Debenture Holders have said clearly they will not accept Jien Offer


TORONTO, Oct. 28 /CNW/ - Jaguar Financial Corporation (TSX: JFC) ("Jaguar") today announced that the holders (the "Debenture Holders") of debentures (the "Debentures") of Canadian Royalties Inc. (TSX: CZZ) ("Canadian Royalties" or "CZZ") have demonstrated clearly that they will not accept the offer (the "Jien Offer") by Jien Canada Mining Ltd. ("Jien").

Jien today announced that a total of $82,837,000 principal amount of Debentures were tendered to the Jien Offer, of which $78,873,000 in Debentures were tendered by FTQ, Colonial and the Caisse. Therefore, additional Debenture Holders holding only $3,964,000 in Debentures or approximately 3% of the total principal amount tendered to the Jien Offer.

There are several options for an acceptable acquisition of CZZ by Jien. First, Jien could increase the total payment to Debenture Holders by $28,875,000 from $110,000,000 to $138,875,000 which would provide the 101% payment Debenture Holders are entitled to receive under the Debenture indenture.

A second option would be a two-tiered payment to Debenture Holders where FTQ, Colonial and the Caisse would accept an 80% payment for their Debentures and the remaining Debenture Holders would be paid 101%. This would involve an increased payment of $12,330,570 by Jien.

Jien stated in its press release that the Jien Offer provides its "best and final prices for the Shares and Debentures." If in fact Jien is unwilling to increase its total payment of $191,639,265 for the CZZ shares and Debentures, then it is up to the CZZ shareholders ("Shareholders") to make a decision whether they would accept a payment of $0.52 per share. A payment of $0.52 per share or a total payment of $52,725,000 for the shares would result in the Debenture Holders receiving $138,875,000 or 101%, and Jien would end up paying the same $191.6 million for the shares and Debentures as is proposed under the Jien Offer.

If the Shareholders are not willing to accept a reduced payment of $0.52 per CZZ share, then the Shareholders must be prepared to accept the consequences of their decision.

One consequence could be the conversion of the Debentures into common shares, as may be agreed to by CZZ and the Debenture Holders if CZZ defaults on any interest payment to the Debenture Holders. For example, at an assumed conservative conversion price of $0.52 per share, which is the 10-day volume weighted average price prior to announcement of the original offer by Jien, the Debenture Holders would be issued 264 million shares and would own 72% of CZZ.

Jaguar believes that the CZZ share price could be quite less than $0.52 per share at the time of any default on the Debentures and that therefore the Debenture Holders would be expected to own more than 72% of CZZ.

As CZZ's cash resources are estimated to cover interest payments on the Debentures and operating expenses for approximately a one-year period, a second possible consequence to CZZ shareholders would result from CZZ making a filing under the Companies Creditors Arrangement Act ("CCAA"). In this scenario, Jaguar believes the shareholders would receive zero.

Vic Alboini, Chairman and CEO of Jaguar stated: "Unfortunately, if Jien will not increase its total $191.6 million payment for a CZZ acquisition, the choices for Shareholders are to accept $0.52 per share in cash now, or face substantial share dilution on a conversion of Debentures or receive the real prospect of zero in a CCAA filing."

"This is a decision for the shareholders, not the Debenture Holders, " added Mr. Alboini.

About Jaguar Financial Corporation

Jaguar is a Canadian merchant bank that invests in undervalued small capitalization companies in a variety of industry sectors.

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this news release. This news release may contain certain forward looking statements which involve known and unknown risks, delays, and uncertainties not under Jaguar's control which may cause actual results, performances or achievements of Jaguar to be materially different from those implied by such forward looking statements.

SOURCE Jaguar Financial Corporation

For further information: For further information: Vic Alboini, Chairman & Chief Executive Officer, (416) 644-8110 - or - Kyler Wells, General Counsel & Corporate Secretary, (416) 644-8177

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