Stornoway Files for Creditor Protection Under the CCAA

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by ahnationtalk on September 10, 201921 Views


LONGUEUIL, Quebec, Sept. 09, 2019 — 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 Board
STORNOWAY DIAMOND CORPORATION
/s/ “Patrick Godin”
Patrick Godin
President and Chief Executive Officer

For more information, please contact Alexandre Burelle (Manager, Investor Relations and Business Development) at 450-616-5555 x2264
or toll free at 1-877-331-2232

Pour 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 **

NT4

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