/NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Aug. 14 /CNW/ - Western Energy Services Corp. ("Western" or the "Company") is pleased to announce the following developments:
- Western has entered into a conditional letter agreement with HSBC
providing for, among other things, a further advance of $1,325,000
and an interest only repayment period until September 30, 2009 and a
reamortization of the Company's senior debt facility (the
"Restructured Senior Facility");
- Western is proceeding with, subject to the conditions noted below, a
private placement offering of units ("Unit Offering), consisting of,
in the aggregate, up to $3 million principal amount of convertible
secured subordinated debentures (the "Debentures") and 30 million
share purchase warrants (the "Warrants");
- The restructuring of the current bridge loan facility (the "Bridge
Loan") originally made available to its subsidiary, Western Energy
Services of Texas Corp., which is guaranteed by Western.
The Unit Offering of the Debentures and Warrants will be placed with a syndicate of investors lead by 1063645 Alberta Ltd. ("106 Alberta"), a company controlled, directly or indirectly, by Mr. Jon Waddell, a director of the Company. Mr. John Halliwell, also a director of the Company, will participate in the Unit Offering. The Debentures will mature twenty-four months from the date of issue (the "Issue Date"), bear interest at an annual rate of 7.0% which interest payments will be subordinated to the interest payments to HSBC under the Restructured Senior Facility. The Debentures will be convertible into common shares of Western ("Common Shares") at the option of the holder at any time prior to the maturity date at the conversion price of $0.10 per Common Share for the first eight months from the Issue Date (the "Initial Period"), $0.15 per Common Share for the eight months following the Initial Period (the "Subsequent Period"), and $0.20 per Common Share for the eight months following the Subsequent Period. Each Warrant shall entitle the holder thereof to acquire one Common Share upon payment of the exercise price of $0.10 and shall expire 24 months from the issue date.
The proceeds of the Restructured Senior Facility and the Unit Offering will be used for retirement of secured, long-term debt in the amount of US$1,406,000 and general corporate purposes. The Debentures, the Warrants and any Common Shares issued upon conversion of the Debentures or exercise of the Warrants will be subject to a hold period of four months and one day from the closing date of the Unit Offering. The closing of the Unit Offering is subject to certain conditions, including securing of the approval of disinterested shareholders as described below and agreement with the current unsecured creditors of the Company to retire a portion of the Company's unsecured obligations in an amount sufficient to satisfy the conditions of HSBC, including working capital covenants, as required by HSBC prior to financing being made available under the Restructured Senior Facility.
Western is also pleased to announce the restructuring of the current bridge loan facility (the "Bridge Loan") originally made available to its subsidiary, Western Energy Services of Texas Corp., which is guaranteed by Western. The accrued interest on the Bridge Loan will be capitalized and added to the principal amount of the Bridge Loan for a total outstanding amount of $2.7 million. Additionally, the interest rate on the Bridge Loan will be decreased from 12% to 7% per annum and the maturity date will be extended to August, 2011.
The Unit Offering constitutes a related party transaction under the policies of the TSX Venture Exchange ("TSXV"), which incorporates by reference, Multilateral Instrument 61-101 ("MI 61-101"). Under MI 61-101, the Unit Offering is a related party transaction because such transaction is with, or securities are being issued to, directly or indirectly, directors of the Company. Unless an exemption is applicable, the related party rules require a formal valuation and minority approval in respect of a related party transaction. MI 61-101 contains an exemption from the requirement to obtain shareholder approval and a formal valuation if an issuer's independent board members, free from any interest in the transactions and unrelated to the parties involved in the transactions, have recommended the transactions, and the independent members of the board of directors resolve that the Company is in serious financial difficulty, the transactions are designed to improve the Company's financial condition, and the transactions are reasonable for the Company in the circumstances.
The Company is relying on an exemption from the requirement to seek shareholder approval for the Unit Offering on the basis of the Company's financial hardship. The Company's independent director has concluded that the Company is in serious financial difficulty, the proposed Unit Offering is designed to improve the Company's financial condition and the Unit Offering is reasonable for the Company in the circumstances. Western is proceeding with the Unit Offering due to the amount of the Company's outstanding senior and subordinated debt and the near term maturity of each loan. The Company has been unsuccessful to date in refinancing the existing senior credit facility and the subordinated debt facility. Despite the Company's best efforts, the current financial environment has made it difficult to refinance its debt obligations and/or sell underutilized assets to significantly reduce outstanding debt.
The Company's independent director has determined that at present, and without the Unit Offering, the Company is in serious financial difficulty such that the completion of the Unit Offering will considerably improve the Company's financial situation. As a result of these factors and considering the current financial environment, the independent directors has approved the Unit Offering.
The Policies of the TSXV also require shareholder approval to be obtained where a private placement will result in the creation of a new control person. As Mr. Waddell will hold, directly and indirectly, greater than 20% of the Common Shares (on a fully diluted basis) following the issuance of the Debentures, Mr. Waddell will be a control person of Western under the policies of the TSXV. Given that the Unit Offering is also a related party transaction under MI 61-101, the TSXV requires Western to obtain such shareholder approval on a disinterested basis. The Company intends to obtain such approval by way of written consents from at least 50.1% of its disinterested shareholders.
This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction. All sales will be made through registered securities dealers in jurisdictions where the offering has been qualified for distribution. The securities offered are not, and will not be, registered under the securities laws of the United States of America, nor any state thereof and may not be sold in the United States of America absent registration in the United States or the availability of an exemption from such registration.
Forward Looking Statements
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws and necessarily involve risks associated with the oil and gas energy services industry, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, volatility of commodity prices, currency fluctuations, environmental risks and competition from other energy services providers. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward-looking statements and information concerning the receipt of all regulatory, corporate and other approvals required in connection with the Unit Offering, use of proceeds of the Unit Offering and closing of the Unit Offering. The forward-looking statements and information are based on certain key expectations and assumptions made by Western, including assumptions concerning the state of the economy and energy services business and its expected direction, which expectations and assumptions management of Western believes to be reasonable at this time. Although Western believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable at the date of this press release, undue reliance should not be placed on the forward looking statements and information as Western can give no assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks, including the failure to obtain required regulatory approvals and others. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements and information contained in this press release are made as of the date hereof and Western undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.