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Update on loan facility
Forbes & Manhattan Coal Corp.
(Registration number: 002116278)
(External company registration number: 2011/011661/10)
Share code on the Toronto Stock Exchange: FMC
Share code on the JSE Limited: FMC
ISIN: CA3451171050
(“Forbes Coal” or “the Company”)
FORBES COAL REPORTS PROGRESS ON LOAN FACILITY
TORONTO, ONTARIO – January 15, 2014: Forbes & Manhattan Coal Corp. (TSX: FMC)
(JSE: FMC) (“Forbes Coal” or the “Company”) is pleased to provide additional information on
the proposed up to US$25 million financing (the “Financing”) to be provided by Resource
Capital Fund V L.P. (the “Lender” or “RCF”) comprising: (i) a bridge loan (the “Bridge Loan”) in
the principal amount of US$4 million, (ii) a convertible loan (the “Convertible Loan”) in the
principal amount of up to US$15 million; and (iii) a refinancing (the “Refinancing”) of the
existing US$6 million convertible loan facility that was completed by the Company with RCF on
September 6, 2013 (the “Existing RCF Loan”), as previously announced on December 31,
2013.
This news release is provided pursuant to certain requirements of the Toronto Stock Exchange
(the “TSX”) in connection with an application to rely on the financial hardship exemption in
connection with any or all of (i) the Bridge Loan, (ii) the Convertible Loan and (iii) the
Refinancing.
The Company has made an application to the TSX to rely on the exemption from the
requirement to obtain shareholder approval of the Financing on the basis of financial hardship
found at section 604(e) of the TSX Company Manual. The Financing would otherwise be subject
to disinterested shareholder approval pursuant to section 607(g)(i) and (ii) and section 501(c) of
the TSX Company Manual as a result of (i) the total dilution to current shareholders in
connection with common shares (“Common Shares”) that may be issued to RCF as a result of
the Financing will be in excess of 25% and (ii) it is anticipated that the value of the consideration
to be received by RCF (who is an insider of the Company as a result of owning more than 10%
of the issued and outstanding Common Shares and having a representative on the board of
directors of Forbes Coal), in the form of the respective establishment fees and interest under
each of (a) the Bridge Loan (when combined with the consideration to be received by RCF
under the Existing RCF Loan); and (b) the Convertible Loan (whether or not combined with the
consideration to be received by RCF under the Existing RCF Loan or the Bridge Loan) will
exceed 10% of the market capitalization of Forbes Coal.
The Company is in serious financial difficulty. The application to rely on the financial hardship
exemption was made upon the recommendation of a special committee of board members free
from any interest in the Financing and unrelated to the Lender. The Financing is designed to
improve the Company's financial situation, and, based on the determination of the special
committee, the Financing is reasonable for the Company in the circumstances.
The TSX has confirmed that the Company may rely on the financial hardship exemption in
connection with the Bridge Loan portion of the Financing.
Bridge Loan
A 5% establishment fee is payable to RCF in connection with the Bridge Loan and the Bridge
Loan will bear interest at a rate of 15% per annum, payable in arrears at the end of each
calendar quarter. The establishment fee will be payable in Common Shares at a price of
C$0.1446 per Common Share and interest payments will be payable in cash or Common
Shares at a price per share equal to the 20-day VWAP as at the date the payment is due and
consequently cannot be conclusively determined as at today’s date.
The following table illustrates the sensitivity of the number of Common Shares issuable as
interest payments on the Bridge Loan to fluctuations in the market price of the Common Shares.
Number of
(1) Total dilution per
20-day VWAP Common Shares (4)
(2)(3) issuance
Issuable
C$0.09 20,181,599 57.55%
C$0.12 15,136,199 43.16%
C$0.15 12,108,959 34.53%
C$0.18 10,090,799 28.77%
C$0.21 8,649,257 24.66%
Notes:
1. The 20-day VWAP for the Common Shares on the TSX on January 13, 2014 was $0.1501.
2. Assumes the Bridge Loan is outstanding from January 30, 2014 to April 30, 2014 at 15% interest and from May 1, 2014 to
June 30, 2017 at 12% interest.
