EACOM Timber Corporation Announces $40 million Secured Debenture Financing backed by Fairfax Financial Holdings Limited and Lan
March 23 2012 - 11:48PM
PR Newswire (Canada)
MONTRÉAL AND VANCOUVER, March 27, 2012 /CNW/ - EACOM Timber
Corporation ("EACOM", or the "Company") today announced that it has
entered into a binding agreement for a $40 million secured
debenture financing (the "Debentures") backed by Fairfax Financial
Holdings Limited and Lansdowne UK Strategic Investment Master Fund
Limited. Fairfax has agreed to purchase $33 million of the
Debentures and may assign a portion of the offering to other
purchasers, at its option, prior to closing. Lansdowne will acquire
$7 million of the Debentures. The transaction is expected to
close on or before April 11, 2012 and is subject to TSX-V approval
and the negotiation and execution of definitive
documentation. The Debentures will be issued at par, will be
secured by all of the assets of the Company excluding working
capital, will have a 5 year term and will bear interest at a rate
of 10%, payable semi-annually. The principal is due on the
expiration of the term. The interest rate is subject to
increase to 15% if certain corporate milestones are not
reached. The Debentures will contain covenants consistent
with a secured borrowing including: to maintain the security and
its priority, not to sell any fixed assets covered by the
Debentures' security unless replaced by equivalent fixed assets or
improvements to fixed assets, limitation on further indebtedness,
guarantees and obligations, other than an asset-backed credit
facility on terms acceptable to the holders of the Debentures and
reasonable guarantees given by the Corporation to governments
related to timber rights; no further granting of security on the
assets secured by the Debentures subject to standard limited
exceptions; and capital restrictions relating to dividends and
repurchases. The net proceeds will be used for general corporate
purposes. The Debentures will have detachable warrants (the
'Warrants"). An aggregate of 200 million warrants will be
issued having a five year term and an exercise price of $0.20 per
common share. The Warrants will permit a cashless exercise, at the
option of the holder, and are transferable subject to TSX-V
approval. The purchasers will receive 5,000 warrants for each
$1,000 principal amount of Debentures purchased. As part of the
transaction, Fairfax will be entitled to nominate at least two
directors to EACOM's board immediately upon closing. Fairfax does
not currently hold any securities of the Company. Assuming the
completion of the transaction, the acquisition by Fairfax of $33
million of Debentures and the exercise by Fairfax of all
165,000,000 Warrants acquired by it in connection with the
transaction, Fairfax will own and control, in the investment
portfolios of its insurance subsidiaries, 165,000,000 common shares
of the Company, representing approximately 26% of the 478,880,056
currently outstanding common shares of the Company (assuming the
exercise in full of only the 165,000,000 Warrants to be acquired by
Fairfax and approximately 24% assuming the exercise of all the
Warrants). About EACOM EACOM Timber Corporation is a TSX-V listed
company. EACOM owns eight sawmills, all located in Eastern Canada,
and related tenures. The mills are Timmins, Nairn Centre, Gogama,
Elk Lake and Ear Falls in Ontario, and Val-d'Or, Ste-Marie and
Matagami in Quebec. The sawmills in Ear Falls, Ontario and
Ste-Marie, Quebec, are currently idled. Operations in
Matagami and Val-d'or are currently on temporary shut down.
These temporary measures primarily relate to the impact of low
lumber prices for stud grade lumber products, the strong CDN dollar
and the impact of the 7.6 percent tax imposed on shipments to the
U.S. EACOM also owns a remanufacturing facility and a 50% interest
in an "I" joist plant. The TSX Venture Exchange has neither
approved nor disapproved the content of this press release.
The TSX Venture Exchange must approve the appointment of any
officer or director. Forward-Looking Statements All statements in
this news release that are not based on historical facts are
"forward-looking statements." While management has based any
forward-looking statements contained herein on its current
expectations, the information on which such expectations were based
may change. These forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of
risks, uncertainties, and other factors, many of which are outside
of our control that could cause actual results to materially differ
from such statements. Such risks, uncertainties, and other factors
include, but are not necessarily limited to, those set forth under
the captions "Risk Factors" of the Filing Statement dated January
8, 2010 and the current MD&A for EACOM Timber Corporation on
file with the Canadian Securities Commissions. EACOM TIMBER
CORPORATION CONTACT: Investors:Marc GirardExecutive Vice-President
and Chief Financial Officer(514) 848-5133Media Relations:Frederic
BerardHKDP(514) 917-1040
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