Stornoway Diamond Corporation (TSX-SWY; the “Corporation”
or “Stornoway”) announced today that the Corporation and
its subsidiaries Stornoway Diamonds (Canada) Inc. (“SDCI”), Ashton
Mining of Canada Inc. (“Ashton”), and FCDC Sales and Marketing Inc.
(“FCDC” and collectively, the “SWY Parties”) have applied today to
the Superior Court of Quebec (Commercial Division) (the “Court”)
for protection under the Companies’ Creditors Arrangement Act
(“CCAA”) in order to restructure its business and financial
affairs.
In connection with the CCAA filing, on September
8, 2019, the SWY Parties entered into a letter of intent (“LOI”)
with certain secured creditors under the bridge financing agreement
entered into by the SWY Parties on June 10, 2019, which include
Diaquem Inc. (“Diaquem”) and certain buyers under the Amended and
Restated Purchase and Sale Agreement entered into on October 2,
2018, as amended (the “Stream Agreement”) (collectively, the
“Participating Buyers” and together with Diaquem, the
“Participating Secured Creditors”). Under the terms of the
LOI, the Participating Secured Creditors have confirmed their
intention to acquire, through an entity to be formed for this
purpose, substantially all of the assets and properties of the SWY
Parties, and to assume the debts and liabilities owing to the
Secured Creditors as well as the ongoing obligations relating to
the operation of the Renard Mine, subject to certain limited
exceptions. The LOI has been entered into in accordance with the
terms of the sale and investment solicitation process announced in
June 2019, as amended as of July 15, 2019 (the “SISP”).
Concurrently with the entering into of the LOI,
SDCI, Ashton and FCDC, as borrowers, have entered into a definitive
and binding working capital facility agreement (“WC Facility
Agreement”) with the Participating Secured Creditors providing for
a working capital facility in an initial amount of $20 million,
which facility can be increased for additional amounts at the
option of the Participating Secured Creditors. The SWY
Parties have applied for a Court-ordered priority charge in favor
of the Participating Secured Creditors to secure the obligations of
the borrowers under the WC Facility Agreement.
The working capital facility provides the
financing and liquidity required to ensure that the Renard Mine
continues to operate in an uninterrupted manner and, together with
the LOI, demonstrates the strong support of the SWY Parties’
financial partners for the Renard project during the restructuring
process.
The continued downward pressure on the market
price for rough diamonds as well as a variety of other factors and
circumstances, have contributed to the Corporation’s inability to
generate positive free cash flow in 2019, and to maintain an
adequate level of working capital. In addition, the SWY Parties’
high level of indebtedness resulted in an inability to consistently
meet their debt repayment obligations. After allowing for the SISP
to be run thoroughly over several months, a process that did not
result in any acceptable qualifying third-party bids, and after
careful consideration of all other available alternatives and
stakeholder interests, the board of directors of each of the SWY
Parties has separately determined that it is in both the best
interests of the SWY Parties as well as those of their respective
stakeholders to seek protection under the CCAA and full
implementation of the transactions contemplated under the LOI.
If the Court grants the initial order sought,
the SWY Parties intend to continue to operate and manage their
business in the ordinary course, including the Renard Mine, and
with the available liquidity provided under the WC Facility
Agreement the SWY Parties expect to be able to meet their
short-term and current payment and other obligations to employees,
suppliers as well as customers as and when they become due.
As part of the CCAA application, approval is
being sought for the appointment of Deloitte Restructuring Inc. as
Monitor to oversee the CCAA proceedings and report to the Court.
While under CCAA protection, management of the Corporation will
remain responsible for the day-to-day operations of the SWY
Parties.
