St. Andrew to settle $42-million in debt with shares

2008-04-21 18:41 ET - News Release

Mr. Don Shaxon reports

ST ANDREW ANNOUNCES DEBT CONVERSION AGREEMENT WITH TECHNIFUND INC.

St. Andrew Goldfields Ltd. has reached an agreement with Technifund Inc. and Herbert Abramson, the chairman of the company's board of directors, pursuant to which St. Andrew will issue common shares valued at 55 cents per share in full satisfaction of $42-million total principal amount of indebtedness held by Technifund. Technifund is a private company controlled by Herbert Abramson. Pursuant to the terms of the transaction, which is subject to the approval of the Toronto Stock Exchange and to the approval of the minority shareholders of St. Andrew, St. Andrew will issue 76,363,636 common shares, being approximately 32.4 per cent of St. Andrew's current issued capital, to Technifund in satisfaction of $15-million principal amount 10-per-cent secured debentures and $27-million principal amount 10-per-cent notes. As a result of the share issuance, Technifund's share ownership in St. Andrew will increase from 15.1 per cent to approximately 35.9 per cent. Prior to completion of the transaction with St. Andrew, Technifund, which presently holds $4-million of the $15-million outstanding debentures, will acquire the remaining $11-million from Trapeze Asset Management Inc., an insider of St. Andrew. The proposed share issue price of 55 cents per share is at a 38-per-cent premium to the last closing price for the company's shares and is equal to the price at which the company completed its $14.75-million private placement in January, 2008. Minority shareholders of St. Andrew will be asked to approve the transaction at the annual and special meeting of shareholders to be held on June 23, 2008.

In January, 2008, the board of directors formed an independent committee of directors, namely Bernard Kraft, Stephen Burns and Louis Gignac, to assist management of St. Andrew with gathering and reviewing possible financing alternatives available to St. Andrew. The independent committee retained GMP Securities LP as its financial adviser and retained independent legal counsel to assist it in discharging its responsibilities. GMP has advised the independent committee that the proposed transaction is fair, from a financial point of view, to minority shareholders of St. Andrew. A copy of the fairness opinion will be included in the management information circular to be mailed to shareholders in connection with the annual and special meeting. The board of directors of St. Andrew, based on the recommendations of the independent committee, has concluded that the proposed transaction is in the best interests of St. Andrew and is fair to the minority shareholders of St. Andrew. In reaching this conclusion, the independent committee and the board considered numerous factors, including that the proposed transaction will enable St. Andrew to eliminate a significant portion of its outstanding indebtedness by issuing shares at a premium to the existing market price for its shares. By eliminating such indebtedness, St. Andrew will have significantly strengthened its balance sheet and will eliminate $4.2-million of annual debt service obligations.

The transaction constitutes a related party transaction under Multilateral Instrument 61-101. Minority shareholder approval of the transaction will be sought at the June 23 meeting of St. Andrew's shareholders, excluding the votes of shares beneficially owned or over which control or direction is exercised by any of Herbert Abramson, Technifund and Randall Abramson, as well as Trapeze Capital Corp. and Trapeze Asset Management Inc., corporations controlled by Randall Abramson, and each of their respective affiliates and associates. An exemption from the requirement to prepare a formal valuation in respect of the transaction will be relied upon on the basis that the consideration in respect of the transaction consists solely of securities of St. Andrew and that St. Andrew, and to its knowledge, Technifund and Herbert Abramson, have no knowledge of any undisclosed material information concerning St. Andrew or its securities.

We seek Safe Harbor.