3. Assumes an exchange rate of US$1.00 = C$1.0869, being the Bank of Canada noon spot rate of exchange for US$ in
terms of C$ on January 13, 2014.
4. Total dilution is calculated as the number of Common Shares issued pursuant to the specified issuance divided by the
non-diluted number of issued and outstanding Common Shares as of the date of this news release.
The Bridge Loan will mature on June 30, 2014, provided that if Forbes Coal receives all
necessary regulatory and/or shareholder approvals as may be required in connection with the
Convertible Loan, the Bridge Loan will convert into a convertible loan with the same terms and
conditions as the Convertible Loan. The terms of the Bridge Loan will contain standard anti-
dilution provisions.
If, prior to conversion of the Bridge Loan into a convertible loan, the establishment fee of
US$200,000 and the interest payments from January 30, 2014 to April 30, 2014 were paid in
Common Shares (assuming a 20-day VWAP for the Common Shares of $0.1501 and an
exchange rate of US$1.00 = C$1.0869), Forbes Coal would issue an aggregate of 13,604,212
Common Shares to RCF, representing 38.79% of the issued and outstanding Common Shares
on a non-dilutive basis, following which RCF would own 21,155,728 Common Shares,
representing 43.46% of the issued and outstanding Common Shares.
The gross proceeds of the Bridge Loan will be used for general working capital in relation to
Forbes Coal’s operations in Dundee, South Africa as well as to facilitate the closing of the
Company’s Toronto office.
The Bridge Loan is expected to close prior to January 31, 2014.
Convertible Loan
A 5% establishment fee is payable to RCF in connection with the Convertible Loan, and the
Convertible Loan will bear interest at a rate of 12% per annum, payable in arrears at the end of
each calendar quarter. Subject to receipt of disinterested shareholder approval, the
establishment fee will be payable in cash or Common Shares at a price of C$0.1446 per share
and interest payments will be payable in cash or Common Shares at a price per Common Share
equal to the 20-day VWAP as at the date the payment is due and consequently cannot be
conclusively determined as at today’s date.
The following table illustrates the sensitivity of the number of Common Shares issuable as
interest on the Convertible Loan to fluctuations in the market price of the Common Shares.
Number of
(1) Total dilution per
20-day VWAP Common Shares (4)
(2)(3) issuance
Issuable
C$0.09 68,906,482 196.48%
C$0.12 51,679,862 147.36%
C$0.15 41,343,889 117.89%
C$0.18 34,453,241 98.24%
C$0.21 29,531,349 84.21%
Notes:
1. The 20-day VWAP for the Common Shares on the TSX on January 13, 2014 was $0.1501.
2. Assumes the maximum amount under the Convertible Loan (US$15 million) is drawn, outstanding from April 30, 2014 to
June 30, 2017.
3. Assumes an exchange rate of US$1.00 = C$1.0869, being the Bank of Canada noon spot rate of exchange for US$ in
terms of C$ on January 13, 2014.
4. Total dilution is calculated as the number of Common Shares issued pursuant to the specified issuance divided by the
non-diluted number of issued and outstanding Common Shares as of the date of this news release.
Subject to receipt of disinterested shareholder approval the principal amount of the Convertible
Loan is convertible into Common Shares at a price of C$0.1446 per Common Share. The
market price of the Common Shares for the purposes of the TSX (calculated as the volume-
weighted average trading price on the TSX for the five days prior to December 30, 2013, the
date the Financing was agreed to) (the “Market Price”), was $0.1435, therefore the conversion
price of $0.1446 represents a 0.77% premium to the Market Price.
The Convertible Loan matures on June 30, 2017. The terms of the Convertible Loan will contain
standard anti-dilution provisions.
The gross proceeds of the Convertible Loan will be used to provide further funds for general
working capital which will allow the Company to enact strategies to improve its operations in
Dundee, South Africa as well as to provide for further necessary capital investment.
The Convertible Loan is expected to close by April 30, 2014.
