YAN:CA V.YAN

hail Mary pass in the air.......

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Yangarra files for bankruptcy, proposes merger

2009-10-08 11:43 ET - News Release

Mr. James Evaskevich reports

YANGARRA PROVIDES RESTRUCTURING UPDATE

Yangarra Resources Ltd. has filed a proposal with its creditors to restructure under the Bankruptcy and Insolvency Act. The purpose of the proposal is to restructure the financial affairs of Yangarra in order continue business. Pursuant to the terms of the proposal:

1. Yangarra will continue to make payments to its senior lender in accordance with the terms of its present arrangements with that senior lender or any other arrangements that may be agreed upon by that senior lender and Yangarra. The senior lender has a first secured charge on the property, assets and undertaking of Yangarra. The senior lender has indicated, subject to credit committee approval, that Yangarra will be offered a new term sheet which will include a loan limit of $8.3-million with interest at prime plus 1 per cent, with loan reductions beginning Jan. 31, 2010, and subject to formal review by the lender no later than May 31, 2010.
2. A second secured creditor that is owed $4.95-million, including accrued interest and fees, but whose interest is subordinate to that of the senior lender, will have its debts satisfied as follows:
   1. Yangarra will satisfy $1-million by issuing preferred shares of Yangarra, such preferred shares having a 5-per-cent annual dividend payable in common shares of Yangarra, being redeemable at any time by Yangarra and being due for redemption on April 15, 2011.
   2. Yangarra will satisfy $450,000, being the amount equal to the claim for accrued interest and fees to Oct. 15, 2009, by issuing nine million common shares of Yangarra at a deemed price of five cents per share, 1,745,753 of which have already been issued pursuant to a previous agreement (see news release in Stockwatch on Aug. 25, 2009.
   3. The balance of $3.5-million will be satisfied by issuing 23,333,333 common shares of Yangarra at a deemed price of 15 cents per share.
3. Ordinary unsecured creditors who are owed up to approximately $1,795,000 will have their debts settled as follows:
   1. The first $500 of each such ordinary unsecured creditor's claim will be paid in cash.
   2. The balance will be satisfied by issuing common shares of Yangarra at a deemed price of 15 cents per share;
4. Yangarra will undertake to merge with a non-arm's-length private company, Athabaska Energy Ltd. (subject to Athabaska shareholder approval). The assets of Athabaska will be combined with the assets of Yangarra no later than 30 days after the court issues a final order approving of the proposal. The number of common shares of the Yangarra to be issued in exchange for the shares of Athabaska will be based on the current net asset value of each company as determined by a qualified independent third party expert. A comprehensive news release regarding the share exchange ratio will be released once the calculations have been performed by a qualified independent third party and the respective boards of directors have approved that calculation.
5. The company resulting from the acquisition of Athabaska by Yangarra will raise $500,000 by selling common shares at a price per share to be determined with reference to then current market conditions, but at a price per share of not less than five cents, no later than 60 days after the court issues a final order approving of the proposal.
6. Yangarra entered into a farm-out arrangement, on normal commercial terms, with Athabaska on June 30, 2009, to allow Yangarra to continue to operating. A director, an employee and other Yangarra shareholders, own shares in Athabaska. A director of Yangarra is also a director of Athabaska. It is intended that this transaction also be approved under the proposal.
7. The proposal will be considered complete when all of the foregoing is accomplished.