TMX group TMXmoney

Imvescor Restaurant Group Inc. (IRG)
Market: CDN Consolidated
$ 1.60
Oct 21, 2014, 6:01 AM EDT
Change: 0.00 (0.00%)
Volume: 100,040
Day Low
1.58
Day High
1.60
Imvescor Restaurant Group announces refinancing and recapitalization transactions

/NOT FOR DISTRIBUTION THROUGH UNITED STATES NEWSWIRES
OR DISSEMINATION IN THE UNITED STATES/

MONCTON, NB, Oct. 14, 2011 /CNW Telbec/ - Imvescor Restaurant Group Inc. ("IRG" or the "Company") (TSX: IRG) announced today that it has entered into a subscription agreement (the "Subscription Agreement") with Fairfax Financial Holdings Limited ("Fairfax") concerning a series of transactions intended to recapitalize the Company by repaying its existing 7.75% convertible extendible unsecured subordinated debentures maturing on December 31, 2011 (the "Convertible Debentures") and provide additional cash to fund ongoing working capital. These refinancing and recapitalization transactions, which are conditional upon, among other things, the approval of the holders of common shares in the capital of the Company ("Shareholders") as required by the rules of the Toronto Stock Exchange (the "TSX") and the Company's shareholder rights plan, are comprised of (the "Refinancing Transactions"):

  • A private placement of $10 million principal amount of 5-year 10% senior unsecured debentures (the "Debentures") and warrants to purchase 15,384,000 common shares (the "Warrants", together with the Debentures, the "Debt and Warrant Private Placement"); and

  • A private placement of common shares for an aggregate amount of $15 million (the "Equity Private Placement").

Fairfax has agreed pursuant to the terms and conditions of the Subscription Agreement to invest (i) $10 million under the Debt and Warrant Private Placement and (ii) $15 million under the Equity Private Placement.

"Over the past several months, the Company explored a number of financing options in the light of the upcoming maturity of the Convertible Debentures on December 31, 2011. We believe the Refinancing Transactions will enable us to optimize the Company's capital structure and allow the Company to respond to its business needs and challenges while providing sufficient flexibility to execute its business plan through the current economic markets. The Company is now able to take full advantage of its business plan and positioned to return to long-term growth and profitability" said Denis Richard, President and Chief Executive Officer of the Company.

The Subscription Agreement provides that, under certain conditions, the Company is entitled to elect to proceed by an offering of rights to subscribe for common shares to its existing Shareholders (the "Rights Offering") for gross proceeds of $15 million, as an alternative to the Equity Private Placement. In the event the Company elects to proceed by Rights Offering, the Equity Private Placement will not occur. Accordingly, Fairfax has agreed, under certain circumstances, to provide a stand-by commitment to purchase all of the securities under a Rights Offering that are not acquired by the Company's existing Shareholders.

The Refinancing Transactions are conditional upon the approval of the Shareholders pursuant to the TSX rules and the Company's shareholder rights plan at the special meeting of the Shareholders to be held on or about November 21, 2011 (the "Special Meeting"). The Refinancing Transactions are also subject to approval by the Company's senior lender, regulatory authorities and the Toronto Stock Exchange, as applicable, and the execution and delivery of a registration rights agreement granting Fairfax certain rights to cause the Company to file a prospectus under Canadian securities laws qualifying for distribution of all or any portion of securities held by Fairfax. The Refinancing Transactions are not conditional upon due diligence investigations by Fairfax.

The Subscription Agreement also provides for a termination fee of $300,000, plus reasonable fees and expenses incurred by Fairfax, payable to Fairfax in the event the Subscription Agreement is terminated in certain circumstances, provided that no termination fee will be payable if the Refinancing Transactions are not concluded due to a failure to obtain shareholder approval at the Special Meeting.

It is anticipated that the Closing will occur on or about December 20, 2011.

In April 2011, the Company's board of directors mandated the audit and risk committee to assist the President and Chief Executive Officer of the Company in evaluating various financing alternatives for the Company. In June 2011, RBC Capital Markets was retained by the Company to provide strategic advice, including the review of the Company's financial strategy and available refinancing alternatives in light of the upcoming maturity of the Convertible Debentures on December 31, 2011. The Company's board of directors, on the recommendation of the audit and risk committee and the advice of RBC Capital Markets, has unanimously approved the entering into of the Refinancing Transactions and unanimously recommends that shareholders vote in favour of the resolutions approving the Refinancing Transactions.

Debt and Warrants Private Placement

The Debentures will bear interest at a rate of 10% per annum payable quarterly and mature on the day that is 5 years after the issuance of the Debentures. The coupon will increase to 15% per annum in the event of any breach by the Company of the terms of the indenture governing the Debentures that remains uncured for a period of 30 days. If, prior to the Maturity Date, a Change of Control of the Company occurs (as defined in the indenture governing the Debentures), the Company will be required to offer to repurchase all of the outstanding Debentures at a price equal to 100% of the outstanding principal amount of the Debentures plus accrued and unpaid interest thereon. The Company will be allowed to repay all or a portion of the Debentures at par at any time without penalty. The Debentures will not provide for any financial covenants but will include certain other typical covenants such as limitations on further indebtedness, security and dividends.

In addition, Fairfax will be entitled, subject to certain conditions, to designate on the slate of nominated directors, at least 40% of the members of the Company's board of directors and the Chair of the board of directors provided that there shall be at all times a majority of independent directors. Fairfax will be designating such individuals to join the board of directors immediately after closing of the transactions.

