S R Telecom (NASDAQ:SRXA)
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SR Telecom Announces Proposed Recapitalization Plan
Reaches Agreement in Principle with Debenture Holders Outstanding 8.15%
Debentures to be Exchanged for Approximately 47.3 Million Common Shares and
$63.9 Million of New Convertible Secured Debentures Plan Includes New Credit
Facility for up to $50 Million and $40 Million Rights Offering to Shareholders
MONTREAL, April 18 /PRNewswire-FirstCall/ -- SR Telecom Inc. (TSX: SRX;
Nasdaq: SRXA) announced today that it has entered into an agreement in
principle with a group representing the required majority of its outstanding
8.15% Debentures due April 22, 2005, regarding its proposed recapitalization
plan.
"This proposed recapitalization will provide the basis for the strengthening of
our operations going forward, and will ensure that we have the capacity to
continue to fully satisfy the needs of our global customer base," said Pierre
St-Arnaud, SR Telecom's President and Chief Executive Officer.
Pursuant to the terms of the agreement in principle, SR Telecom will exchange
the outstanding $71 million in principal amount of its 8.15% Debentures, due
April 22, 2005 and all accrued interest of approximately $2.9 million into
47,266,512 common shares and approximately $63.9 million new 10% Convertible
Redeemable Secured Debentures, due 2010. Interest on the new Convertible
Debentures is payable in cash or in kind at the option of the Corporation. The
common shares issued to the Debenture holders will represent approximately 73%
of the issued and outstanding common shares of SR Telecom. In addition, each
$1,000 in principal amount of new Convertible Debentures will be convertible
into 4,727 (the "Conversion Rate") common shares, representing a conversion
price at closing of approximately $0.21 per common share. The Conversion Rate
may be adjusted to account for interest accrued pending closing such that the
aggregate equity holding represented by the common shares issued together with
the new Convertible Debentures will not exceed 95.2% of the issued and
outstanding common shares of the Corporation on a fully diluted basis before
giving effect to the Rights Offering described below.
The restricted group of Debenture holders has also agreed, subject to execution
of final documentation, to provide a five-year $50 million secured Credit
Facility to the Corporation of which $20 million will be available as soon as
loan documentation and registrations are in place, with the balance to be
available over the next three quarters, subject to certain conditions. Based on
the current agreement in principle, the financial terms include the following:
a 2% up-front facility fee (based on the full $50 million facility amount) and
interest paid partly in cash at a rate equal to the greater of 6.5% and the
three-month Canadian Dollar LIBOR rate plus 3.85% and partly paid in kind at a
rate equal to the greater of 7.5% and three-month Canadian Dollar LIBOR plus
4.85%. In addition the facility contemplates a payout fee of 5% (based on $50
million facility amount) or 2% of distributable value at maturity.
The Debenture exchange and the Credit Facility are subject to numerous
conditions, including the execution of definitive documentation satisfactory to
the lenders under the Credit Facility, the approval by the holders of at least
66 2/3 % of the outstanding Debentures, and regulatory approval. Debenture
holders representing approximately 75% of the outstanding Debentures have
indicated in writing their support for the Debenture exchange. The Credit
Facility is expected to close as soon as loan documentation and registrations
are in place and the Debenture exchange is expected to close on or about May 9,
2005 although there can be no assurance that such conditions will be satisfied
by such date.
Additionally, it is a condition of the recapitalization that the lenders to the
Corporation's Chilean subsidiary, CTR, will restructure CTR's outstanding debt
and amortization schedule and provide an extended waiver of at least three
years, subject to final negotiations and the receipt of credit approvals. CTR's
lenders had previously waived compliance with certain financial and operational
covenants of CTR until April 22, 2005.
The Corporation is free to accept an alternative transaction, which must
provide for the payment of all amounts due to the Debenture holders plus
expenses, unless otherwise agreed to by the Debenture holders. However, if the
Corporation accepts an alternative transaction after the later of two weeks
from today or the date on which the Credit Facility becomes binding, such
acceptance would result in the payment of $1 million to the lenders providing
the Credit Facility.
