High North completes plan of arrangement for 12% convertibles due 2015

Company converts or amends shares, per holders’ option, on Wednesday

By Toni Weeks

San Luis Obispo, Calif., July 15 – High North Resources Ltd. announced in a press release that the plan of arrangement under the Business Corporations Act (British Columbia) with holders of its C$8.67 million of 12% convertible unsecured subordinated debentures due April 4, 2015 has been completed and is effective as of July 15. The steps taken on the effective date are noted below.

The arrangement was approved at an extraordinary meeting of the debnetureholders on June 4, and a final order approving the arrangement was given by the Supreme Court of British Columbia on June 8.

June 4 meeting

As previously announced, the company lacked funds to meet its obligations under the 12% convertibles and sought holder approval to amend the terms.

At the meeting in Calgary, Alta., debentureholders representing 88.64% of the bonds voted to approve amendments to the bond indenture. High North needed approval by 75% of the principal amount of debentures outstanding to pass the amendments.

The meeting had originally been set for noon ET on May 21, but the company postponed it to allow more time for High North to prepare for the mailing of the meeting materials. The record date remained unchanged at April 6.

The company said on March 13 that the current state of the oil and gas industry prompted it to conduct an investigation into and exhaust a variety of financial and strategic alternatives to enable it to pay the amounts due on the convertibles. The company previously said it believed that the amendments provide the best available solution and would allow it to continue as a going concern.

Because the meeting was held after the bonds’ maturity date, High North would be in default unless the holders of a majority of the principal amount of convertibles instructed the trustee to waive the event of default by requisition in writing.

High North asked debentureholders to vote for waiving the event of default, and if approved, the waiver was to remain in effect until the earlier of the conclusion of the meeting, the cancellation of the meeting and July 30.

Amendments

As previously noted, the amendments provided the debentureholders with three options.

Following court approval, debentureholders holding 4,011 debentures in the principal amount of C$4,011,000, or about 46% of the debentures, elected for Option A, whereby their respective debentures were to be redeemed in exchange for common shares. Additionally, debentureholders holding 4,659 in the principal amount of C$4,659,000, or about 54% of debentures, elected for Option B, whereby the debentures would continue to be held as debentures and would be subject to the terms of a supplemental debenture indenture.

As already noted, Option A was to

• Give High North a one-time right to redeem the outstanding principal amount of the convertibles by converting them into shares at a conversion price of C$0.06 through July 30; and

• Allow High North to pay all of the accrued interest in common shares. Interest on the interest accrued from the maturity date up to but excluding the redemption date will be waived.

Option B would

• Extend the maturity date to April 4, 2017;

• Lower the interest rate to 6% per annum, calculated annually and not in advance, not compounded and payable in cash only, effective from April 4;

• Provide that interest will accrue from April 4 and will be payable on April 4, 2017;

• Reduce the conversion price to C$0.18 per common share from C$0.85 per common share, subject to customary anti-dilution adjustments; and

• Allow High North to pay all of the accrued interest in common shares. Interest on the interest accrued from April 4 up to but excluding the date of the supplemental indenture will be waived.

Option C gave debentureholders the option to elect option A for a portion of their convertibles and option B for the remainder.

Holders who did not select an option were deemed to have selected option A.

Following approval, the closing of the arrangement was expected by July 15.

Steps taken on closing date

According to Wednesday’s press release, the following steps were completed on July 15:

• The 4,011 debentures under Option A were redeemed in exchange for 66.85 million common shares;

• 4,659 debentures under Option B were amended and are now governed by the convertible debenture indenture dated April 4, 2014 between High North and trustee Computershare Trust Co. of Canada, as amended on April 4, 2015.

The amended debentures mature on Oct. 4, 2016 and bear interest at 6% per year calculated annually, and not in advance, not compounded and payable in cash only, effective from April 4.

Each amended debenture will be convertible at the holder’s option into common shares at any time after July 15 and prior to 4:30 p.m. ET on Sept. 30, 2016 at the conversion price of C$0.10 per common share. Although the amended debentures will not be listed on the TSX Venture Exchange, any common shares issuable upon conversion, redemption or maturity will be listed;

• Debentureholders were issued a total of 8.67 million common shares as payment for the accrued interest at a rate of 12% per year due April 4, 2015; and

• Debentureholders who tendered their debentures to Option A were issued a total of 1,120,882 common shares as payment for accrued interest at 6% per year from April 4 up to but not including the July 15 effective date.

After the closing of the arrangement, High North has a total of 147,740,934 common shares outstanding, the release said.

High North is a Calgary, Alta.-based company that explores, develops and produces oil and natural gas.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.