IQ, Orion and CDQP backed Stornoway Diamond files for CCAA

Stornoway Diamond Corporation (TSX-SWY) together with its subsidiaries Stornoway Diamonds (Canada) Inc., Ashton Mining of Canada Inc. and FCDC Sales and Marketing Inc, have obtained an initial order from the Superior Court of Quebec (Commercial Division) for protection under the Companies’ Creditors Arrangement Act (CCAA).

Deloitte Restructuring Inc. has been appointed as Monitor to oversee the CCAA proceedings. Stornoway’s management will remain for the day-to-day operations.

On September 8, 2019, Stornoway and subsidiaries entered into a letter of intent (LOI) with certain secured creditors under the bridge financing agreement. Pursuant to the agreement, Diaquem Inc., a holder of $100 million senior secured debentures and an affiliate of Investissement Québec (IQ), and certain buyers, including streaming royalty holder, Osisko Gold Royalties Ltd., through an entity to be formed for this purpose, will acquire substantially all of the assets and properties of Stornoway, and to assume the debts and liabilities owing to the secured creditors as well as the ongoing obligations relating to the operation of the Renard Mine, subject to certain limited exceptions.

Stornoway Diamond’s common shares and convertible debentures will soon be delisted from trading on TSX. Stornoway Diamond said, irrespective of the outcome of the CCAA proceedings, there is and will be no recoverable or residual value in either Stornoway’s common shares or convertible debentures.

As of April 1, 2019, Ressources Québec and its affiliates including Diaquem Inc., Orion Co-Investments I LLC, and Caisse de dépôt et placement du Québec (CDPQ) and its affiliates, were the three largest shareholders, holding 238,318,001 shares (25.78%), 130,083,596 shares (14.07%), and 101,867,518 shares (11.02%) respectively.

Stoornoway creditors also include Fonds de solidarité des travailleurs du Québec (FTQ) and Fonds régional de solidarité F.T.Q. Nord-du-Québec, S.E.C.

photo credit: Stornoway Diamond

News Release

September 9, 2019
STORNOWAY GRANTED INITIAL CCAA ORDER

Stornoway Diamond Corporation (TSX-SWY; the “Corporation” or “Stornoway”) announced today that the Corporation and its subsidiaries Stornoway Diamonds (Canada) Inc. (“SDCI”), Ashton Mining of Canada Inc. (“Ashton”) and FCDC Sales and Marketing Inc. (“FCDC” and collectively, the “SWY Parties”) have obtained an initial order (the “Initial Order”) from the Superior Court of Quebec (Commercial Division) (the “Court”) for protection under the Companies’ Creditors Arrangement Act (“CCAA”) in order to restructure their business and financial affairs.

As announced earlier today, on September 8, 2019 the SWY Parties entered into a letter of intent (“LOI”) with certain secured creditors under the bridge financing agreement entered into by the SWY Parties on June 10, 2019, which include Diaquem Inc. (“Diaquem”) and certain buyers under the Amended and Restated Purchase and Sale Agreement entered into on October 2, 2018, as amended (the “Stream Agreement”) (collectively, the “Participating Buyers” and together with Diaquem, the “Participating Secured Creditors”). Under the terms of the LOI, the Participating Secured Creditors confirmed their intention to acquire, through an entity to be formed for this purpose, substantially all of the assets and properties of the SWY Parties, and to assume such the debts and liabilities owing to the Secured Creditors as well as the ongoing obligations relating to the operation of the Renard Mine, subject to certain limited exceptions. Concurrently with the entering into of the LOI, SDCI, Ashton and FCDC, as borrowers, have entered into a definitive and binding working capital facility agreement (“WC Facility Agreement”) with the Participating Secured Creditors providing for a working capital facility in an initial amount of $20 million, which facility can be increased for additional amounts at the option of the Participating Secured Creditors.

The Initial Order provides for a broad stay of proceedings and the exercise and enforcement of rights and remedies against the SWY Parties. The Initial Order also authorizes the entering into of the WC Facility Agreement and the granting of a Court-ordered priority charge in favour of the Participating Secured Creditors securing the obligations under the working capital facility, which is expected to permit the SWY Parties to be able to continue to meet their short-term and current payment and other obligations to employees, suppliers as well as customers as and when they become due.

The transactions contemplated under the LOI are subject to the fulfilment of certain conditions, including the issuance by the Court of a final, non-appealable vesting order approving the definitive agreements giving effect to the sale of the SWY Parties’ business to the Participating Secured Creditors.

Under the terms of the Initial Order, Deloitte Restructuring Inc. has been appointed as Monitor to oversee the CCAA proceedings and report to the Court. While under CCAA protection, management of the Corporation will remain responsible for the day-to-day operations of the SWY Parties.

Trading in Securities of Stornoway

As announced earlier today, trading in Stornoway’s common shares on the Toronto Stock Exchange (“TSX”) has been halted. The Corporation expects that the remedial delisting process by the TSX announced on August 22, 2019 will be accelerated and the Corporation’s common shares and convertible debentures will soon be delisted from trading on TSX. In addition, given the granting of the Initial Order, the Corporation believes that, irrespective of the outcome of the CCAA proceedings, there is and will be no recoverable or residual value in either Stornoway’s common shares or convertible debentures.

About Stornoway Diamond Corporation

Stornoway is a Canadian diamond exploration and production company headquartered in Montreal and owns a 100% interest in the Renard Mine, Québec’s first diamond mine.

On behalf of the Board
STORNOWAY DIAMOND CORPORATION
/s/ “Patrick Godin”
Patrick Godin
President and Chief Executive Officer

For more information, please contact Alexandre Burelle (Manager, Investor Relations and Business Development) at 450-616-5555 x2264 or toll free at 1-877-331-2232
Pour plus d’information, veuillez contacter Alexandre Burelle (Directeur, Relations avec les investisseurs et développement des affaires) au 450-616-5555 x2264, aburelle@stornowaydiamonds.com.

** Website: www.stornowaydiamonds.com Email: info@stornowaydiamonds.com **

Ted Liu

Ted Liu, M.Sc. (Mining, Queen's), MBA (Finance, Toronto), is the Editor of Private Capital Journal, CanadaMetals.ca, TechWire.ca, and the former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, having most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA).

Ted is the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, Canada's most sophisticated and advanced all private capital and public market financing database.