Refinancing of the Existing RCF Loan
The Existing RCF Loan is currently convertible into Common Shares at a price of C$0.36 per
Common Share. Assuming an exchange rate of US$1.00 = C$1.0869, if the Lender converts
the entire amount of the Existing RCF Loan into Common Shares (assuming no additional
Common Shares are paid as interest), the Lender will be issued an aggregate of 18,115,000
Common Shares, which would result in the Lender holding an aggregate of 25,666,516
(48.26%) of the issued and outstanding Common Shares.
The Lender also has the right to receive interest payments under the Existing RCF Loan in
Common Shares, at a price per Common Share equal to the 20-day VWAP prior to the date the
interest payment is due.
Subject to receipt of disinterested shareholder approval, the Existing RCF Loan will be
refinanced as part of the convertible loan facility and will contain the same terms and conditions
as the Convertible Loan.
The number of Common Shares potentially issuable in satisfaction of interest payments on the
Existing RCF Loan (as proposed to be refinanced) will be calculated with reference to the 20-
day VWAP as at the date the payment is due, and consequently cannot be conclusively
determined as at today’s date. The following table illustrates the sensitivity of the number of
Common Shares issuable as interest on the Existing RCF Loan to fluctuations in the market
price of the Common Shares.
Number of
(1) Total dilution per
20-day VWAP Common Shares (4)
(2)(3) issuance
Issuable
C$0.09 26,109,422 74.45%
C$0.12 19,582,067 55.84%
C$0.15 15,665,653 44.67%
C$0.18 13,054,711 37.22%
C$0.21 11,189,752 31.91%
Notes:
1. The 20-day VWAP for the Common Shares on the TSX on January 13, 2014 was $0.1501.
2. Assumes conversion of the maximum amount outstanding under the Existing RCF Loan into a loan with the same terms
as the Convertible Loan, outstanding from April 30, 2014 to June 30, 2017.
3. Assumes an exchange rate of US$1.00 = C$1.0869, being the Bank of Canada noon spot rate of exchange for US$ in
terms of C$ on January 13, 2014.
4. Total dilution is calculated as the number of Common Shares issued pursuant to the specified issuance divided by the
non-diluted number of issued and outstanding Common Shares as of the date of this news release.
The table below illustrates the number of Common Shares that could be issued upon the
occurrence of any of the establishment fee for the Bridge Loan or the Convertible Loan, or the
interest payments and principal for each of the Bridge Loan, Convertible Loan and Existing RCF
Loan (as refinanced), being satisfied through the issuance of Common Shares, and the
respective percentage of the outstanding Common Shares held by RCF as a result of each such
occurrence.
Bridge Loan(1) Convertible Loan(2) Existing RCF Loan(3)
Percentage
Percentage of of issued and Percentage of
issued and outstanding issued and
Number of outstanding Number of Common Number of outstanding
Dollar Value Common Common Shares Dollar Value Common Shares held Dollar Value Common Common Shares
(US$) Shares held by RCF on a (US$) Shares by RCF on a (US$) Shares held by RCF on a
Issuable partially diluted Issuable partially Issuable partially diluted
basis post- diluted basis basis post-
issuance (%) post- issuance (%)
issuance (%)
Establishment
$200,000 1,503,320 24.76 $750,000 5,637,448 32.40 N/A N/A N/A
Fee(4)
Interest
$1,671,123.29 12,100,892 41.66 $5,705,753.42 41,316,345 63.97 $2,161,972.60 15,655,217 45.75
Payments(4)(5)
Principal
$4,000,000 30,066,390 57.75 $15,000,000 112,748,963 81.38 $6,000,000 45,099,585 65.67
Amount(4)
Bridge Loan(1) Convertible Loan(2) Existing RCF Loan(3)
Total
$5,871,123.29 43,670,602 65.05 $21,455,753.42 159,702,756 85.87 $8,161,972.60 60,754,802 71.28
Notes:
1. Assumes the Bridge Loan is outstanding from January 30, 2014 to April 30, 2014 at 15% interest and from May 1, 2014 to
June 30, 2017 at 12% interest.
