/THIS PRESS RELEASE IS NOT FOR PUBLICATION OR
DISSEMINATION IN THE UNITED
STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY
CONSTITUTE A VIOLATION OF UNITED
STATES SECURITIES LAW./
CALGARY, Jan. 19, 2018 /CNW/ - Manitok Energy Inc.
("Manitok" or the "Corporation") provides the
following update of corporate activities related to various
corporate matters and its proposed restructuring plan.
Under certain Collateralized Exchange Listed NotesTM
("CEL Notes") issued by Manitok, Manitok was required to
make an interest payment on November 15,
2017 (the "November Interest Payment"). Due to
ongoing liquidity issues and limits on its access to its operating
facility with its senior lender, Manitok's board of directors (the
"Board") determined that it was in the best interests of
Manitok and its stakeholders to defer payment of the November
Interest Payment until it was able to carry out transactions which
would address its liquidity issues and payout and replace the
senior lender. Under the CEL Notes, the failure to cure such
default in paying the November Interest Payment became an event of
default on December 15,
2017.
In December of 2017, Manitok negotiated an agreement with a
private Hong Kong based
corporation (the "Potential Investor") and its wholly
owned Canadian subsidiary (the "Cdn Subsidiary")
under which Manitok would acquire all the issued and outstanding
shares of the Cdn Subsidiary (the "Proposed
Acquisition"), which would give Manitok access to
approximately $21.7 million of cash,
$1.3 million in a form of a deposit
held by Alberta Energy Regulator and certain oil assets. The
purchase price for the shares of the Cdn Subsidiary would be
payable by way of issuance of common shares of Manitok. The
Proposed Acquisition would result in the Potential Investor
becoming a "Control Person" of Manitok (as such term is defined
under the TSX Venture Exchange ("TSXV") Corporate Finance
Manual), thus requiring Manitok to hold a special meeting of its
shareholders to obtain the requisite approval to the contemplated
change to Manitok's equity structure. The completion of the
Proposed Acquisition was subject to the satisfaction of a number of
conditions precedent, including the completion of due
diligence.
Manitok was unable to resolve its liquidity issues by
December 15, 2017 and therefore was
unable to make the November Interest Payment, thereby triggering an
event of default under the CEL Notes. Considering this event
of default, and the material nature of the Proposed Acquisition,
Manitok voluntarily halted the trading of its common shares and its
CEL Notes on the TSXV on December 15,
2017 pending the outcome of the Potential Investor's due
diligence.
Subsequently, the Potential Investor advised Manitok that it
would not proceed with the Proposed Acquisition unless Manitok was
restructured to reduce its aggregate indebtedness. At that
time, Manitok contacted certain stakeholders, including holders of
CEL Notes and its largest shareholders, to propose a restructuring
that would permit it to repay its senior lender. It obtained
support from holders of CEL Notes to whom in excess of 66.67% of
the aggregate principal amount was owed and in excess of
$9.0 million in new equity was
committed pursuant to executed subscription agreements.
Manitok also negotiated the terms of a new first lien loan from an
existing stakeholder.
On December 29, 2017, the senior
lender issued a letter to Manitok demanding repayment in full of
the indebtedness owed by the Corporation to the senior lender and
terminating the credit facilities provided by it (the "Payment
Demand"). Concurrently, the senior lender sent to Manitok
a notice of intention to enforce its security (the "Notice of
Intention").
Under the Bankruptcy and Insolvency Act (Canada) (the "BIA"), Manitok had ten
(10) days from the receipt of the Notice of Intention within which
to file a Notice of Intention to Make a Proposal (a "NOI")
under the BIA, failing which the senior lender would be at liberty
to apply to the Court of Queen's Bench of Alberta (the "Court") for an order
appointing a receiver of Manitok's property and assets. If a
receiver was appointed, the receiver would have the authority to
liquidate and sell the property and assets of Manitok.
During the ten (10) day period, the Board met to discuss the
options available to Manitok. Based on discussions between
senior management of Manitok, the Potential Investor and various
stakeholders, the Board determined that it was in the best interest
of Manitok and its stakeholders to file an NOI with the
Superintendent of Bankruptcy (the "Superintendent") under
Division I of Part III of the BIA. Accordingly, Manitok filed
an NOI on January 10, 2018 naming FTI
Consulting Canada Inc., as proposal trustee (the "Proposal
Trustee", and the proceedings initiated by the NOI being the
"Proposal Proceedings"). The Proposal Trustee is an
officer of the Court and is empowered to monitor the business and
affairs of Manitok during the Proposal Proceedings, report to the
Court from time to time, and to assist Manitok in formulating a
Proposal.
Under section 69(1) of the BIA, upon the filing of an NOI, no
creditor may exercise a remedy against Manitok or its property, or
is permitted to commence or continue any action, execution or other
proceedings for the recovery of a claim provable in
bankruptcy. The BIA requires that a proposal by Manitok to
its creditors (a "Proposal") must be filed within thirty
(30) days of the commencement of the filing of the NOI. The
Court is authorized under the BIA to extend this time period in up
to forty-five (45) day increments, to a maximum of five months
after the expiry of the initial thirty (30) day period.
In order to fund its operations during the Proposal Proceedings,
Manitok and the Potential Investor entered into an agreement
pursuant to which the Potential Investor would provide an interim
financing credit facility, secured by a charge created by the
Court. Manitok applied to the Court for an order approving
the interim credit facility and creating charges in favour of the
Potential Investor to secure the indebtedness of Manitok under the
interim facility, to secure the professional fees and costs of the
Proposal Trustee and counsel to Manitok and the Proposal Trustee,
and to secure the obligation of Manitok to indemnify its directors
and officers for certain liabilities arising during the Proposal
Proceedings (such order being the "NOI Charges
Order"). The senior lender applied for an order
terminating the Proposal Proceedings and appointing a receiver of
the property and assets of Manitok.
