CoolBrands provides update
Friday November 17, 7:21 pm ET
TORONTO, Nov. 17 /CNW/ - CoolBrands International Inc. ("CoolBrands") (TSX:
COB.A - News) announces today that 2118769 Ontario Inc. ("2118769"), a
company controlled by Mr. Michael Serruya, has entered into an agreement to
acquire, at par, all of the indebtedness of the senior lenders under the
credit facility provided to Americana Foods, L.P. ("Americana") which is
guaranteed by CoolBrands. Americana is CoolBrands' 50.1% owned joint venture
facility based in Dallas, Texas, which is currently in U.S. bankruptcy
proceedings and is in default of its obligations to the senior lenders. In
connection with the purchase, 2118769 has entered into a forbearance
agreement with CoolBrands pursuant to which 2118769 has agreed for a period
of six months not to take any action to demand repayment of the indebtedness
on account of existing defaults under the Americana credit facility. The
terms of the Americana credit facility remain unchanged and JPMorgan Chase
Bank N.A. continues in its capacity as administrative agent under the credit
facility. In addition, as part of this transaction, the senior lenders have
provided a forbearance agreement relating to the remaining debt of
CoolBrands that they hold, pursuant to which they agree for a period of six
months not to take any action to demand repayment of the indebtedness on
account of existing defaults under the CoolBrands credit facility. The total
debt of CoolBrands is approximately US$25 million of which approximately
US$21.7 million is debt of Americana and was acquired by 2118769.
CoolBrands' credit facility continues to be held by JPMorgan Chase Bank N.A.
and the other senior lenders. The transaction documents have all been signed
in escrow pending the completion of the transaction which is expected to
occur on Monday, November 20, 2006.
JPMorgan Chase Bank N.A. and the other senior lenders have also agreed to
continue to make available to CoolBrands a US$8 million revolving line of
credit. In connection therewith, 2118769 has provided a US$5 million letter
of credit from which the senior lenders can draw in the event that
CoolBrands does not repay such revolving line of credit. The debt acquired
by 2118769 is subordinated to this revolving line of credit.
Effective today, CoolBrands' independent directors were replaced by Romeo
DeGasperis, Garry Macdonald and Ronald W. Binns. Each of the audit
committee, the corporate governance committee and the compensation committee
were also reconstituted and are now comprised of the three new independent
directors. At the request of 2118769, CoolBrands' four current independent
directors and the current Co-Chairman, President and Chief Executive
Officer, David J. Stein, have resigned as directors to facilitate the
agreement by the lenders to forbear from exercising their rights under the
credit facilities. CoolBrands thanks the directors for their services.
Michael Serruya has agreed to assume the positions of President and Chief
Executive Officer of CoolBrands, on an interim basis, replacing Mr. Stein
who will continue as Head of Strategic Planning of CoolBrands. A brief
biography of each of the new independent directors is set out below.
In consideration of 2118769 agreeing to enter into the forbearance
arrangement with CoolBrands and providing the line of credit to the senior
lenders, the newly reconstituted board of directors of CoolBrands has
authorized the issuance by CoolBrands to 2118769 of warrants to purchase
5,500,000 subordinate voting shares of CoolBrands, which represents
approximately 9.8% of the shares currently outstanding. The exercise price
of the warrants is Cdn$0.50, and the term of the warrants is five years from
the date of grant. CoolBrands has received conditional approval from the TSX
for the listing of the 5,500,000 shares that may be issued to 2118769 upon
exercise of the warrants. Although the transaction is considered to be a
"related party transaction", CoolBrands is relying on the financial hardship
exemption contained in section 604(e) of the TSX Company Manual in
connection with the issuance of these warrants at an exercise price that is
below market price.
