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KGIC plans restructuring, $20.2M debt settlement
2016-09-26 18:21 ET - News Release
Mr. Alex MacGregor reports
KGIC INC. ANNOUNCES PLAN FOR CAPITAL RESTRUCTURING AND $20.2M DEBT SETTLEMENT
KGIC Inc. plans to execute a capital restructuring and debt settlement plan that it expects will preserve value to existing stakeholders, by improving the balance sheet and debt-equity ratio, and facilitate required financing.
The debt settlement plan is expected to reduce the company's existing debt by approximately $20.2-million by offering equity conversion to holders of existing unsecured convertible debentures, subordinated loans and preferred shares, and a debt settlement with Bank of Montreal (BMO), the company's senior lender.
BMO has agreed to enter into a debt settlement agreement with the company, pursuant to which it will reduce the debt owing by the company by $5.4-million, and the company will pay the balance owing in cash, subject in all respect to the successful restructuring of the unsecured debt securities and necessary financing. The debt settlement plan requires substantial participation from holders of unsecured debt securities.
The company has also made an offer to holders of the unsecured debt securities, representing approximately $14.8-million inclusive of accrued interest and dividends as of Sept. 30, 2016, pursuant to which the company has proposed to settle the unsecured debt securities by issuing approximately 74.2 million common shares.
In connection with the proposed restructuring of the debentures in the principal amount of $5.25-million, the company intends to amend the terms of the debenture indenture governing the terms of the debentures dated Dec. 5, 2013, to authorize the company to redeem the debentures, in whole or in part, at a price equal to the principal amount thereof plus accrued and unpaid interest thereon at any time from time to time, and elect to satisfy its obligation to pay all or any portion of the principal amount of debentures and the accrued but unpaid interest thereon due upon redemption by issuing and delivering to holders of the debentures that number of common shares obtained by dividing the principal amount of the redeemed debentures and accrued but unpaid interest by 20 cents. The debentures will continue to bear interest at 7.5 per cent per annum and will mature on Nov. 30, 2018.
"With the successful execution of the debt settlement plan, management is confident that the impending financing of the company will not only accelerate the company's growth plans but also strengthen our position in the education market," said Alex MacGregor, president and chief executive officer.
It is anticipated that the closing of the transactions contemplated by the debt settlement plan will occur by the end of October, 2016. The transactions contemplated by the debt settlement plan, of which the company has received conditional approval by TSX Venture Exchange, are subject to certain conditions, including obtaining the final approval of the TSX Venture Exchange and all other required governmental, regulatory and third party approvals, as applicable. The company can give no assurances that any of the transactions contemplated by the debt settlement plan will be completed. If not completed, the company's ability to continue as a going concern may be significantly affected.
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