Harte Gold gets extension of stay period, increased DIP financing

By Sarah Lizee

Olympia, Wash., Dec. 17 – Harte Gold Corp. has received court approval to increase the amount it may borrow under its debtor-in-possession facility to C$2.5 million from C$400,000 and has also received an extension of its stay period to Dec. 21, according to a press release issued Friday.

As previously reported, the company filed an application to the Ontario Superior Court of Justice for an initial order under the Companies' Creditors Arrangement Act on Dec. 7.

In conjunction with the CCAA proceedings, Harte Gold has entered into a subscription agreement with investor 1000025833 Ontario Inc., a wholly owned indirect subsidiary of Silver Lake Resources Ltd. If 1000025833 Ontario is the successful bidder at the conclusion of the sale and investment solicitation process and is approved by the court, it would become the sole shareholder of the company in a transaction that provides for the continuation of its business and operations as a going concern.

Harte Gold and the investor entered into an agreement providing for a DIP loan of up to C$10.8 million to fund operations and the CCAA proceedings.

The DIP financing agreement, if given final approval by the court, will provide Harte Gold with the liquidity required to continue the operations of Sugar Zone Mine until closing of a transaction.

The investor is the lender to Harte Gold under the amended and restated credit agreement dated Aug. 28, 2020 with BNP Paribas.

The subscription agreement is a credit bid which provides for payment in full of all claims ranking in priority to, or pari passu with, the amounts owed under the credit agreement; payment in full of the properly perfected and secured obligations owing to AHG (Jersey) Ltd. under the Appian facility agreement dated Aug. 28, 2020; and the assumption of up to $7.5 million in trade accounts payable.

The subscription agreement provides no recovery for other stakeholders ranking subordinate to the Appian facility, including holders of existing equity interests in the company.

If the court grants the initial order, Harte Gold will seek the approval of a sale and investment solicitation process and authority to use the subscription agreement as a stalking horse in the process in order to provide interested parties with the opportunity to submit superior proposals.

Unless the successful bid at the conclusion of the process provides for significantly higher value than the subscription agreement, there will be no recovery for holders of existing equity interests in the company.

The company said execution of the subscription agreement and the DIP financing agreement is the culmination of the strategic review process undertaken by the company over several months.

On Wednesday, Harte Gold executed an amended subscription agreement with the investor which now includes the retention of additional contracts, including all existing royalty offtake agreements.

As a result of the delay in the filing of materials with the court due to the ongoing negotiations in respect of the amended subscription agreement, the court adjourned the hearing to ensure that the court had enough time to consider the matter more fully.

The hearing will now take place on Dec. 20. In the meantime, the court issued the stay period and increased the amount that the company may borrow under the DIP facility.

Harte Gold is a gold exploration company based in Toronto.

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