2. Assumes the maximum amount under the Convertible Loan (US$15 million) is drawn, outstanding from April 30, 2014 to
June 30, 2017.
3. Assumes conversion of the maximum amount outstanding under the Existing RCF Loan into a loan with the same terms
as the Convertible Loan, outstanding from April 30, 2014 to June 30, 2017.
4. All calculations based on an assumed exchange rate of US$1.00 = C$1.0869, being the Bank of Canada noon spot rate
of exchange for US$ in terms of C$ on January 13, 2014.
5. Share issuances in satisfaction of interest payment obligations are calculated at C$0.1501, being the 20 day VWAP as of
January 13, 2014.
If the establishment fees under both the Bridge Loan and the Convertible Loan and all interest
payments under the Bridge Loan, the Convertible Loan and the Refinancing were paid in
Common Shares (on the basis of the assumptions noted in the table above), and the entire
principal amount of the Financing (being US$25 million) was converted into Common Shares
(on the basis of the assumptions noted in the table above), Forbes Coal would issue an
aggregate of 264,128,160 Common Shares to RCF, following which RCF would own
271,679,676 Common Shares, representing approximately 91% of the issued and outstanding
Common Shares.
The table below illustrates the total dilution to existing shareholders if RCF accepts payment of
the establishment fee for the Bridge Loan and Convertible Loan in Common Shares, chooses to
accept payment of interest on the Bridge Loan, Convertible Loan and Existing RCF Loan in
Common Shares, and converts the entire amount of the Bridge Loan, Convertible Loan and
Existing RCF Loan (as refinanced) into Common Shares.
Bridge Loan(1) Convertible Loan(2) Existing RCF Loan(3)
Number of Total Number of Total Number of Total
Dollar Value Dollar Value Dollar Value
Common Dilution Common Shares Dilution Common Dilution
(US$) (US$) (US$)
Shares Issuable (%)(4) Issuable (%) Shares Issuable (%)
Establishment
$200,000 1,503,320 4.29 $750,000 5,637,448 16.07 N/A N/A N/A
Fee(5)
Interest
$1,671,123.29 12,100,892 34.50 $5,705,753.42 41,316,345 117.81 $2,161,972.60 15,655,217 44.64
Payments(5)(6)
Principal
$4,000,000 30,066,390 85.73 $15,000,000 112,748,963 321.50 $6,000,000 45,099,585 128.60
Amount(5)
Total
$5,871,123.29 43,670,602 124.52 $21,455,753.42 159,702,756 455.38 $8,161,972.60 60,754,802 173.24
Notes:
1. Assumes the Bridge Loan is outstanding from January 30, 2014 to April 30, 2014 at 15% interest and from May 1, 2014 to
June 30, 2017 at 12% interest.
2. Assumes the maximum amount under the Convertible Loan (US$15 million) is drawn, outstanding from April 30, 2014 to
June 30, 2017.
3. Assumes conversion of the maximum amount outstanding under the Existing RCF Loan into a loan with the same terms
as the Convertible Loan, outstanding from April 30, 2014 to June 30, 2017.
4. Total dilution is calculated as the number of Common Shares issued pursuant to the specified issuance divided by the
non-diluted number of issued and outstanding Common Shares as of the date of this news release.
5. All calculations based on an assumed exchange rate of US$1.00 = C$1.0869, being the Bank of Canada noon spot rate
of exchange for US$ in terms of C$ on January 13, 2014.
6. Share issuances in satisfaction of interest payment obligations are calculated at C$0.1501, being the 20 day VWAP as of
January 13, 2014.
If the establishment fees under both the Bridge Loan and the Convertible Loan and all interest
payments under the Bridge Loan, the Convertible Loan and the Refinancing were paid in
Common Shares (on the basis of the assumptions noted in the table above), and the entire
principal amount of the Financing (being US$25 million) was converted into Common Shares
(on the basis of the assumptions noted in the table above), the aggregated 264,128,160
Common Shares Forbes Coal would issue to RCF would represent total dilution of 753.14% to
existing Forbes Coal Shareholders.