The newly constituted board of directors of CoolBrands believes that these
transactions should provide CoolBrands with sufficient time to restructure
its financial affairs and address its liquidity issues. In deciding to
approve the transactions described above, the new independent directors of
CoolBrands and the board of directors as a whole determined that CoolBrands
is in serious financial difficulty, the transactions are designed to improve
the financial position of CoolBrands, and the terms of the transactions are
reasonable in the circumstances.
The following is a brief summary of the backgrounds of our new
directors:
Romeo DeGasperis is the CEO and a Vice-President of Con-Drain Company
Limited, a private company operating in Ontario. He is also a director
of
Futureway Communications (FCI Broadband), a full service provider of
local and long distance telephone, high-speed Internet and data center
service to homes and businesses in the Greater Toronto Area. Mr.
DeGasperis was also an independent director of CoolBrands from February
2000 to August 2006.
Garry Macdonald is currently the President and Principal of Maccess
Management Inc., a private company providing strategic planning,
business
development and consultancy services. From 1998 to 2002, he served as
President and CEO of Country Style Food Services Inc. Between 1989 and
1998, Mr. Macdonald was the President and CEO of the Franchise
Operations
Division of Maple Leaf Foods Inc.
Ronald W. Binns is currently the CFO of Nevada Capital Corporation Ltd.
From 1989 to 2002, he served as the CFO of Franco-Nevada Mining
Corporation Ltd. Mr. Binns obtained his Chartered Accountancy with
Coopers & Lybrand in 1984, has lectured extensively for the B.C.
Institute of Chartered Accountants and "Big Four" accounting firms and
has been a director of several public and private companies.
CoolBrands also announces today that it has entered into a letter of intent
with Healthy Food Holdings, LLC (the "Buyer") with respect to a sale of its
CoolBrands Dairy, Inc. subsidiary, for consideration of US$45 million in
cash, a US$5 million subordinated note and a warrant to purchase up to
2,000,000 shares of stock. CoolBrands Dairy, Inc. manufactures and markets
Breyers yogurt products. Healthy Foods Holdings, LLC, controlled by
Catterton Partners, also owns The Yofarm Company which manufactures and
markets the YoCrunch family of yogurt products. The transaction remains
subject to the entering into of definitive agreements, which the parties
intend to negotiate and execute on or before November 30, 2006. There can be
no assurance that definitive agreements will be agreed to, or that the
transaction will ultimately be consummated. The letter of intent provides
that CoolBrands will not engage in discussions with any other party
regarding a potential sale involving CoolBrands Dairy, Inc. for the period
ending November 30, 2006 (the "Exclusive Period"). The Exclusive Period will
continue for successive 10 day periods unless terminated by either party.
CoolBrands has agreed to reimburse the Buyer's transaction expenses, to a
maximum of US$350,000, in certain circumstances where a definitive agreement
is not reached, and also has agreed to pay, in certain circumstances, a
"break fee" of US$2 million if the transaction is not completed.
CoolBrands also announces the closing today of the previously-announced sale
by its subsidiary, Eskimo Pie Frozen Distribution, Inc. of its "direct store
door" frozen distribution assets in Florida, California, Oregon and
Washington to Southwest Traders, Inc. for net consideration of approximately
US$5 million. Net proceeds from the sale will be used to repay a portion of
CoolBrands' borrowings.
About CoolBrands International: CoolBrands International Inc. markets a
broad range of ice creams and frozen snacks under a family of brands,
including Eskimo Pie(R), Godiva(R) Ice Cream, Whole Fruit(TM) Sorbet,
Snapple(R) On Ice Pops, Tropicana(R) Fruit Bars, No Pudge! (TM) Frozen
Snacks, Crayola(R) Color Pops, Yoplait(R) Frozen Yogurt and many other well
recognized brand names. CoolBrands also markets fresh yogurt products,
including Breyers(R) Fruit on the Bottom, Probiotics Plus Light and Creme
Savers(R) cup yogurt varieties. Eskimo Pie and Whole Fruit are trademarks of
CoolBrands, all other marks are used under license. |
