Echo Energy Canada Inc.
Listing: TSX Venture Exchange ("EEI.V")
Issued Common Shares: 60,208,086
TORONTO, May 19 /CNW/ - Further to the press releases dated February 10, 2010, March 22, 2010 and May 4, 2010, Charles Edey, President of Echo Energy Canada Inc. ("Echo Energy" or the "Company"), announced that the Company has entered into a subordinated debenture loan facility (the "Facility") with Jamalex Investments Ltd. (the "Lender") whereby the Lender will advance an aggregate of $1,000,000 directly to the Toronto-Dominion Bank (the "Bank") to pay down the Bank's $4,950,000 loan and $50,000 on account of the Bank's work fee in accordance with the terms of the forbearance agreement (the "Forbearance Agreement") entered into with the Bank. To date, the Lender has advanced an aggregate of $200,000.
The term of the Facility will be nine months from the date of the initial advance, being April 20, 2010.
The Company will pay the Lender at a rate of 1.5% per month on the outstanding amount of the Facility calculated monthly in addition to a commitment fee of $25,000.
The Facility is secured in favour of the Lender by way of a fixed and floating charge over all the assets of the Company, a general assignment of rents and a general security agreement. All security provided by the Company in favour of the Lender in respect of the Facility will be in second position to the Bank.
Bank Debt Forbearance Agreement
The Company has entered into the Forbearance Agreement 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.
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