Stornoway Secures Bridge Financing, Seeks Sale or Investment Proposals for Renard Mine
Stornoway Diamond Corporation has announced that the Company, along with its material subsidiaries, has entered into a bridge financing agreement with certain secured lenders and key stakeholders to ensure immediate uninterrupted operations at its Renard Diamond Mine in Canada.
Simultaneously, it has also launched a formal sale and investment solicitation process to seek out proposals for a restructuring transaction that would involve an investment in, or the acquisition of all or substantially all of the property, assets and undertakings of Stornoway and its direct and indirect subsidiaries.
The Company said that these steps were being taken on the completion of the strategic review process it had initiated earlier this year, aimed at ensuring the long-term viability of the Renard mine.
It reiterated that the performance of the Corporation’s business has been significantly impacted by the significant drop in the price of diamonds in world markets. As a result, Stornoway’s mine sells its product at a lower price than in previous years and much lower than initially anticipated during the construction of the mine. A continued downward pressure on the market price for rough diamonds has inhibited the Corporation’s ability to generate positive free cash flow in 2019. Such events or conditions cast significant doubt about the Corporation’s ability to continue as a going concern.
Under the bridge financing, besides an amount of C$11.7 million being made available to the Corporation’s Canada subsidiary, amounts equivalent to certain of the royalty and interest payments due are also covered, with some other payments in these categories being waived, or deferred as well.
Amounts owing under the Bridge Facility will become due and repayable in full upon the maturity date, the Corporation said, which would be the earliest to occur of certain stated events, including (i) the completion of a restructuring or other material transaction pursuant to the SISP Process or the sale of all or substantially all of the property, assets and undertakings of Stornoway, and (ii) September 16, 2019 (the maturity date being subject to 30-day extensions by unanimous consent of the Bridge Lenders).