EastCoal Inc Disposal of Assets (8389X)

TIDMECX

RNS Number : 8389X

EastCoal Inc

16 January 2014

January 16, 2014

EastCoal Inc. Announces Disposal of Assets

--------------------------------------------------------------------------------

Vancouver, British Columbia - EastCoal Inc. (TSX VENTURE EXCHANGE: ECX, AIM: ECX) ("the Company" or "EastCoal") announces that on January 10, 2014 the Company and its wholly-owned, Cyprus incorporated subsidiary, Gramsico Holdings Ltd. ("Gramsico") entered into share purchase agreements with an Austrian based company, EFI Holding GmbH ("EFI"), pursuant to which EFI will acquire all of the Company's 0.1% shareholding and all of Gramsico's 99.9% shareholding in East Coal Company LLC ("ECC") for an aggregate cash consideration of US$499,000.

On January 10, 2014, the Company and Gramsico also entered into share purchase agreements with EFI pursuant to which EFI will acquire all of the Company's 0.1% shareholding and all of Gramsico's 99.9% shareholding in Ukraine Energy LLC ("UE") for an aggregate cash consideration of US$1,000.

ECC and UE are Ukranian incorporated companies that are indirectly wholly-owned by the Company through Gramsico. ECC holds the assets relating to the Company's material project, the Verticalnaya mine. UE is an inactive shell company.

The share purchase agreements with EFI also provide for a royalty interest to be earned by the Company equal to US$1.00 per tonne of coal produced at the Verticalnaya mine, and provide for the assignment to EFI of the Company's rights pursuant to a loan agreement dated June 25, 2009 between the Company (as lender) and ECC as (borrower).

On January 10, 2014, the Company and Gramsico also entered into share purchase agreements with Cyprus based company, Strong Group Corporation Limited ("Strong Group"), pursuant to which Strong Group will acquire all of the Company's 0.1% shareholding and all of Gramisco's 99.9% shareholding in Inter-Invest Coal LLC ("IIC") for an aggregate cash consideration of US$15,020.

IIC is a Ukrainian incorporated company that is indirectly wholly-owned by the Company through Gramsico. IIC holds the assets relating to the Company's Menzhinsky mine, and, as previously announced, IIC is currently in a liquidation process in the Ukraine.

The share purchase agreements also provide for the assignment to Strong Group of the Issuer's rights pursuant to various loan agreements between the Company (as lender) and IIC as (borrower).

The acquisition of ECC and UE by EFI and the acquisition of IIC by Strong Group (together, the "Disposals") will be conditional on the receipt of a court order under the Bankruptcy and Insolvency Act (Canada) ("BIA") which application is currently scheduled for January 16, 2014. The Company has applied for the conditional approval of the TSX Venture Exchange for the Disposals. On January 14, 2013, the Company also received notification from EFI's lawyers that they received a payment into escrow of the US$100,000 as a deposit for the proposed acquisitions by EFI payable to the Company subject to the court approval referred to above.

If the Disposals are approved by the court and are completed, the cash proceeds payable to Gramsico will be distributed directly to the Company for use in funding any further proposal to creditors under the BIA and negotiating any further transactions that may present themselves to the Company in order to potentially generate some additional value for creditors and shareholders. The Company is currently exploring various funding options and potential transactions with a view to maintaining its public company status and utilizing its accumulated tax losses. If the Company is able to secure further funding or complete a transaction in the future it may be able to improve its proposal to creditors.

The Company has filed an application for an extension of the order for the stay of proceedings pending the filing by the Company of a proposal to its creditors pursuant to the provisions of Part III of the BIA. Such an extension, if granted, would run until March 3, 2014. The extension application will be applied for simultaneously with the application for the approval of the Disposals, which court hearing is currently scheduled for January 16, 2014.

In the event that the Disposals are completed, the Company will (for the purposes of the AIM Rules) be classified as an investing company. The Company's listing on TSX Venture Exchange will be moved to the NEX exchange as administered by the TSX Venture Exchange as the Company will no longer meet the continued listing requirements of a Tier 2 issuer on the TSX Venture Exchange.

Under the AIM Rules, the Disposals would result in a fundamental change of business and would ordinarily be conditional on the consent of the Company's shareholders being given in a general meeting. As the Disposals are a result of the Company's ongoing insolvency proceedings it has sought and been granted a derogation by AIM from the requirement to seek shareholder consent for the Disposals under the AIM Rules. Upon completion of the Disposals, as an investing company under the AIM Rules, the Company will be required to seek approval from its shareholders for its proposed investing policy.

The Disposals represent the highest consideration the Company was able to negotiate for its assets after an extensive marketing process. However, the Company is still actively seeking further sources of funding although there can be no guarantee that the Company will be successful in securing further financing or achieving its restructuring objectives. If the Company fails to achieve its financing and restructuring goals it will likely result in the Company becoming bankrupt.

The Company further announces the departure of Mr. JR King, Chief Operating Officer, with immediate effect. Under Mr. King's guidance the Verticalnaya mine was brought into production and the Company thanks him for his support.

Forward-Looking Statements: This news release contains discussion of items that may constitute forward-looking statements within the meaning of securities laws that involve risks and uncertainties. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurances that its expectations will be achieved. In particular, statements regarding the potential, following the completion of the Disposals, for the Company to generate any additional value for creditors and shareholders, the ability of the Company to maintain its public company status and preserving for use its accumulated tax losses, the ability of the Company to complete any transactions following the Disposals, the ability of the Company to offer improved proposals to its creditors and the likelihood of the Company becoming bankrupt if it fails to achieve its financing and restructuring goals are or involve forward--looking statements. These statements reflect management's expectations as of the date of this press release regarding the Company's future financial performance and should not be read as guarantees of future performance or results.

Factors that could cause actual results to differ materially from expectations include the effects of general economic conditions, actions by government authorities and courts, uncertainties associated with contract negotiations and additional financing requirements. These factors and others are more fully discussed in Company filings with Canadian securities regulatory authorities.

Neither the 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.

For more information please contact:

EastCoal Inc.

Abraham Jonker, President and Acting CFO

[phone] / [phone] (Cell)

www.eastcoal.ca

Cenkos Securities plc

Alan Stewart/Derrick Lee

[phone]

This information is provided by RNS

The company news service from the London Stock Exchange

END

DISBFMBTMBABBRI