Cricket Media announces proposed debt restructuring

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

WASHINGTON, April 6, 2015 /CNW/ - Cricket Media Group Ltd. (TSXV:CKT) ("Cricket Media" or the "Company") announces that it has entered into a memorandum of understanding with certain holders of the Company's 6.5% secured convertible debentures in the aggregate principal amount of C$11,999,000 (the "Junior Indebtedness") issued pursuant to a trust indenture dated October 19, 2012 and certain holders of the Company's 10% secured convertible debentures in the aggregate principal amount of C$10,000,000 issued pursuant to a trust indenture dated March 20, 2013, pursuant to which the Junior Indebtedness and the Senior Indebtedness will be restructured as more fully described below (the "Debt Restructuring"). 

The Debt Restructuring requires the approval of holders of 66 2/3% of the aggregate principal amount of Junior Indebtedness and holders of 66 2/3% of the aggregate principal amount of Senior Indebtedness. The Company is pleased to announce that holders of greater than 90% of the principal amount of each of the Junior Indebtedness and the Senior Indebtedness are supportive of the Debt Restructuring on the terms described below. The Company is proceeding with the definitive documents necessary to fully effect the Debt Restructuring. Implementation of the Debt Restructuring is subject to the acceptance by the TSX Venture Exchange ("TSXV"). After the implementation of the Debt Restructuring and assuming the Company raises a minimum of US$10 million pursuant to the Financing and the Bridge Loan (each as defined below), collectively, the Company's long term debt will be reduced from approximately US$22 million to approximately US$11 million.

The proposed Debt Restructuring includes the following principal terms:

Treatment of Junior Indebtedness and Senior Indebtedness

• The Junior Indebtedness and the Senior Indebtedness will be consolidated into a single class of U.S. dollar senior indebtedness ("New Senior Indebtedness") evidenced by secured convertible debentures ("New Secured Debentures") having principal terms as more fully discussed below.
• Current holders of Junior Indebtedness will receive New Senior Indebtedness in a principal amount equal to 65% of the aggregate principal amount of Junior Indebtedness outstanding plus all accrued and unpaid interest thereon.
• Current holders of Senior Indebtedness will receive New Senior Indebtedness in a principal amount equal to 75% of the aggregate principal amount of Senior Indebtedness outstanding plus all accrued and unpaid interest thereon.

Principal Terms of New Senior Indebtedness

• The New Secured Debentures will mature four (4) years following the date of closing of the Debt Restructuring and will bear interest at a rate of 5% per annum payable annually in arrears. The Company will be entitled to pay interest accrued during the initial two (2) years that the New Senior Indebtedness is outstanding by issuing, at a holder's option, either: (i) voting common shares or restricted voting common shares of the Company at a price equal to the weighted average closing price of the voting common shares of the Company on the TSXV for the ten (10) trading days preceding the date of settlement ("Market Price"); or (ii) preferred shares of the Company ("Preferred Shares") to be created in connection with the Financing (as defined and described in greater detail below).
• The New Senior Indebtedness will be denominated in U.S. dollars and the New Secured Debentures will not be listed for trading on the TSXV or any other public marketplace.
• The New Secured Debentures will be convertible into voting common shares or restricted voting common shares of the Company, at the option of the holder, at a conversion price equal to the greater of (i) US$3.33 per share; and (ii) the amount per share equal to US$100,000,000 divided by the total number of issued and outstanding voting common shares and restricted voting common shares of the Company.
• The Company will be entitled to satisfy payment obligations under bank indebtedness in the principal amount of approximately US$1.5 million, subject to a maximum payment of principal and interest, collectively, of US$400,000 per year and subject to reduced permitted payments until such time as the Company raises sufficient funds pursuant to the Financing.
• The Company will be permitted to dissolve or wind-up dormant or inactive subsidiaries and dispose of certain non-core or immaterial portions of its business at fair market value.
• Annual mandatory prepayment of principal shall be made on the New Secured Debentures to holders on a pro rata basis, in an amount equal to 20% of the free cash flow of the Company in respect of such fiscal year.
• The indenture governing the New Senior Indebtedness will include covenants of the Company in respect of cash flow and minimum cash balance.
• Cricket Media will be entitled to incur additional secured indebtedness under a Bridge Loan (as defined below) in a principal amount of up to US$5 million, up to the first US$4 million of which shall rank senior to the New Senior Indebtedness (the "Senior Bridge Funds") and a further US$1 million of which, if any, shall rank subordinate to the New Senior Indebtedness (the "Junior Bridge Funds").
• Other than in respect of the Senior Bridge Funds, the Company will be prohibited from incurring additional indebtedness ranking senior to or pari passu with the New Senior Indebtedness.