At a hearing before the Court held on January 12, 2018, the Court adjourned the
application of the senior lender sine die and granted the
NOI Charges Order, subject to the final settlement of its terms.
Subsequently, the senior lender and Manitok agreed that the senior
lender would provide the interim financing in place of the
Potential Investor. On January 15,
2018, the Court pronounced the final settled form of the NOI
Charges Order, effective January 12,
2018, which among other things approved an interim financing
loan agreement with the senior lender (the "Loan
Agreement"). Under the Loan Agreement, the senior lender has
provided a non-revolving credit facility to Manitok in the maximum
principal amount of $3.0 million,
which may be drawn in tranches of not less than $0.5 million and bears interest at the interim
lender's prime rate plus 3.0% per annum (the "Interim
Facility"). The Loan Agreement provides for two non-refundable
commitment fees of $50,000 each, of
which, the first is payable at the time of first drawdown and the
second is payable on the maturity of the Interim Facility.
Advances under the Interim Facility may only be used by Manitok in
accordance with its 13-week cash-flow projections which are
prepared by Manitok and vetted by the Proposal Trustee in
connection with the Proposal Proceedings.
During the remainder of the initial thirty (30) day period
ending February 9, 2018, Manitok will
negotiate the framework and form of a Proposal with the relevant
parties. The successful implementation of a Proposal is dependent
on entering into a number of additional definitive agreements,
potentially including a first lien credit agreement with an
existing stakeholder, support agreements in respect of the Proposal
with the holders of CEL Notes and other creditors, revised
subscription agreements to obtain equity financing, and possibly a
support agreement with the Potential Investor. Manitok will seek an
extension of the thirty (30) day period on or prior to its expiry
on February 9, 2018 to have the time
to complete the necessary voting required by creditors to complete
the Proposal.
In addition to the foregoing, the Corporation advises that:
(a)
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on or about January
8, 2018, it received notice from the lessor of the lands associated
with the Lease Issuance and Drilling Commitment Agreement dated
April 30, 2015, as amended (the "LIDCA"), that Manitok was
in breach of the terms and conditions of the LIDCA and that a
commitment payment under such agreement in the amount of $8.0
million would be due on or before March 31, 2018;
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(b)
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on or about January
10, 2018, it received notice from the trustee of the CEL Notes that
the missed November Interest Payment represented an Event of
Default as defined by the provisions of the CEL Notes Indenture;
and
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(c)
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the Corporation was
unable to meet its entire renunciation obligations arising under
the May 2016 private placement offering of 7,994,980 common shares
of the Corporation issued on a "flow-through" basis with respect to
"Canadian exploration expenses" within the meaning of the Income
Tax Act (Canada) and regulations thereunder (collectively, the
"Tax Act") (the "CEE Flow-through Shares") issued at
a price of $0.21 per CEE Flow-through Share and 23,605,879 CEE
Flow-through Shares issued at a price of $0.145 per CEE
Flow-through Share (collectively, the "Flow-through
Shares"). The Corporation's aggregate renunciation obligations
for the Flow-through Shares is approximately $4.1
million.
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Manitok intends to address the matters referred to above as a
part of the restructuring proposal.
About Manitok
Manitok is a public oil and gas exploration and development
company focusing on Lithic Glauconitic light oil in southeast
Alberta and Cardium light oil in
west central Alberta. The
Corporation utilizes its expertise, combined with the latest
recovery techniques, to develop the remaining oil and liquids-rich
natural gas pools in its core areas of the Western Canadian
Sedimentary Basin.
Forward-looking Information Cautionary
Statement
This press release contains forward-looking statements. More
particularly, this press release contains statements concerning the
terms and anticipated completion of the Proposal Proceedings and
possible extension of 30 day stay period under the NOI past
February 9, 2018.
The forward-looking statements in this press release are
based on certain key expectations and assumptions made by Manitok,
including expectations and assumptions concerning the prevailing
market conditions, the intentions of its lender, commodity prices,
and the availability of capital.
Although Manitok believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because Manitok can give no assurance
that it will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks. These include, but are not limited to, risks
associated with adverse market conditions, the inability of Manitok
to complete the Proposal Proceedings at all or on the terms
announced, not obtaining the required court, shareholder and
regulatory approvals and the risks associated with the oil and gas
industry in general (e.g., operational risks in development,
exploration and production; delays or changes in plans with respect
to exploration or development projects or capital expenditures; the
uncertainty of reserves estimates; the uncertainty of estimates and
projections relating to production, costs and expenses; and health,
safety and environmental risks), uncertainty as to the availability
of labour and services, commodity price and exchange rate
fluctuations, unexpected adverse weather conditions, general
business, economic, competitive, political and social
uncertainties, capital market conditions and market prices for
securities and changes to existing laws and regulations. More
information about certain of these risks are set out in the
documents filed from time to time with the Canadian securities
regulatory authorities, available on Manitok's SEDAR profiles at
www.sedar.com.
Forward-looking statements are based on estimates and
opinions of management of Manitok at the time the statements are
presented. Manitok may, as considered necessary in the
circumstances, update or revise such forward-looking statements,
whether as a result of new information, future events or otherwise,
but Manitok undertakes no obligation to update or revise any
forward-looking statements, except as required by applicable
securities laws.
This press release shall not constitute an offer to sell
or the solicitation of an offer to buy any securities nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful. The securities
issued pursuant to the Arrangement and/or the financing described
herein may not be offered or sold in the
United States absent registration or applicable exemption
from the registration requirements.
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 release.
SOURCE Manitok Energy Inc.