EastCoal Inc. Announces Disposal of Assets
17 January 2014 - 12:00AM
Marketwired
EastCoal Inc. Announces Disposal of Assets
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Jan 16, 2014) -
EastCoal Inc. (TSX-VENTURE:ECX)(AIM:ECX) ("the Company" or
"EastCoal") announces that on January 10, 2014 the Company and its
wholly-owned, Cyprus incorporated subsidiary, Gramsico Holdings
Ltd. ("Gramsico") entered into share purchase agreements with an
Austrian based company, EFI Holding GmbH ("EFI"), pursuant to which
EFI will acquire all of the Company's 0.1% shareholding and all of
Gramsico's 99.9% shareholding in East Coal Company LLC ("ECC") for
an aggregate cash consideration of US$499,000.
On January 10, 2014, the Company and Gramsico also entered into
share purchase agreements with EFI pursuant to which EFI will
acquire all of the Company's 0.1% shareholding and all of
Gramsico's 99.9% shareholding in Ukraine Energy LLC ("UE") for an
aggregate cash consideration of US$1,000.
ECC and UE are Ukranian incorporated companies that are
indirectly wholly-owned by the Company through Gramsico. ECC holds
the assets relating to the Company's material project, the
Verticalnaya mine. UE is an inactive shell company.
The share purchase agreements with EFI also provide for a
royalty interest to be earned by the Company equal to US$1.00 per
tonne of coal produced at the Verticalnaya mine, and provide for
the assignment to EFI of the Company's rights pursuant to a loan
agreement dated June 25, 2009 between the Company (as lender) and
ECC as (borrower).
On January 10, 2014, the Company and Gramsico also entered into
share purchase agreements with Cyprus based company, Strong Group
Corporation Limited ("Strong Group"), pursuant to which Strong
Group will acquire all of the Company's 0.1% shareholding and all
of Gramisco's 99.9% shareholding in Inter-Invest Coal LLC ("IIC")
for an aggregate cash consideration of US$15,020.
IIC is a Ukrainian incorporated company that is indirectly
wholly-owned by the Company through Gramsico. IIC holds the assets
relating to the Company's Menzhinsky mine, and, as previously
announced, IIC is currently in a liquidation process in the
Ukraine.
The share purchase agreements also provide for the assignment to
Strong Group of the Issuer's rights pursuant to various loan
agreements between the Company (as lender) and IIC as
(borrower).
The acquisition of ECC and UE by EFI and the acquisition of IIC
by Strong Group (together, the "Disposals") will be conditional on
the receipt of a court order under the Bankruptcy and
Insolvency Act (Canada) ("BIA") which application is currently
scheduled for January 16, 2014. The Company has applied for the
conditional approval of the TSX Venture Exchange for the Disposals.
On January 14, 2013, the Company also received notification from
EFI's lawyers that they received a payment into escrow of the
US$100,000 as a deposit for the proposed acquisitions by EFI
payable to the Company subject to the court approval referred to
above.
If the Disposals are approved by the court and are completed,
the cash proceeds payable to Gramsico will be distributed directly
to the Company for use in funding any further proposal to creditors
under the BIA and negotiating any further transactions that may
present themselves to the Company in order to potentially generate
some additional value for creditors and shareholders. The Company
is currently exploring various funding options and potential
transactions with a view to maintaining its public company status
and utilizing its accumulated tax losses. If the Company is able to
secure further funding or complete a transaction in the future it
may be able to improve its proposal to creditors.
The Company has filed an application for an extension of the
order for the stay of proceedings pending the filing by the Company
of a proposal to its creditors pursuant to the provisions of Part
III of the BIA. Such an extension, if granted, would run until
March 3, 2014. The extension application will be applied for
simultaneously with the application for the approval of the
Disposals, which court hearing is currently scheduled for January
16, 2014.
In the event that the Disposals are completed, the Company will
(for the purposes of the AIM Rules) be classified as an investing
company. The Company's listing on TSX Venture Exchange will be
moved to the NEX exchange as administered by the TSX Venture
Exchange as the Company will no longer meet the continued listing
requirements of a Tier 2 issuer on the TSX Venture Exchange.
Under the AIM Rules, the Disposals would result in a fundamental
change of business and would ordinarily be conditional on the
consent of the Company's shareholders being given in a general
meeting. As the Disposals are a result of the Company's ongoing
insolvency proceedings it has sought and been granted a derogation
by AIM from the requirement to seek shareholder consent for the
Disposals under the AIM Rules. Upon completion of the Disposals, as
an investing company under the AIM Rules, the Company will be
required to seek approval from its shareholders for its proposed
investing policy.
The Disposals represent the highest consideration the Company
was able to negotiate for its assets after an extensive marketing
process. However, the Company is still actively seeking further
sources of funding although there can be no guarantee that the
Company will be successful in securing further financing or
achieving its restructuring objectives. If the Company fails to
achieve its financing and restructuring goals it will likely result
in the Company becoming bankrupt.
The Company further announces the departure of Mr. JR King,
Chief Operating Officer, with immediate effect. Under Mr. King's
guidance the Verticalnaya mine was brought into production and the
Company thanks him for his support.
Forward-Looking Statements: This news release contains
discussion of items that may constitute forward-looking statements
within the meaning of securities laws that involve risks and
uncertainties. Although the company believes the expectations
reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurances that its
expectations will be achieved. In particular, statements regarding
the potential, following the completion of the Disposals, for the
Company to generate any additional value for creditors and
shareholders, the ability of the Company to maintain its public
company status and preserving for use its accumulated tax losses,
the ability of the Company to complete any transactions following
the Disposals, the ability of the Company to offer improved
proposals to its creditors and the likelihood of the Company
becoming bankrupt if it fails to achieve its financing and
restructuring goals are or involve forward‐looking statements.
These statements reflect management's expectations as of the date
of this press release regarding the Company's future financial
performance and should not be read as guarantees of future
performance or results.
Factors that could cause actual results to differ materially
from expectations include the effects of general economic
conditions, actions by government authorities and courts,
uncertainties associated with contract negotiations and additional
financing requirements. These factors and others are more fully
discussed in Company filings with Canadian securities regulatory
authorities.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
EastCoal Inc.Abraham JonkerPresident and Acting CFO+1 (604) 973
0079 or +1 (604) 992 5600 (Cell)www.eastcoal.caCenkos Securities
plcAlan Stewart+44 (0) 131 220 6939Cenkos Securities plcDerrick
Lee+44 (0) 131 220 6939
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