Bridge Loan and Conversion of Indebtedness to Preferred Shares

• The Company proposes to seek bridge financing up to an aggregate principal amount of US$5 million (the "Bridge Loan"). The Bridge Loan will mature on April 30, 2016 and will bear interest at a rate of 5% per annum. The Company will have the option to pay accrued interest in cash, or by issuing the lenders under the Bridge Loan voting common shares or restricted voting common shares at a price equal to the Market Price at the time of settlement. The indebtedness under the Bridge Loan will be convertible into voting common shares or restricted voting common shares of the Company at the option of the holder, at a conversion price of US$0.32 per share.
• In the event of the winding up or liquidation of the Company or a sale of all or substantially all of the assets or capital stock of the Company, the principal amount of the Bridge Loan outstanding at such time will be deemed to have increased by 100%, which increased amount will form a secured debt obligation of the Company which will rank subordinate to the Senior Bridge Funds and the New Senior Indebtedness and pari passu with the Junior Bridge Funds and the Company's bank indebtedness.
• In the event that Cricket Media receives Senior Bridge Funds from any person, certain amounts of New Senior Indebtedness held by insiders of the Company will convert to Preferred Shares.
• In the event that the Company raises aggregate gross proceeds of a minimum of US$10 million pursuant to an equity financing of Preferred Shares (the "Financing") and the Bridge Loan, collectively: (i) all New Senior Indebtedness held by insiders of the Company will convert to Preferred Shares at a price per share to be determined (the "Issue Price"); and (ii) all outstanding indebtedness under the Bridge Loan will convert into, at the option of the holder: (A) New Preferred Shares at a conversion price equal to the lesser of (y) 80% of the Issue Price; and (z) US$0.81; or (B) voting common shares or restricted voting common shares of the Company at a price of US$0.32 per share, or a combination of (A) and (B) at the holder's option.

Cricket Media believes the Debt Restructuring is of benefit to all stakeholders for the following reasons:

• The Company's current balance sheet is a significant impediment to capitalizing on growth opportunities and strategic initiatives and the Debt Restructuring is expected to provide financial flexibility for the Company to continue with its operating strategy and focus on enhancing long-term value for its stakeholders.
• Current holders of Junior Indebtedness will now rank pari passu with current holders of Senior Indebtedness since such indebtedness will be consolidated into a single debt instrument.
• Subject to the security interest in respect of the Senior Bridge Funds and customary permitted encumbrances, the New Senior Indebtedness will have a first ranking priority security interest in the Company's assets.
• Upon the Company achieving certain financing milestones: (i) New Senior Indebtedness held by certain insiders of the Company will convert to Preferred Shares, thereby increasing each other holder's percentage holding of the New Senior Indebtedness; and (ii) indebtedness under the Bridge Loan will convert to Preferred Shares thereby elevating the priority of the security interest of the New Senior Indebtedness.
• Absent the Debt Restructuring, the Company may have difficulty in raising additional capital and in pursuing its operating strategy.   

Amendment to Loan Facility

The Company also announces that its wholly-owned subsidiary, Cricket Media, Inc. (a Delaware corporation) has amended the terms of its existing revolving promissory note (the "Note") with ZG Ventures, LLC ("ZG").  Under the prior terms of the Note, Cricket Media, Inc. was entitled to borrow up to a maximum of US$2,500,000 and payment of all outstanding principal and interest was due March 31, 2015. The Note has been amended to (i) increase the principal amount that may be borrowed and outstanding from time to time thereunder to a maximum of US$3,500,000; (ii) extend the repayment date to April 30, 2015; (iii) provide that borrowings that result in the principal amount outstanding exceeding US$2,500,000 will be at the sole discretion of ZG; and (iv) provide for conversion of the principal outstanding under the Note into indebtedness owing under the Bridge Loan.

Certain of the transactions described in this news release constitute or will constitute "related party transactions" within the meaning of Multilateral Instrument 61-101 Protection of Minority Shareholders in Special Transactions ("MI 61-101"). For these transactions the Company intends to rely on the exemption from the formal valuation requirements of MI 61-101 contained in section 5.5(b) of MI 61-101 on the basis that no securities of the Company are listed on a specified market set out in such section and the Company intends to rely on the exemption from the minority shareholder approval requirements of MI 61-101 contained in Section 5.7(1)(e) of MI 61-101 on the basis of meeting the financial hardship exemption requirements.

About Cricket Media

Cricket Media (TSXV: CKT) is an education media company that provides award-winning content on a safe and secure learning network for children, families and teachers across the world. Cricket Media's 14 popular media brands for toddlers to teens include Babybug, Ladybug, Cricket® and Cobblestone® with multiple language editions and apps in English, Spanish and Chinese. The Company's innovative web-based K12 tools for school and home include the ePals community and virtual classroom for global collaboration as well as In2Books®, a Common Core eMentoring program that builds reading, writing and critical thinking skills. Cricket Media serves approximately one million classrooms and millions of teachers, students and parents in over 200 countries and territories through its platform and NeuPals, its joint venture with China's leading IT services company Neusoft. Cricket Media also licenses its content and platform to top publishing and educational companies worldwide. For more information, please visit www.Cricketmag.com, www.ePals.com and www.In2Books.com.

Neither the 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.

Forward Looking Statements

This news release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by the Company and described in the forward-looking statements contained in this press release. 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 the Company will derive therefrom. The forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

SOURCE Cricket Media Inc.

Aric Holsinger, Chief Financial Officer, Cricket Media, Phone: [phone], [email protected]; Cory Pala, Investor Relations, E.vestor Communication Inc., Phone: [phone], [email protected]