TORONTO, Jan. 22, 2020 /CNW/ - Marret Asset Management Inc. (Marret) today announced that Cline Mining Corporation (Cline) has entered into a binding agreement (Agreement) for the sale by Cline to Allegiance Coal Limited (Allegiance) of all the shares in New Elk Coal Company, LLC (NECC). NECC owns the fully permitted New Elk Coal hard coking coal mine (Mine), located in southeast Colorado. The main asset of Marret High Yield Strategies Fund (MHY) (CSE: MHY.UN) and Marret Multi-Strategy Income Fund (MMF) (CSE: MMF.UN) is senior secured debt and equity issued by Cline. The Agreement reflects the term sheet originally signed by Cline and Allegiance on July 15, 2019.
The principal terms of the sale are as follows:
- The purchase price for the shares in NECC will be USD $1, with Allegiance than arranging for the repayment of certain obligations owed by NECC to Cline equal to CDN $55 million (Debt), which represents a total acquisition cost of CDN $55,000,001.31.
- Completion of the sale must take place before July 15, 2020 (Completion)
- The Debt will be repaid by NECC to Cline as follows:
- US$3M in cash on Completion;
- US$3M in Allegiance shares issued on Completion, subject to a voluntary 12 month hold period;
- US$5M on Completion to replace the Colorado State Mine reclamation bond;
- the remainder of the Debt to be repaid by Cline receiving 60% of NECC's retained earnings after NECC makes prudent provision for any preferred debt payments and obligations, and sustaining and working capital, until the Debt is paid in full, but in any event within 10 years of Completion. The Debt will not bear interest; and
- the Debt will be reduced by the amount of Mine care and maintenance costs which Allegiance has agreed to fund until Completion. Such costs are fixed at USD $150,000 per month.
- The Debt will be evidenced by NECC issuing a promissory note, secured against the assets of NECC and subject only to indebtedness and security granted in respect of the preferred debt issued by NECC to a maximum of USD $40 million.
The transaction is subject to normal conditions for similar transactions and to Allegiance raising start-up capital for the Mine, which Allegiance currently estimates at USD $55 million. This represents both capital investment in equipment, mine rehabilitation and working capital.
Allegiance is a publicly listed (ASX:AHQ) Australian company advancing a metallurgical coal mine into production in British Columbia, Canada.
The full text of the Allegiance press release which provides more detail on the transaction can be found at https://www.allegiancecoal.com.au/irm/content/asx-announcements.aspx?RID=8.
About Marret Asset Management Inc
Marret specializes in fixed income and particularly in high-yield debt strategies.
This press release contains forward-looking statements and information within the meaning of applicable securities legislation. Forward-looking statements can be identified by the expressions "seeks", "expects", "believes", "estimates", "will", "target" and similar expressions. The forward-looking statements are not historical facts but reflect the current expectations of Marret and the managers of the underlying portfolios regarding future results or events and are based on information currently available to them. Certain material factors and assumptions were applied in providing these forward-looking statements. All forward-looking statements in this press release are qualified by these cautionary statements. Marret believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions; however, Marret can give no assurance that the actual results or developments will be realized. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed under "Risks Factors" in the annual information forms of MHY and MMF dated March 28, 2016. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. Marret undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances except as required by securities laws. These forwardlooking statements are made as of the date of this press release
SOURCE Marret Asset Management Inc.
For further information: Marret Investor Relations, 416-214-5800, [email protected]