The maximum number of common shares that may be issued, assuming all of the new
Convertible Debentures are converted into common shares at the Conversion Rate,
is approximately 302,001,106 common shares, which, together with the issuance
of 47,266,512 common shares in exchange for a portion of the outstanding 8.15%
Debentures, represents a total potential dilution of 1,983% over the currently
outstanding common shares, without taking into account the Rights Offering.
As the aggregate number of common shares issuable in connection with the
Debenture exchange will exceed the maximum number of securities issuable
without security holder approval under the rules of the Toronto Stock Exchange
(the "TSX"), SR Telecom intends to rely on an exemption from the security
holder approval requirements provided for under Section 604(e) of the TSX
Company Manual on the basis of its serious financial difficulty. Upon the
recommendation of a special committee of independent directors of SR Telecom,
who are free from any interest in the transactions and are unrelated to any of
the parties involved in the transactions, the Board of Directors of SR Telecom
has determined that SR Telecom is in serious financial difficulty, that the
transactions are designed to improve its financial situation and are reasonable
in the circumstances, and has authorized SR Telecom to make the application to
the TSX.
Rights Offering
In addition, as soon as practicable following the closing of the Debenture
exchange, the Corporation intends to file a preliminary prospectus relating to
a Rights Offering to its shareholders. Pursuant to the Rights Offering, the
Corporation will offer to shareholders holding its currently outstanding common
shares, the right to subscribe to up to $40 million of new common shares at a
price to be determined, but no less than $0.254 per share.
The Rights Offering will be structured to result in a proportionate reduction
of the participation of the new Convertible Debentures which will vary with the
price and amount of the rights exercised. For example, assuming a subscription
price of $0.254 and that the full amount of $40 million is subscribed for, the
shareholders holding the Corporation's currently outstanding common shares
would own approximately 36% of the Corporation's common shares on a fully
diluted basis. The first $25 million raised under the Rights Offering will be
used for working capital and general corporate purposes and all amounts raised
in excess of $25 million will be applied 50% to working capital and general
corporate purposes and 50% to a pro rata redemption of the new Convertible
Debentures at 95% of their face value.
Executive Appointment
SR Telecom also announced today that is has engaged Mr. William Aziz, Managing
Partner of Blue Tree Advisors, as Chief Restructuring Officer on a contract
basis to assist senior management in identifying and implementing strategies to
capitalize on opportunities for the enhancement of operating performance. He
will report to the CEO and the Board of Directors.
Financial Advisor
Genuity Capital Markets advised SR Telecom on the recapitalization plan and led
negotiations with the Debenture holders.
About SR Telecom
SR TELECOM (TSX: SRX, Nasdaq: SRXA) designs, manufactures and deploys
versatile, Broadband Fixed Wireless Access solutions. For over two decades,
carriers have used SR Telecom's products to provide field-proven data and
carrier-class voice services to end-users in both urban and remote areas around
the globe. SR Telecom's products have helped to connect millions of people
throughout the world.
A pioneer in the industry, SR Telecom works closely with carriers to ensure
that its broadband wireless access solutions directly respond to evolving
customer needs. Its turnkey solutions include equipment, network planning,
project management, installation and maintenance.
SR Telecom is a principal member of WiMAX Forum, a cooperative industry
initiative which promotes the deployment of broadband wireless access networks
by using a global standard and certifying interoperability of products and
technologies.
FORWARD-LOOKING STATEMENTS
Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance, financial condition and financing plans of the Corporation.
These statements are based on suppositions and uncertainties as well as on
management's best possible evaluation of future events. Such factors may
include, without excluding other considerations, fluctuations in quarterly
results, evolution in customer demand for the Corporation's products and
services, the impact of price pressures exerted by competitors, and general
market trends or economic changes. As a result, readers are advised that all of
the forward-looking statements in this news release are qualified by these
cautionary statements and actual results or developments may differ from
expected results or developments and that such differences may be significant.
The Corporation expressly disclaims any obligation to update any
forward-looking information.
SR TELECOM is a trademark of SR Telecom Inc. All rights reserved 2005. All
other trademarks are property of their owners.
DATASOURCE: SR TELECOM INC.
CONTACT: David Adams, (Senior Vice-President, Finance and CFO); Scott
Lawrence, (Maison Brison); (514) 335-4035; (514) 731-0000,
; http://www.srtelecom.com/