On October 31, 2016, in order to facilitate a financial and corporate restructuring through a going-concern sale of substantially all of the assets of the Debtors, the Debtors filed voluntary petitions (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the District of Delaware (the "U.S. Court") and filed an application for the issuance of an initial order under the Companies' Creditors Arrangement Act (the "CCAA") before the Ontario Superior Court of Justice (together with the U.S. Court, the "Courts").
Asset Purchase Agreement
Pursuant to the APA, the Purchaser has agreed to (i) purchase and assume substantially all of the properties, rights, interests and other assets of the Debtors (the "Assets") and (ii) assume, become responsible for, and discharge and perform when due certain of the liabilities of the Debtors, for aggregate consideration based on a base purchase price of US$575,000,000 (the "Transactions"). The foregoing would be accomplished through a sale undertaken pursuant to Section 363 of the Bankruptcy Code and Section 36 of the CCAA. As part of such purchase, certain executory contracts and unexpired leases of the Debtors will be assumed by and assigned to the Purchaser pursuant to Section 365 of the Bankruptcy Code. The Assets, contracts and leases would be acquired free and clear of any and all liens or claims, other than liens permitted and liabilities expressly assumed by the Purchaser under the APA.
In connection with the APA, it is expected that the Debtors will concurrently conduct a competitive process pursuant to bidding procedures to be approved by the Courts, seeking higher and better qualified bids for a sale at auction of all or substantially all of the Debtors' assets pursuant to Section 363 of the Bankruptcy Code and Section 36 of the CCAA. Upon approval by the Courts, the bidding procedures will provide that the Purchaser is the "stalking horse" bidder for the Assets and that the Debtors will pay a break-up fee to the Purchaser equal to US$20,125,000 (the "Break-Up Fee") upon the consummation of an alternate transaction involving the sale of substantially all of the Assets to any person or entity other than the Purchaser or in certain other circumstances where the Transactions are not consummated. The APA, subject to the approval of the Courts, also provides for reimbursement of certain expenses incurred by the Purchaser in connection with the APA.
The APA is subject to a number of closing conditions, including, among others, (i) the approval of the Courts; (ii) the accuracy of representations and warranties of the parties; and (iii) compliance in all material respects with the obligations set forth in the APA. The APA will terminate following the occurrence of certain termination events set forth in the APA, subject to, in most cases, a cure period, unless the termination event is waived by the applicable Parties. The APA requires that the Purchaser deposit a "good faith deposit" of US$28,750,000 to be held in escrow.
The Issuer has disclosed that Bank of America, N.A. and certain other of the Issuer's existing asset-based lenders have agreed to arrange debtor-in-possession financing to support the Debtors' continued operations during the pendency of the Chapter 11 Cases. The Purchaser has also agreed to arrange debtor-in-possession financing (the "Term DIP Facility") that will provide for a secured multiple draw term loan credit facility of up to US$361,300,000, with US$30,000,000 available to fund working capital needs and approximately US$331,300,000 available to repay in full the Issuer's existing pre-petition term loan facility. Interest on the Term DIP Facility is payable in cash at a per annum rate equal to 8%. Subject to the entry of a final order approving the Term DIP Facility and limited carve-outs, the Issuer is expected to draw on the Term DIP Facility to repay the Issuer's pre-petition secured term loans and, in connection therewith, the Issuer's obligations under the Term DIP Facility will be secured by all pre-petition and post-petition assets of the Issuer. The obligations of the Issuer under the Term DIP Facility are guaranteed by each of the U.S. and Canadian subsidiaries of the Issuer and secured by all or substantially all the assets of the Issuer and the guarantors.