Forbes Coal will call and hold a special meeting of shareholders to obtain disinterested
shareholder approval for each of the Convertible Loan and the Refinancing. Common Shares
held by RCF will be excluded from the votes required to approve the Convertible Loan and the
Refinancing as RCF is a party to the Financing. RCF currently owns 7,551,516 (21.5%) of the
issued and outstanding Common shares on a non-dilutive basis.
The Financing is a related party transaction under MI 61-101 and will be subject to minority
shareholder approval in accordance with section 5.6 of MI 61-101. Forbes Coal will be relying
on the valuation exemption set forth is section 5.5(c) of MI 61-101. Forbes Coal does not have
knowledge of any material information concerning Forbes Coal or its securities that has not
been generally disclosed. Neither Forbes Coal nor any of its officers or directors, after
reasonable inquiry, are aware of any prior valuations that have been completed in the past 24
months.
RCF will have the right to participate in any future financings by the Company on a pro rata
basis, to its partially diluted shareholding. In addition, provided that RCF holds Common Shares
or the right to acquire Common Shares equal to at least 10% of the issued and outstanding
Common Shares, RCF will have the right to nominate one individual to the board of directors. If
RCF holds Common Shares or the right to acquire Common Shares equal to at least 30% of the
issued and outstanding Common Shares, RCF will have the right to nominate two individuals to
the board of directors. If RCF holds Common Shares or the right to acquire Common Shares
equal to at least 50% of the issued and outstanding Common Shares, RCF will have the right to
nominate three individuals to the board of directors.
TSX Delisting Review
The TSX has informed the Company that it will be placed under remedial delisting review in
connection with the Company's application for reliance on the financial hardship exemption from
shareholder approval. Delisting review is customary practice under TSX policies when a
company requests relief in reliance on this exemption.
About Forbes Coal
Forbes Coal is a coal producer in southern Africa. It holds a majority interest in two operating
mines through its 100% interest in Forbes Coal (Pty) Ltd., a South African company which has a
70% interest in Zinoju Coal (Pty) Ltd. (“Zinoju”). Zinoju holds a 100% interest in the Magdalena
bituminous mine and the Aviemore anthracite mine in South Africa. Forbes Coal has an
experienced coal-focused management team.
Cautionary Notes:
This press release contains “forward-looking information” within the meaning of applicable
Canadian securities legislation. Forward-looking information includes, but is not limited to,
statements with respect to the Financing with RCF, use of proceeds, references to the future
financial or operating performance of Forbes Coal and its projects. Generally, forward-looking
information can be identified by the use of forward-looking terminology such as “plans”,
“expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”,
“intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and
phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be
taken”, “occur” or “be achieved”. Forward-looking information is subject to known and unknown
risks, uncertainties and other factors that may cause the actual results, level of activity,
performance or achievements of Forbes Coal to be materially different from those expressed or
implied by such forward-looking information, including but not limited to: general business,
economic, competitive, foreign operations, political and social uncertainties; a history of
operating losses; delay or failure to receive board or regulatory approvals; timing and availability
of external financing on acceptable terms; not realizing on the potential benefits of the proposed
transaction; conclusions of economic evaluations; changes in project parameters as plans
continue to be refined; future prices of mineral products; failure of plant, equipment or processes
to operate as anticipated; accidents, labour disputes and other risks of the mining industry; and,
delays in obtaining governmental approvals or required financing or in the completion of
activities. Although Forbes Coal has attempted to identify important factors that could cause
actual results to differ materially from those contained in forward-looking information, there may
be other factors that cause results not to be as anticipated, estimated or intended. There can be
no assurance that such information will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements. Accordingly, readers should
not place undue reliance on forward-looking information. The Company does not undertake to
update any forward-looking information, except in accordance with applicable securities laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
Stephan Theron
President and Chief Executive Officer
+1 (416) 861-5912
Email: stheron@forbescoal.com
Sarah Williams
Vice President - Finance
+27 11 656 3206
Email : swilliams@forbescoal.com
Craig Wiggill
Chairman
Email: crwiggill@gmail.com
16 January 2014
Johannesburg
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 16/01/2014 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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