Each Warrant will entitle the holder to purchase one common share at an exercise price (the "Exercise Price") of $0.65 and will be exercisable at any time, in whole or in part, until five years from the date of issuance. In lieu of payment of the Exercise Price, the Warrant holder may elect to receive, without payment by the Warrant holder of any additional consideration, common shares equal to the value of the Warrants.

Equity Private Placement or Rights Offering

Pursuant to the Subscription Agreement, Fairfax has agreed to invest $15 million under the Equity Private Placement or alternatively, at the option of the Company if certain conditions are satisfied, to provide a stand-by commitment to purchase all of the securities under the Rights Offering that are not acquired by Company's existing Shareholders.

Under the Equity Private Placement, the Common Shares will be issued at a price equal to the lesser of (A) the volume weighted average trading price for the 20 trading day period prior to the announcement of the Equity Private Placement, and (B) $0.65 per common share. Fairfax has committed to acquire an aggregate amount of $15 million of common shares, the whole on the terms and conditions described in the Subscription Agreement. Such amount will result in the issuance of up to 26,757,523 common shares, representing a dilution of up to 73.9% of all of the 9,445,546 issued and outstanding common shares at the date hereof.

In the event that the Company decides to proceed with the Rights Offering, further details of the distribution of Rights will be provided in a subsequent press release and in the preliminary short form prospectus.

In consideration for their commitment, Fairfax will be entitled to a fee, representing approximately 3.5% of the aggregate gross proceeds of either the Equity Private Placement or the Rights Offering, as applicable, payable in cash or in kind in Warrants together with all of its costs and expenses incurred in connection with the transactions.

Following completion of the Equity Private Placement, Fairfax will beneficially own, or exercise control or direction over, directly or indirectly, 26,757,523 common shares representing approximately 73.9% of the then issued and outstanding common shares (on a fully-diluted basis) and, assuming the exercise of all Warrants issued under the Debt and Warrant Private Placement, 42,142,139 common shares, representing approximately 81.7% of the issued and outstanding common shares.

TSX Matters and Shareholder Approval

The Company will apply to list the common shares issuable under the Equity Private Placement and the Common Shares issuable upon the exercise of the Rights and the Warrants, as applicable, on the TSX. The Equity Private Placement is subject to the approval of the TSX and since it will provide (i) for the issuance of common shares and Warrants of greater than 25% of the currently outstanding common shares of the Company, and (ii) be deemed under the rules of the TSX to materially affect control of the Company, the rules of the TSX require that the Company obtain approval of the offering from the holders of a majority of the common shares of the Company.

Under the shareholder rights plan entered into between a predecessor of the Company and Computershare Investor Services Inc. on July 23, 2009, shareholder approval is required in order to redeem the rights and allow the Refinancing Transactions to proceed.

About Imvescor Restaurant Group

Headquartered in Moncton, New Brunswick, Imvescor Restaurant Group owns franchised and corporate stores throughout Canada, under four brands: Pizza Delight® operates primarily in Atlantic Canada, where it dominates the family/mid-scale segment. Mikes® and Scores® restaurants operate primarily in Quebec in the family and casual dining segments and the take-out and delivery segments. Bâton Rouge® operates in Quebec, Ontario, and Alberta in the casual dining segment.

Cautionary Note Regarding Forward-Looking Statements

Certain information in this press release regarding the Company, including, but not limited to, the Company's business objectives, strategies and priorities, the generation of cash flows, the refinancing of the Convertible Debentures, the ability to secure the approvals and consents required to proceed with the Refinancing Transactions, including shareholders' approval and other statements that are not historical facts, are "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable securities laws. These statements are based on information currently available to the Company's management and on the current assumptions, intentions, plans, expectations and estimates of the management regarding the Company's future growth, results of operations, performance and opportunities as well as the economic environment in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside the Company's control. A number of factors could cause actual results of the Company to differ materially from the results discussed in the forward-looking statements, including, but not limited to: market conditions for financing, competitive conditions, whether related to new competitors or current competitors; change in the Company's or its competitors current pricing strategies; changes in demographic trends; changes in consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; risks associated with the closure of restaurants, costs associated with strategically exiting locations, the ability of the Company to pay dividends, the Company successfully offers new and innovative products and executes its strategies as planned; legislation and governmental regulation; changes in accounting policies, practices and standards; and the results of operations and financial condition of the Company and other factors referenced in the Company's continuous disclosure filings which are available on SEDAR at www.sedar.com. Although the forward-looking statements contained herein are based upon what the Company believes to be reasonable assumptions on the date of this press release, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Certain assumptions underlying the forward-looking statements contained herein include assumptions related to the Company's ability to obtain financing on conditions favorable to the Company, future cash flows, market conditions, sales estimates, estimates relating to the Company's ability to settle and exit leases. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, accordingly, are subject to change after such date. Forward-looking statements are provided herein for the purpose of giving information about the Company's current strategic priorities, expectations and plans, allowing investors and others to get a better understanding of the Company's business outlook and operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes. The Company assumes no obligation to update such forward-looking statements to reflect new information, future events or otherwise, except as required by applicable securities laws. Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any transactions that may be announced or that may occur after the date of this press release. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way it presents known risks affecting the business. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. View delay times for all exchanges. Market Data powered by QuoteMedia. See the QuoteMedia Terms of Use