WINNIPEG, MB, Nov. 18, 2021 /CNW/ - Lanesborough Real
Estate Investment Trust ("LREIT") (TSXV: LRT.UN) announces a
proposed transaction to settle its $24,810,800 principal amount of outstanding 5.00%
Series G redeemable subordinated secured debentures due
June 30, 2022 (the
"Debentures"), and all the accrued or unpaid interest owing
thereon, in exchange for trust units in the capital of LREIT (the
"Trust Units") (collectively, the "Exchange
Transaction").
The Exchange Transaction
LREIT intends to make a proposal to the holders of the
Debentures (the "Debentureholders") pursuant to which all of
the Debentures will be settled and all claims of the
Debentureholders thereunder will be extinguished in exchange for
Trust Units, including the payment, in the form of Trust Units, of
the accrued and unpaid interest owing on the Debentures on the
closing date of the Exchange Transaction on the basis of a deemed
price of $0.05 per Trust Unit. The
closing of the Exchange Transaction is expected to be on or shortly
after December 22, 2021. It is
anticipated that the amount of interest owing on the Debentures as
at December 22, 2021 will be
approximately $7,973,444.
In the event that the Exchange Transaction is approved, upon
completion of the Exchange Transaction the current
Debentureholders, as of the date hereof, will hold approximately
96.96% of the issued and outstanding Trust Units. Accordingly, the
Exchange Transaction would effectively transfer control of LREIT
from the current holders of Trust Units to the
Debentureholders.
The Exchange Price
The price at which the Trust Units are being issued in payment
of the principal amount of the outstanding Debentures and the
interest accrued thereon is the lowest price permitted by the TSX
Venture Exchange (the "TSXV"), being $0.05 per Trust Unit.
Advantages and Background to the Exchange Transaction
The Board of Trustees of LREIT has determined that the Exchange
Transaction is in the best interests of LREIT as it will reduce
LREIT's overall debt and interest burden, simplify its capital
structure and improve its balance sheet. LREIT is unable to obtain
financing and/or refinancing and does not have the ability to repay
the Debentures. If the Debentures remain outstanding when they
mature on June 30, 2022, management
of LREIT anticipates that LREIT will be forced into insolvency due
to the inability to repay the Debentures and the cross-defaults
that would occur under the other indebtedness of LREIT.
Additionally, in an insolvency scenario, the assets of LREIT would
likely be required to be liquidated, which could result in LREIT's
properties being sold at prices that may not be reflective of their
fair market value.
If LREIT were to be forced into insolvency upon the maturity of
the Debentures, given the amount of indebtedness of LREIT with
security that ranks ahead of the Debentures, management of LREIT
believes that the Debentureholders would not receive any payment
for their Debentures. By converting the Debentures and all
outstanding interest thereon into Trust Units pursuant to the
Exchange Transaction, the Debentureholders may have the opportunity
to participate in a possible recovery of LREIT in the future. In
the view of the management of LREIT, merely extending the maturity
date of the Debentures five years past June
30, 2022 will not be sufficient to allow LREIT a chance to
recover from its financial difficulties as compounding interest
continues to accumulate on the approximately $275 million of existing debt which ranks in
priority to the Debentures. For the foreseeable future, all
available cash flow will be required to service the senior
indebtedness of LREIT.
Key Steps to the Exchange Transaction
LREIT has applied to the TSXV for approval of the listing of the
Trust Units to be issued as a result of the Exchange
Transaction. The listing will be subject to LREIT satisfying
all of the requirements of the TSXV. The Trust Units will continue
to trade on the TSXV under the symbol "LRT.UN". LREIT will apply to
have the Debentures delisted following the completion of the
Exchange Transaction.
The current terms of the Debentures are set forth in the first
supplemental trust indenture between LREIT and CIBC Mellon Trust
Company (the "Indenture Trustee") dated as of October 28, 2011, as amended by the second
supplemental trust indenture between LREIT and the Indenture
Trustee dated as of June 17, 2014, as
amended by the third supplemental trust indenture between LREIT and
the Indenture Trustee dated as of June 22,
2016 (collectively, the "Trust Indenture"), which
replaced the original trust indenture between LREIT and the
Indenture Trustee dated as of December 8,
2006. A copy of the Trust Indenture is posted for public
access on LREIT's SEDAR profile at www.sedar.com.
A special meeting (the "Meeting") of the Debentureholders
be held at the offices of Shelter Canadian Properties Limited, 2600
Seven Evergreen Place, Winnipeg,
Manitoba, R3L 2T3, on December 21,
2021 at 3:00 pm (Winnipeg time). The record date for the
Meeting will be November 19, 2021.
The Meeting will be requested by LREIT pursuant to Article 14 of
the Trust Indenture to obtain the approval of the Debentureholders
for the Exchange Transaction in accordance with the Trust Indenture
by way of an "Extraordinary Resolution".
The Trust Indenture defines the term "Extraordinary Resolution"
as a resolution proposed to be passed at a meeting of
Debentureholders (including an adjourned meeting) duly convened for
the purpose and held in accordance with the provisions of Article
14 of the Trust Indenture at which the holders of not less than 25%
in principal amount of the Debentures then outstanding, are present
in person or represented by proxy and passed by the favourable
votes of holders of not less than 66 2/3% of the principal amount
of the Debentures represented at the meeting and voted on a poll
upon such resolution. At the Meeting, the Debentureholders will be
asked to consider and, if deemed advisable, to approve, with or
without amendment, an Extraordinary Resolution approving the
Exchange Transaction.
In the event that LREIT becomes aware that the Exchange
Transaction will result in the creation of a new "Control Person"
or "Insider", as those terms are defined by the TSXV, LREIT will
not deliver any Trust Units to such new Control Person or Insider
until such time as all requirements of the TSXV with respect to the
creation of a new Control Person or Insider have been
satisfied.
Further information about the Exchange Transaction and the
Meeting will be provided in an information circular expected to be
distributed to Debentureholders in the near future, as well as
in other LREIT continuous disclosure filings available on SEDAR
(www.sedar.com), or from LREIT on request.
Wellington-Altus Financial Inc. will act as solicitation agent
of LREIT for the Exchange Transaction.
ABOUT LREIT
LREIT is a real estate investment trust, which is listed on the
Toronto Stock Exchange under the symbols LRT.UN (Trust Units) and
LRT.DB.G (Series G Debentures). For further information on LREIT,
please visit our website at www.lreit.com.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as the term is defined in the policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Certain statements contained in this press release are
"forward-looking statements" that reflect the expectations of
management regarding the Exchange Transaction. Readers are
cautioned not to place undue reliance on forward-looking
information. All statements other than statements of historical
fact contained herein are 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" and similar expressions. Such
forward-looking statements reflect management's current beliefs and
are based on information currently available to management.
Forward looking statements involve significant risks and
uncertainties. A number of factors that could cause actual results
to differ materially from the results discussed in forward-looking
statements are discussed in LREIT's management discussion and
analysis for the six-month period ended June
30, 2021 available on SEDAR at www.sedar.com. Although
the forward-looking statements contained herein are based upon what
management believes to be reasonable assumptions, LREIT cannot
assure investors that actual results will be consistent with these
forward-looking statements.
The forward-looking statements contained herein are expressly
qualified in their entirety by this cautionary statement.
Forward-looking statements are made as of the date hereof, or such
other date specified in such statements, and neither LREIT nor any
other person assumes any obligation to update or revise such
forward-looking statements to reflect new information, events or
circumstances, except as expressly required by applicable
securities law.
SOURCE Lanesborough Real Estate Investment Trust