Work Fee Letter
The Issuer has also entered into a Work Fee Letter (the "Work Fee Letter") with the Purchaser, pursuant to which the Issuer paid a fee of US$2,500,000 to Sagard Capital in consideration of work performed in investigating various strategic alternatives with the Issuer, including any future due diligence, analyses, negotiation, preparation and execution of term sheets and final commitments relating to the foregoing, as applicable (the "Work Fee"). If the Break-Up Fee becomes due and payable under the APA, the Break-Up Fee payable to the Purchaser will be reduced by the amount of the Work Fee actually paid to the Purchaser. In addition, the Work Fee Letter provides that (i) if any Breakup Fee is not due and payable in accordance with the APA, and the Purchaser consummates the transaction contemplated by the APA, then, contemporaneous with closing of such transaction, the Purchaser is obligated to refund the Work Fee to the Issuer or (ii) if any Breakup Fee is not due and payable in accordance with the APA, and the Purchaser does not consummate the transaction contemplated by the APA by reason of its breach of the APA, then the amount of any deposit made by the Purchaser in connection with the APA will be reduced dollar-for-dollar by the amount of the Work Fee and that same amount will be released by the applicable deposit escrow agent to the Issuer.
Information Relating to the Issuer
Certain information in this press release about the Issuer and the Issuer's restructuring process, including forward-looking information within the meaning of applicable securities laws, has been derived from the Issuer's press release dated the date hereof and filed under the Issuer's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov (the "Issuer Press Release"). Forward-looking statements, by their nature, are based on assumptions (including those disclosed in the Issuer Press Release) that may prove to be incorrect, and are subject to important risks and uncertainties (including those disclosed in the Issuer Press Release).
The Issuer's head office is located at 100 Domain Drive, Exeter, New Hampshire, U.S.A., 03833.
About Sagard Capital
Sagard Capital Partners, L.P., Sagard Capital Partners GP, Inc., Sagard Capital Partners Management Corp., Sagard Holdings Inc. and 9938982 Canada Inc. issue this press release pursuant to applicable requirements of Canadian securities legislation.
Sagard Capital continues to beneficially own and control an aggregate of 7,721,599 common shares of the Issuer ("Shares"), representing approximately 16.9% of the issued and outstanding Shares. Fairfax Financial has informed Sagard Capital that it does not have ownership or control over any Shares as of the date hereof.
Sagard Capital Partners, L.P. is the direct owner of the Shares reported herein as being beneficially owned and over which control is shared by the entities comprising Sagard Capital. Sagard Capital Partners, L.P. is principally engaged in the business of investing in securities. Sagard Capital Partners GP, Inc. is the general partner of Sagard Capital Partners, L.P. Sagard Capital Partners Management Corp. is the investment manager of Sagard Capital Partners, L.P. Sagard Holdings Inc. is a limited partner of Sagard Capital Partners, L.P. and the sole stockholder of Sagard Capital Partners Management Corp. 9938982 Canada Inc. is currently a wholly-owned subsidiary of Sagard Holdings Inc. Each entity comprising Sagard Capital is a subsidiary of Power Corporation of Canada, in which a controlling voting interest is held by The Desmarais Family Residuary Trust.
Sagard Capital is relying on Part 5 of National Instrument 62-103 in respect of aggregation relief relating to any securities that may be held by Great-West Lifeco Inc. and its subsidiaries, IGM Financial Inc. and its subsidiaries, and any investment fund managed by entities within the Power Corporation of Canada group of companies.
For each of Sagard Capital Partners, L.P., Sagard Capital Partners GP, Inc. and Sagard Capital Partners Management Corp., the principal business address, which also serves as the principal office, is 280 Park Avenue, 3rd Floor West, New York, New York, 10017. For Sagard Holdings Inc., the principal business address, which also serves as the principal office, is 751 Victoria Square, Montréal, Québec, H2Y 2J3. For 9938982 Canada Inc., the principal business address, which also serves as the principal office, is 161 Bay Street, Suite 5000, Toronto, Ontario, M5J 2S1.
Sagard Capital's strategy is to acquire significant minority or control positions in small and mid-sized companies. It offers a unique and highly differentiated value proposition to companies looking for supportive, long-term shareholders. Based in New York, New York, Sagard Capital is an evergreen fund with an indefinite holding period for its investments. Sagard Capital is purpose-built to be an independent, flexible, supportive partner to management teams focused on building sustainable, leading businesses and generating long-term shareholder value.
In connection with the above, Sagard Capital has filed an early warning report, which updates an earlier report of Sagard Capital dated October 27, 2016, under the Issuer's profile on SEDAR at www.sedar.com.
SOURCE Sagard Capital Partners, L.P.