Summary of the Brookfield TransactionFrom Monitor's report May 7:
The Brookfield Transaction
15. Armtec has executed an asset purchase agreement with Armtec Operating LPL (an
affiliate of Brookfield, the "Purchaser"» (the "APA", a copy of which is attached as Exhibit C to the Caiger Affidavit) which reflects the terms and conditions of the Brookfield Transaction originally contemplated by the Extension Agreement. The existence of the Brookfield Transaction has been an important backstop for Armtec in ensuring ongoing stability to its business and providing assurances to its customers and employees that the business will continue as a going concern.
16. The terms of the Brookfield Transaction, as reflected in the APA are outlined in detail in both the Initial Order Affidavit and the Caiger Affidavit. Key terms under the APA are as follows:
a) The Purchaser will acquire substantially all of Armtec's assets and will assume substantially all of Armtec's trade payables, contractual obligations, employee and pension obligations and will provide employment to all of Armtec's employees;
b) The Purchaser will not assume any obligations under the Senior Notes or the Convertible Notes;
c) The Armtec business will continue as a going concern and it is expected there will be no disruption to the operation of the business;
d) The Purchase Price will be satisfied by a release by Brookfield of all obligations under the Brookfield Facility;
e) The Brookfield Transaction is also subject to a number of conditions including:
i. The granting of an Approval and Vesting Order;
ii. Payment of certain amounts including under the KERP as well as the fees and disbursements of Armtec's advisors, the Monitor and its counsel;
iii. Assumption of the CIBC and Trisura facilities or the implementation of alternative arrangements acceptable to each of them respectively; and
iv. A closing date of June 1,2015.
17. The Brookfield Transaction does not preclude the entering into of another transaction prior to the closing of the Brookfield Transaction provided that Brookfield is repaid in full. The June 1, 2015 closing date was agreed to by, among others, the Purchaser and the Participating Noteholders in connection with the Support Agreement as a way of providing the Participating Noteholders with time to discuss and propose an alternative transaction during that period. In the event that Armtec terminates the APA as a result of the completion of an alternative transaction that repays Brookfield in full, the Purchaser will be entitled to a backstop fee of $5 million ("Backstop Fee") plus reimbursement of reasonable legal fees and disbursements. The Monitor understands that the Backstop Fee and expense reimbursement were agreed to by Armtec as part of the Extension Agreement.
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CONCLUSION
20. At the current time, there do not appear to be any viable alternatives to the Brookfield Transaction particularly since no Superior Transaction was received by the bid deadline as set out in the Sale and Investment Process. The Brookfield Transaction as reflected in the APA provides for a smooth transition of the Armtec business, preserves employment for all of Armtec's employees and provides for the assumption in full of all trade liabilities. Further, it does not preclude the Participating Noteholders from submitting their own proposal prior to the anticipated closing date. Based on the updates provided to EY (both prior to its appointment as Monitor and since the date of the Initial Order), the Monitor is not aware of any impropriety in the terms or conduct of the Sale and Investment Process. As such, absent the submission of a proposal that provides for a Superior Transaction, the Monitor supports Armtec's motion for approval of the APA and the related relief sought therein.