Trading in Securities of
Stornoway
Trading in Stornoway’s common shares on the
Toronto Stock Exchange (“TSX”) has been halted. The Corporation
expects that the remedial delisting process by the TSX announced on
August 22, 2019 will be accelerated and the Corporation’s common
shares and convertible debentures will soon be delisted from
trading on TSX. In addition, given the filing for protection under
the CCAA and assuming the initial order is granted, the Corporation
believes that, irrespective of the outcome of the CCAA proceedings,
there is and will be no recoverable or residual value in either
Stornoway’s common shares or convertible debentures.
About Stornoway Diamond
Corporation
Stornoway is a Canadian diamond exploration and
production company headquartered in Montreal and owns a 100%
interest in the Renard Mine, Québec’s first diamond mine.
On behalf of the BoardSTORNOWAY DIAMOND
CORPORATION/s/ “Patrick Godin”Patrick GodinPresident and Chief
Executive Officer
For more information, please contact Alexandre Burelle (Manager,
Investor Relations and Business Development) at 450-616-5555
x2264or toll free at 1-877-331-2232Pour plus d’information,
veuillez contacter Alexandre Burelle (Directeur, Relations avec les
investisseurs et développement des affaires) au 450-616-5555 x2264,
aburelle@stornowaydiamonds.com.** Website:
www.stornowaydiamonds.com Email: info@stornowaydiamonds.com ** |
FORWARD-LOOKING
STATEMENTS
This document contains forward-looking
information (as defined in National Instrument 51-102 – Continuous
Disclosure Obligations) and forward-looking statements within the
meaning of Canadian securities legislation and the United States
Private Securities Litigation Reform Act of 1995 (collectively
referred to herein as “forward-looking
information” or “forward-looking
statements”). These forward-looking statements are made as
of the date of this document and, the Corporation does not intend,
and does not assume any obligation, to update these forward-looking
statements, except as required by law.
These forward-looking statements relate to
future events or future performance and include, among others,
statements with respect to Stornoway’s objectives and strategies to
achieve those objectives, as well as statements with respect to our
management’s beliefs, plans, objectives, expectations, estimates,
intentions and future outlook and anticipated events or results.
Although management considers these assumptions to be reasonable
based on information currently available to it, they may prove to
be incorrect.
Forward-looking statements reflect current
expectations or beliefs regarding future events and include, but
are not limited to, statements with respect to the CCAA proceedings
and creditor protection, the restructuring process, and the SWY
Group's ability to meet its obligations. Any statements that
express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words
or phrases such as “expects”, “anticipates”, “plans”, “projects”,
“estimates”, “assumes”, “intends”, “strategy”, “goals”,
“objectives”, “schedule” or variations thereof or stating that
certain actions, events or results “may”, “could”, “would”, “might”
or “will” be taken, occur or be achieved, or the negative of any of
these terms and similar expressions) are not statements of
historical fact and may be forward-looking statements.
Forward-looking statements are made based upon
certain assumptions by Stornoway or its consultants and other
important factors that, if untrue, could cause the actual results,
performances or achievements of Stornoway to be materially
different from future results, performances or achievements
expressed or implied by such statements. Such statements and
information are based on numerous assumptions regarding present and
future business prospects and strategies and the environment in
which Stornoway will operate in the future.
By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and
specific, and risks exist that estimates, forecasts, projections
and other forward-looking statements will not be achieved or that
assumptions do not reflect future experience. We caution readers
not to place undue reliance on these forward- looking statements as
a number of important risk factors could cause the actual outcomes
to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates, assumptions and intentions
expressed in such forward-looking statements. These risk factors
may be generally stated as the risk that the assumptions and
estimates referred to above do not occur, including the assumption
in many forward-looking statements that other forward-looking
statements will not be correct, but specifically include, without
limitation the risk that the restructuring may be protracted and
the additional risk factors described herein and in Stornoway’s
annual and interim MD&A, its other disclosure documents and
Stornoway’s anticipation of and success in managing the foregoing
risks. Stornoway cautions that the foregoing list of factors that
may affect future results is not exhaustive and new, unforeseeable
risks may arise from time to time.