Zaio debentureholders win ruling to set aside meeting

2016-08-31 08:31 ET - News Release

Mr. Shane Copeland reports

ZAIO CORPORATION PROVIDES UPDATE ON COURT PROCEEDING, ARRANGES STANDBY FACILITY, NEW DEBT FACILITY, CONVERSION AND ISSUER BID FOR CONVERTIBLE DEBENTURES AND ANNOUNCES SHAREHOLDER CONFERENCE CALL

Zaio Corp. has received a decision from the Court of Queen's Bench of Alberta in the application by a group of convertible debentureholders to set aside the results of the meeting of convertible debentures held May 25, 2016. The court has decided that the convertible debentures will not be automatically converted as previously announced (press release dated May 25, 2016). During this process, the company preserved the rights of the debenture holders. No damages were sought in the application.

"The intent of the original offer was to help strengthen the company's balance sheet and to give a fair and lucrative offer to the debentureholders," said Shane Copeland, chief executive officer of Zaio. "In light of the outcome of the court case, Zaio will make an issuer bid to allow those who voted in favour of the original offer to participate."

The company also announces that Zaio has arranged a standby facility to pay out any outstanding convertible debentures at a maturity on May 9, 2017. The standby facility is for the amount of up to $5-million, by way of either direct financing by Stableview Asset Management or co-investment. Zaio will pay a standby fee of 7 per cent of the standby amount to Stableview upon drawdown of the facility, satisfied by way of promissory notes, which in turn may be satisfied by the issuance of common shares of Zaio at the time of the drawdown at the discounted market price (as defined in TSX Venture Exchange policies on the date or added to the standby facility at the discretion of the lender representative). The standby facility will be utilized for repayment when due upon maturity of all outstanding, 10-per-cent secured, redeemable convertible debentures, maturing May 9, 2017, and to the extent not required for repayment of convertible debentures such other purposes, subject to the lender representative's prior approval. The standby facility will be available in a single drawdown of not less than $3-million (or at the sole discretion of the lender representative) subject to the satisfaction or waiver of the drawdown conditions. The borrower shall pay the lenders on the advance date a drawdown fee of 20 per cent of the amount of the standby facility drawn down to be added to the principal amount of the standby facility outstanding. The maturity date is three months from the advance date, which may be extended at the option of the lenders for further nine months (total one year). The borrower will pay interest in the amount of 2 per cent per month (for the three-month term), calculated and payable monthly in cash in arrears or at the option of the lender's representative in common shares issued at discounted market price based on five-day volume-weighted average price of the common shares. The interest rate reduces to 8 per cent per annum collected and payable monthly in the event the standby facility is extended. The principal amount outstanding of the standby facility shall be convertible at the option of the lender representative at the lesser of market price (as defined in TSX-V policies) and 11 cents. The borrower will pay for any and all reasonable legal expenses incurred with the establishment and maintenance of the standby facility.

Zaio has also arranged a debt facility of up to $4-million led by StableView Asset Management for general working capital needs essentially duplicating the terms of the facility of January, 2016. Stableview has also agreed to convert the January, 2016, facility into common shares of the company, subject to the regulatory approval.

The issuer bid, standby facility, the Stableview facility and conversion are all subject to the approval of the regulatory bodies and the approval of the TSX Venture Exchange.

Zaio also announces that it is holding a shareholder conference call scheduled for Wednesday, Aug. 31, 2016, at 4 p.m. Eastern Time. During the call, the executive management of the company will provide shareholders with a corporate update and will discuss the company's strategic plans and future growth prospects. A question-and-answer session will follow the corporate update.

Conference call details

Date: Wednesday, Aug. 31, 2016

Time: 4 p.m. Eastern Time

Participant dial-in numbers

Local -- Toronto: 1-416-764-8688

Toll-free -- North America: 1-888-390-0546

Conference ID: 59734882

Recording playback numbers

Toronto: 1-416-764-8677

Toll-free -- North America: 1-888-390-0541

Pass code: 734882 followed by the number sign

Expiry date: Wednesday, Sept. 7, 2016, 4 p.m. Eastern Time

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