NEX - GAR.H
NISKU, AB, July 2 /CNW/ - Garneau Inc. ("Garneau" or the "Corporation") (GAR.H: NEX) On July 2, 2010 the Corporation announced that it had executed a term sheet (the "Term Sheet") with certain affiliates of a major shareholder (the "Lender") pursuant to which the Corporation is to enter into an alternative form of financing, which would result in the payment in full of all outstanding amounts owing to the Corporation's senior secured lender under its credit facility. In connection with the new plan, the Lender has agreed to provide up to $3.6 million in new financing (the "New Facility"). The Term Sheet describes some of the basic terms of the New Facility, which will be subject to the terms contained in definitive loan documentation.
Pursuant to the Term Sheet, the New Facility is to have a term of two (2) years, and interest accrued at a rate of (9%) percent (the "Base Rate") on all unpaid principal would be payable monthly. Beginning six (6) months following closing, principal repayment in the amount of $25,000.00 is to be paid in monthly installments. Garneau may, however, without notice, permanently prepay amounts outstanding under the New Facility in whole or in part at any time at its discretion, without penalty.
The fees associated with the new facility are as follows:
(i) Loan Fee - the Corporation is to pay a fee of 1% (100 basis
points) of the principal amount of the New Facility at the time of
(ii) Annual Fee - the Corporation is to pay an annual fee of 1% (100
basis points) of the principal amount outstanding as of each
anniversary date would be payable commencing on the first
anniversary date; and
(iii) Initial Fee - the Corporation paid a non-refundable $15,000 fee
upon the execution of the Term Sheet by the Corporation; such
amounts are to be used toward due diligence out-of-pocket expenses
of the Lender and third-party costs.
The New Facility is to be secured by way of a first mortgage on the real property of the Corporation. Pursuant to the Term Sheet, the proceeds of the New Facility are to be used by the Corporation as follows:
(i) to satisfy all existing mortgage(s) and other liens over the real
property of the Corporation;
(ii) to pay all fees and expenses related to the New Facility; and
(iii) for general operating purposes, to pay trade creditors and to pay
employee severances, with the exception of Mr. Glen Garneau's owed
severance which is to be paid after the New Facility is
Entering into the New Facility resulted from the process undertaken by the board of directors of the Corporation (the "Board") in the Board's continuing efforts to preserve shareholder value. The Board will continue in its review of strategic alternatives for Garneau.
Due to the Lender's interest in the New Facility, the entering into of the New Facility is a related party transaction pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Corporation is relying on the financial hardship exemption from the valuation and minority approval requirements of MI 61-101. Specifically, pursuant to subsection 5.5(g) and 5.7(e) of MI 61-101, a formal valuation and minority approval are not required in the event of financial hardship in specified circumstances. The Corporation has satisfied the elements of this exemption on the basis that the Corporation is in serious financial difficulty, that the New Facility is designed to improve the financial position of the Corporation, the New Facility is not subject to court approval nor has it been ordered under bankruptcy or insolvency law and the Board, acting in good faith, and at least two-thirds of the Corporation's independent directors, acting in good faith, have determined the foregoing circumstances are applicable and the terms of the New Facility are reasonable in the circumstances of the Corporation. The Corporation has three independent directors who, acting in good faith, have determined that the above statements are correct and that the terms of the New Facility are reasonable in the circumstances of the Corporation. The closing of the New Facility is subject to certain conditions including consent of the Corporation's bankers.
Certain information in this press release contains forward-looking statements. These statements relate to future events. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Garneau's control. Future events related to the Corporation could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Garneau will derive from them. Except as required by law, Garneau undertakes no obligation to publicly update or revise any forward-looking statements.
Neither 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.
SOURCE GARNEAU INC.
For further information: For further information: Glen Garneau, Acting President and CEO, Email: firstname.lastname@example.org, Phone: (780) 955-2396, Fax: (780) 955-7715