Update.. Not sure why they had to release it Friday night..
Allen-Vanguard Provides Update on Recapitalization Transaction
OTTAWA, Oct. 2, 2009 (Canada NewsWire via COMTEX News Network) --
Allen-Vanguard Corporation (TSX: VRS) ("Allen-Vanguard" or the "Company") of Ottawa, Canada today provided an update and additional background on its going-private transaction. On September 12, 2009, the Company announced that it had entered into a binding agreement (the "Transaction Agreement") with an affiliate of Versa Capital Management, Inc. ("Versa"), a Philadelphia-based private equity investment firm, and the Company's senior lenders (the "Lenders"), pursuant to which investment affiliates of Versa will become the 100% owner of the Company and Allen-Vanguard will complete a recapitalization to comprehensively resolve its current financial concerns (the "Transaction").
"We continue to anticipate a closing later this year," confirmed David E. Luxton, President and Chief Executive Officer of Allen-Vanguard. "We have received positive feedback from a number of our key customers and suppliers about this agreement and the much-needed solution it brings to the serious financial challenges that had been threatening the Company. While we regret that the Transaction will not result in any recovery for our shareholders, we are pleased that customers, suppliers and creditors will be able to continue their normal course dealings with the Company. We hope that some of the information provided here, as well as in my prior letter to shareholders and our FAQs published online, will help shed light on our situation and provide the appropriate context for understanding the necessity of the Transaction to our Company."
The Transaction will be implemented through a Court approved arrangement. In obtaining Court approval of the Transaction, the Company will demonstrate the fairness and reasonableness of the Transaction to all constituencies whose rights are affected, including shareholders. The Company will publicly disclose the date of the hearing for Court approval of the Transaction once it has been set.
The Transaction represents the culmination of a long effort by the Company and its Board to comprehensively solve its financial problems and allow it to return to business preserving as much value as possible under the circumstances. Relevant background to this process has been disclosed by the Company over time, including in the Company's February 12, 2009 information circular for the shareholders' meeting held earlier this year. Details of the background to the Transaction will also be included in the material to be filed with the Court when approval is sought for the Transaction, which material will be made available on the Company's website at www.allenvanguard.com.
The Company believes that, in the absence of the Transaction, the Company would not have been able to meet its financial obligations as they became due and would likely have been unable to continue to carry on business beyond the very short term. With the Company's significant debt-load, its financial position became increasingly dire during 2009. As of June 30, 2009, and as reflected in the interim financial statements of the Company for the nine months ended June 30, 2009 filed on August 14, 2009, the Company owed an aggregate of approximately Cdn $232 million to the Lenders and had a working capital deficiency of approximately Cdn $31 million. These interim financial statements included going-concern disclosure.
Under the terms of the Transaction Agreement, the Lenders, which have first-ranking security over effectively all of the assets of the Company and its subsidiaries, agreed to substantial compromises in order to facilitate the Transaction's completion. Among other things, the Lenders agreed, upon completion of the Transaction, to: (a) forego approximately US $14 million owed to the Lenders by the Company; (b) convert most of the Company's indebtedness into a restructured term loan on terms that are materially more favourable to the Company; (c) provide a new US $30 million revolver and a new US $10 million letter of credit facility to the Company to finance its business going forward; and (d) provide new interim funding to the Company of up to US $14.5 million pending completion of the Transaction. Without this new interim funding the Company could have been forced to cease operations in short order.
Throughout the period that the Transaction was considered and negotiated, the Board met regularly and sought and relied upon the advice of its experienced and independent financial and legal advisors. In accordance with its duties, the Board considered the interests of the Company as a whole and all of its stakeholders and not any particular set of stakeholders. In determining to approve the Transaction, the Board also had regard to the lengthy search for alternative transactions that had been conducted by the Company and the unavailability of any superior (or even comparable) alternative transaction that was reasonably capable of completion. Given the Company's financial condition, and based on advice from its financial advisor, the Company concluded that there was no reasonable prospect of any recovery by shareholders. In these circumstances, shareholder approval is not required to complete the Transaction and the Company will not be seeking such approval. The Company also notes that the requirements of Multilateral Instrument 61-101 are not applicable to the Transaction.
There are no agreements or arrangements in place between Versa and any directors, officers or employees of the Company regarding any direct or indirect participation by such directors, officers or employees in the equity of the Company going forward or regarding their role with the Company, or their employment or compensation arrangements, after closing. All existing equity rights of the Company's directors, officers and employees will be cancelled for no consideration upon completion of the Transaction, as they will for all shareholders. The Transaction Agreement provides that existing obligations of the Company to its employees will not otherwise be affected by implementation of the Transaction, nor will the Company's obligations to suppliers and other trade creditors.
The Transaction Agreement has been filed with Canadian securities regulators and is available on the SEDAR website at www.sedar.com. A letter to the Company's shareholders regarding the Transaction, as well as updates and the Company's responses to frequently asked questions by shareholders regarding the Transaction, have been posted and are available on the Company's website at www.allenvanguard.com.
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