WINNIPEG, Jan. 5,
2016 /CNW/ - All in West! Capital Corporation (the
"Corporation") (TSX-V: ALW) announced today that it has
conditionally agreed to sell the Econolodge Inn & Suites
located in Hinton, Alberta (the
"Econolodge Hinton") to Lexor Management Inc.
("Lexor") effective January 31,
2016 (the "Effective Date") on the terms and
conditions described below (the "Transaction"), subject to
the approval of the TSX Venture Exchange Inc. (the
"TSXV").
The Corporation has obtained an updated
independent third party appraisal of the Econolodge Hinton as at
December 31, 2015, valued at
$3,810,000.
The Corporation is currently in default of its
obligations to pay interest on the mortgage loan (the
"Econolodge Mortgage Loan") secured by the Econolodge
Hinton. Lexor is the mortgagee under the Econolodge Mortgage
Loan. The reason for the default is that the net operating
income from the Econolodge Hinton is not sufficient to enable the
Corporation to make the required interest payments. The
Corporation has not made any payments under the Econolodge Mortgage
Loan since June, 2015. As at the Effective Date, the
Corporation will owe Lexor $196,875
(the "Effective Date Interest Amount") in unpaid interest
under the Econolodge Mortgage Loan.
The Econolodge Mortgage Loan is scheduled to
mature on June 30, 2017. The
interest payments payable under the Econolodge Mortgage Loan are
$28,125 per month, or an aggregate of
$478,125 (the "Maturity Date
Interest Amount") through the balance of the 17-month remaining
term of the Econolodge Mortgage Loan. Given the current
performance of the Econolodge Hinton, the financial condition of
the Corporation and the lack of alternative financing sources
available to the Corporation, as at the date hereof, the
Corporation does not anticipate being able to make any such future
interest payments.
Subject to receipt of regulatory approval, the
Transaction will involve the following on the Effective Date
|
(a)
|
the transfer by the
Corporation to Lexor of the Econolodge Hinton;
|
|
|
|
|
|
(b)
|
the assumption by
Lexor of all accounts payable relating to the Econolodge Hinton
outstanding as at the Effective Date and the assignment to Lexor of
all cash and all accounts receivable relating to the Econolodge
Hinton as at the Effective Date, as well as usual closing
adjustments (the "Working Capital Adjustments"), which the
Corporation estimates on the date hereof will result in a net
amount assumed by Lexor of $25,000 (such amount, as may be
adjusted, the "Working Capital Adjustment
Amount");
|
|
|
|
|
|
(c)
|
the agreement by
Lexor to pay up to $250,000 in estimated costs of the Corporation
relating to the Transaction and a potential debt restructuring or
other strategic transaction involving the Corporation or the shares
or property thereof (the "Restructuring Costs");
and
|
|
|
|
|
(d)
|
the termination of
the Econolodge Mortgage Loan and amounts owning to Lexor thereunder
or otherwise relating to the Econolodge Hinton, other
than:
|
|
|
|
|
|
|
(i)
|
an aggregate amount
equal to the Effective Date Interest Amount, the Working Capital
Adjustment Amount and the Restructuring Costs, which amounts will
continue to be secured by the guarantee of the Corporation and will
confirmed through the delivery of a senior promissory note in such
aggregate amount in favour of Lexor (the "Senior Note");
and
|
|
|
|
|
|
|
(ii)
|
an amount equal to
$418,125 (which is $60,000 less than the Maturity Date Interest
Amount), which amount will continue to be secured by the guarantee
of the Corporation and will be confirmed through the delivery of a
promissory note in such amount in favour of Lexor which will rank
pari passu with the Series C debentures of the Corporation
(the "Series C Pari Passu Note") and senior to the Series A
and Series B debentures of the Corporation.
|
The principal amount of the Senior Note will be
adjustable following the Effective Date to reflect any Working
Capital Adjustments which are not factored in on the Effective
Date. The Senior Note will also be reduced to the extent that
Restructuring Costs are less than $250,000. The Senior Note will rank
senior to the outstanding Series A, Series B and Series C
debentures of the Corporation. The Series C Pari Passu Note
will rank senior to the outstanding Series A and B debentures and
will rank pari passu with the Series C debentures.
The independent directors of the Corporation have
determined that the Transaction is in the best interests of the
Corporation due to the financial performance of the Econolodge
Hinton and the fact that the appraised value of the Econolodge
Hinton is significantly less than the principal amount of the
Econolodge Mortgage Loan. The net operating income from the
Econolodge Hinton is less than the required debt servicing
payments.
The Transaction is expected to improve the
financial condition of the Corporation as a result of the
Corporation being forgiven approximately $690,000 of the principal amount of the
Econolodge Mortgage Loan, being the difference between the
$4,500,000 principal amount thereof,
less the appraised value of the Econolodge Hinton.
The Transaction was unanimously approved by the
independent directors of the Corporation. Mr. Cornelius Martens, Chief Executive Officer of
the Corporation, abstained from voting in respect of the approval
of the Transaction due to the fact that the principal director,
officer and shareholder of Lexor is Mr. Peter Schiller, his son-in-law. Lexor also
manages the Corporation's hotel operations.
To the extent that the Transaction may be
considered to be a "related party transaction" as defined under
TSXV Policy 5.9 and Multilateral Instrument 61-101 – Protection
of Minority Security Holders in Certain Transactions, the
Corporation will rely on the "financial hardship exemption" from
the minority shareholder approval requirement as a result of the
satisfaction of the following conditions:
|
(a)
|
the Corporation is
insolvent or in serious financial difficulty;
|
|
|
|
|
(b)
|
the Transaction is
designed to improve the financial position of the
Corporation;
|
|
|
|
|
(c)
|
the Transaction is
not made pursuant to a bankruptcy proceeding;
|
|
|
|
|
(d)
|
the Corporation has
three independent directors in respect of the Transaction (Mr.
Cornelius Martens declared a conflict of interest due to his
relationship with Mr. Peter Schiller); and
|
|
|
|
|
(e)
|
the board of
directors of the Corporation, acting in good faith, determined, and
all of the Corporation's independent directors, acting in good
faith, determined, that: (i) paragraphs (a) and (b) above apply;
and (ii) the terms of the Transaction are reasonable in the
circumstances of the Corporation.
|
The Transaction is scheduled to close on the
Effective Date, subject to receipt of TSXV approval and
acknowledgement from the indenture trustee for the Series A, B and
C debentures with respect to the priority and ranking of the Senior
Note and the Series C Pari Passu Note.
The Corporation will remain in default of its
other debt obligations following the closing of the Transaction,
including its obligations under its outstanding Series A, Series B
and Series C debentures.
The Corporation is currently in the process of
developing a debt restructuring plan which will be subject to the
approval of each series of its outstanding debentures and its
shareholders.
The TSXV has not reviewed or approved the
contents of this press release.
Forward-Looking Statements
This press release contains forward-looking
statements regarding the proposed transaction involving the
Econolodge Hinton and a potential future debt restructuring
plan. There can be no assurance that the proposed
transactions will be completed on the terms described herein or at
all.
SOURCE All in West! Capital Corporation