BUENOS AIRES, ARGENTINA--(Marketwire - June 26, 2012) -
THIS PRESS RELEASE IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Estrella International Energy Services Ltd. (the "Company" or "Estrella") (TSX VENTURE:EEN) is pleased to announce that it has executed a definitive investment agreement with Ringo Holding L.P., a subsidiary of Southern Cross Latin America Private Equity Fund IV, L.P. (the "Purchaser"), dated June 26, 2012 (the "Investment Agreement"). Pursuant to the Investment Agreement, the Purchaser has agreed to purchase, 166,666,667 units ("Units") of the Company at a price of CAD$0.15 per Unit, for gross proceeds of CAD$25,000,000 to the Company (the "Private Placement"). The subscription price of CAD$0.15 represents a premium of approximately 100% over the closing price of the Common Shares on June 25, 2012. Canaccord Genuity Corp. ("Canaccord") acted as financial advisor to the Company in connection with the Private Placement.
Each Unit is composed of 1 common share (a "Common Share") in the capital of the Company and 0.4 Common Share purchase warrants (each whole warrant a "Warrant"). Each Warrant will entitle the holder to purchase 1 Common Share at an exercise price of CAD$0.15 per share (the "Exercise Price") for a period of 18-months from the date of issuance. After six months from the date of issuance, if the 10-day weighted average market price of the Common Shares is greater than CAD$0.25, the exercise price of the warrants will be equal to the higher of CAD$0.15 or 90% of the current market price.
Upon closing of the Private Placement, the Purchaser will hold approximately 55.7% of the outstanding Common Shares, which will result in the creation of a new control person of the Company, as defined by the rules of the TSX Venture Exchange ("Exchange").
Closing of the Private Placement is subject to, among other things, the approval of the shareholders of Estrella and the approval of the Exchange, the amendment of the Credit Suisse Credit Facility (as defined below) on terms set forth below, and to certain other conditions precedent customary in transactions of this type, all as more specifically set forth in the Investment Agreement, a copy of which has been filed by the Company on SEDAR.
The board of directors of the Company has considered and has unanimously approved the transaction and will recommend the approval of the Private Placement to the shareholders of Estrella at the Company's upcoming annual general and special meeting of shareholders (the "AGM"). The parties intend to complete the transaction as soon as practicable following the AGM, subject to receipt of final approval from the Exchange.
All of the officers and directors of the Company, together with certain of the Company's shareholders, representing a total of 70,471,773 (53.1%) of the issued and outstanding Common Shares, have entered into support agreements with the Purchaser, wherein they have agreed to vote the Common Shares held by them in favour of the Private Placement and the creation of the new control person.
The Company expects to use part of the proceeds of the Private Placement to repay US$10,000,000 of outstanding indebtedness on its existing credit facility ("Credit Facility") with Credit Suisse AG (the "Lender"). The balance of the proceeds may be used to further reduce indebtedness and for working capital reserves to assist with new project start-ups in Latin America.
As part of Estrella's plan to repay US$10,000,000 of the Credit Facility, the Company has entered into a term sheet with the Lender that contemplates: (i) modifying the existing credit agreement to reduce administrative fees; (ii) modifying the amortization schedule such that Estrella will repay the remaining indebtedness in seven quarterly instalments of US$2,000,000 beginning on May 31, 2014; and (iii) freeing up certain collateral currently pledged under the credit agreement in an effort to reduce administrative costs. In addition, the 3,072,000 Common Share purchase warrants which were issued to the Lender in connection with the Credit Facility would be returned to the Company for cancellation.
For its role as financial advisor, the Company has agreed to pay Canaccord a success fee in connection with the closing of the Private Placement.
About Southern Cross Group
Southern Cross is a value oriented private equity buyout firm focused on operational and strategic management. Southern Cross was created to make value-oriented, control investments in Latin American companies that have significant potential for improved performance and growth. Since its inception in 1998, Southern Cross has raised over $2.5 billion and has completed 25 investments in the region, including investments in oil & gas companies in the region. Southern Cross seeks to deliver superior returns by optimizing its companies' strategic direction and operating performance through the Principals' direct involvement with the management of each portfolio company. As a result of its extensive regional experience, Southern Cross is well-positioned to identify and capitalize on high quality investment opportunities in Latin America.
Warren Levy, CEO of Estrella, commented, "We are very pleased to be entering into this Investment Agreement with Southern Cross. The transaction gives the company the capital required to improve our balance sheet. In conjunction with the US$6 million in amortization payments made by the Company in the last seven months, this transaction will help the Company achieve a substantial reduction in indebtedness. This will allow the Company to exert all of its focus on continued operational improvements. Southern Cross also brings extensive experience and knowledge about the Latin American marketplace, and we look forward to having them as partner moving forward."
Annual and Special Meeting
The annual and special meeting of shareholders of Estrella will be held at the offices of Aird & Berlis LLP, Brookfield Place, 181 Bay Street, Suite 1800, Toronto, Ontario, on or about July 25, 2012, at 10:00 a.m. (Toronto time). Shareholders of record as of June 25, 2012, will be entitled to vote on all matters under consideration
Statements in this press release may contain forward-looking information. Any statements in this press release that are not statements of historical fact may be deemed to be forward-looking information. Forward-looking information are often identified by terms such as "may", "should", "anticipate", "expects", "will", "intend" and similar expressions. Forward-looking statements in this press release include, but are not limited to, statements with respect to services anticipated use of proceeds of the Private Placement, the repayment of the Credit Facility and matters related thereto, the anticipated closing date of the Private Placement and timing for the annual and special meeting of shareholders of Estrella.
The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances, such as future availability of capital on favourable terms, may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Estrella. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this press release are made as of the date of this press release, and Estrella does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.
THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.
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.