Listing: TSX Venture Exchange ("EEI.V")
Issued Common Shares: 60,208,086
TORONTO, May 4 /CNW/ - Charles Edey, President of Echo Energy Canada Inc. ("Echo Energy" or the "Company"), announced that the Company has not filed its audited annual financial statements for the year ended December 31, 2009 (the "Annual Financial Statements"), its management discussion and analysis (the "MD&A") relating to the Annual Financial Statements or its reserves data and other oil and gas information as required by National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities (collectively, the "Required Filings") on or before the prescribed deadline of April 30, 2010.
The Company made an application with the applicable securities regulators under National Policy 12-203 requesting that a management cease trade order be imposed in respect of this late filing but there is no guarantee that it will be granted. The restructuring of certain aspects of the Company's business and operations, including entering into a forbearance agreement with its bank and arranging $1,000,000 of financing, due to low gas prices and financial pressures resulted in the Company being unable to file the Required Filings within the prescribed time. The Company's management is working diligently through the various issues in order to expedite the finalization of the Required Filings, and the Company expects to file the Required Filings on or before June 30, 2010.
The Company confirms that it will satisfy the provisions of the alternative information guidelines under National Policy 12-203 by issuing bi-weekly default status reports in the form of news releases so long as it remains in default of the filing requirements set out above. The Company is not subject to any insolvency proceedings at the present time and there is no other material information relating to the affairs of the Company that has not been generally disclosed.
Bank Debt Forbearance Agreement
The Company has entered into a forbearance agreement (the "Agreement") with The Toronto-Dominion Bank (the "Bank") wherein the Bank agreed to forbear from realizing on its security until January 31, 2011. The Agreement pertains to the debenture security for the demand loan payable by the Company to the Bank in the amount of $4,950,000.
The interest rate on the demand loan is increased to prime plus 4% from June 1, 2010 to August 31, 2010 and to prime plus 5% thereafter. The credit limit will be permanently reduced with $950,000 of principal repayments which the Company is scheduled to make in monthly repayment installments to October 6, 2010 and with additional repayments of $20,000 which will be payable for each month in which the average price for natural gas exceeds $5.00 per gigajoule and with 75% of any gas sales in excess of the projections provided to the Bank. The balance of the loan must be repaid by January 31, 2011.
The Bank is entitled to a work fee of $100,000 with $50,000 payable by May 6, 2010 and $50,000 payable when the balance of the loan is paid. The second payment of $50,000 will be waived if the loan is repaid by October 21, 2010. The Bank has also waived the current asset ratio requirement but requires the Company to meet projections for reserves and for revenues and expenses with KPMG monitoring the Company's performance on a monthly basis.
The Company has arranged for $1,000,000 of interim financing to be provided by Jamalex Investment Ltd. ("Jamalex") for the purpose of reducing Bank debt in accordance with the terms of the forbearance agreement. Jamalex has agreed to loan the Company $1,000,000 with interest at 1.5% per month for a term of nine months secured by means of a subordinated debenture with a commitment fee of $25,000.
About Echo Energy Canada Inc.
Echo Energy Canada Inc. is a publicly traded energy company with revenue producing natural gas production operations near Port Burwell, Ontario, Canada on the shores of Lake Erie.
Statements in this news release that are not historical facts, including statements about plans and expectations regarding properties, reserves, transactions and opportunities, capital resources and future financial results are forward-looking. Forward-looking statements involve risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from those expressed. These uncertainties and risks include changing gas and commodity prices and currency exchange rates, demand for gas, lack of success of future exploration and development, competition and other factors discussed from time to time in the company's filings with the Ontario Securities Commission.
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 news release.
SOURCE Echo Energy Canada Inc
For further information: For further information: Charles Edey, President, at 1-877-396-3540, email@example.com, http://www.echoenergycanada.com