
Holders are surrendered for repurchase, then together with the maximum
principal amount of $12.7 million of Notes that are to be surrendered
by the three largest Holders in connection with the Put Option, the
Company anticipates that it will utilize a maximum of $40.6 million of
cash and, depending on the election of the Holders, may issue from 11.4
million to 13.2 million common shares to repurchase the Notes in
connection with the restructuring.
In order to surrender the Notes for repurchase pursuant to the Put
Option, Holders must deliver a Repurchase Notice to The Bank of New
York Mellon, as successor in interest to the Bank of New York, the
Trustee and paying agent for the Notes under the Indenture, no later
than 5:00 p.m., New York City time, on June 15, 2012. Holders of Notes
complying with the transmittal procedures of The Depository Trust
Company need not submit a physical Repurchase Notice to The Bank of New
York Mellon. Holders may withdraw any Notes previously surrendered for
repurchase pursuant to the Put Option at any time no later than 5 p.m.,
EDT, on June 15, 2012.
Holders that wish to elect the Alternative Election must deliver a
letter of transmittal no later than 5:00 p.m., New York City time, on
June 29, 2012 pursuant to the instructions in the Amended Notice.
Pursuant to the Indenture, the Notes are currently convertible into
132.626 shares of the Company's common stock per $1,000 principal
amount of Notes, subject to adjustment under certain circumstances.
The Company will make available to Holders, through The Depository Trust
Company, documents specifying the terms, conditions and procedures for
surrendering and withdrawing Notes for repurchase. Holders are
encouraged to read these documents carefully before making any decision
with respect to the surrender of the Notes, because these documents
contain important information regarding the details of the Company's
obligation to repurchase the Notes.
Annual and Special Shareholders Meeting
At the annual and special shareholders meeting scheduled to be held on
June 27, 2012, the Board of Directors and management of the Company
will recommend shareholders approve the Restructuring. Members of the
Board and management intend to vote all of the Company's shares held by
them in favor of the Restructuring. In connection with these
transactions, members of the Board and management have also agreed to a
one time waiver of rights under their Change of Control and Retention
Units Agreements that would contractually arise as a result of a party
acquiring more than 25% of the Company's shares. Shareholders of record
on May 21, 2012 will be receiving a Management Information Circular
shortly that will describe the Restructuring in more detail, as well as
other matters including an amendment and continuance of the Company's
Shareholder Rights Plan.
Doug Belanger, President stated "This transaction will minimize to the
extent practicable shareholder dilution and management and the Board of
Directors recommend that shareholders approve this transaction and will
be voting their own shares in favor of this transaction. This
transaction is good for all stakeholders in that it rationalizes the
capital structure of the Company, with greater certainty going forward,
while dealing with the refinancing of $102.5 million in convertible
debt that can be put to the Company on June 15, 2012."
Holders of Notes are urged to read the Amended Notice, letters of
transmittal and related offer materials when they become available
because they contain important information. An amendment to our Tender
Offer Statement, which includes the offer materials, is being filed
with the Securities and Exchange Commission ("SEC") today. The Amended
Notice, letters of transmittal and related documents may be obtained
free of charge at the SEC's website, www.sec.gov or by directing a request to the Company.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
Further information regarding the Company can be located at www.goldreserveinc.com, www.sec.gov and www.sedar.com.
"Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release."
SOURCE Gold Reserve Inc.
For further information:
A. Douglas Belanger, President
926 W. Sprague Ave., Suite 200
Spokane, WA 99201 USA
Tel. (509) 623-1500
Fax (509) 623-1634