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First Nickel Inc. Announces Restructuring of Indebtedness

Apr 1 2013 12:00AM

Marketwire

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TORONTO, ONTARIO -- (Marketwire) -- 04/01/13 -- First Nickel Inc. ("FNI" or the "Company") (TSX: FNI) announces that it has entered into agreements with its lenders to restructure all of the Company's existing indebtedness (the "Refinancing"). The Refinancing includes an increase in the principal amount of the revolving credit facility (the "BNS Facility") with The Bank of Nova Scotia ("BNS") from US$10 million to US$15 million and the extension of the maturity dates for the BNS Facility and the Company's loan agreements with each of Resource Capital Fund IV L.P. ("RCF IV"), Resource Capital Fund V L.P. ("RCF V" and together with RCF IV, "RCF") and a fund managed by West Face Capital Inc. ("West Face"). RCF and West Face are insiders of the Company and were insiders of the Company at the time of entering into the loan agreements with RCF V and West Face.

Terms of the Refinancing

Pursuant to the terms of the Refinancing, the BNS Facility will be increased from a US$10 million loan facility to a US$15 million revolving credit facility with a new maturity date of March 30, 2015 and will be backed by a total of US$15 million of standby letters of credit (the "Letters of Credit") pursuant to two letters of credit arranged for by RCF and West Face. BNS may draw from the Letters of Credit in the event of an event of default under the BNS Facility in accordance with its terms.

Each of the RCF Letter of Credit and the West Face Letter of Credit will be backstopped by a new credit facility between the Company and each of RCF and West Face (the "Shareholder LC Facilities"). Any draws by BNS on the Letters of Credit will be treated as draws by FNI under the Shareholder LC Facilities. Each such draw will be treated as a separate secured loan under the Shareholder LC Facilities and bear interest at an annual rate of 12%. The Shareholder LC Facilities have a maturity date of three years from the closing date of the Refinancing. Interest payments owing under the Shareholder LC Facilities may be payable in cash or, at the election of the applicable lender, in common shares in the capital of the Company ("Common Shares") calculated on the basis of the volume-weighted average trading price for the five business days immediately preceding the date of issuance of such Common Shares.

In addition, the maturity dates of the US$10 million 8% convertible loan facility from RCF IV (the "RCF IV Convertible Facility"), the US$5 million loan from RCF V and the US$5 million loan from West Face (collectively the "Shareholder Loans") will be extended to March 31, 2015. As a result of the extension of maturity dates of the Shareholder Loans, additional interest will be payable to such related parties, which may, in accordance with the terms of the respective Shareholder Loans, be payable in cash or, at the election of the applicable lender, in Common Shares. The number of Common Shares issuable in satisfaction of interest on calculated on the basis of the formula within each applicable loan agreement. All of the interest owing under the loans with RCF V and West Face, which bear interest at an annual rate of 12%, will be pre-paid by the Company in Common Shares, calculated on the basis of $0.05 per Common Share, less a 12% discount rate.

In connection with the Refinancing, the Company will be obligated to pay certain establishment and extension fees to its various lenders, which may be payable in cash or, at the election of the applicable lender, in Common Shares calculated on the basis of the Market Price. In addition, FNI will issue 50 million warrants to purchase Common Shares ("Warrants") to each of RCF and West Face. Such Warrants will be exercisable for two years at an exercise price of $0.05 per Common Share. RCF and West Face will be entitled to receive a utilization fee for their provision of the Letters of Credit. The utilization fee will be 2% of the daily balance outstanding under the BNS Facility and the fee may be satisfied in cash or, at the election of RCF or West Face, as the case may be, in Common Shares, calculated on the basis of the five day volume-weighted average trading price of the Common Shares immediately prior to any such issuance. The number of Common Shares issuable will be calculated monthly and issued on a quarterly basis.

RCF currently holds approximately 24.5% of the Common Shares on a fully diluted basis, or approximately 36.3% assuming conversion of the RCF IV Convertible Facility. West Face currently holds approximately 19.5% of the Common Shares on a fully diluted basis, or approximately 16.5% assuming conversion of the RCF IV Convertible Facility.

Assuming that all fees paid to RCF and West Face are paid in Common Shares and interest owing to RCF and West Face under the loans is satisfied in Common Shares, and assuming a current market price of $0.04 per Common Share:

-- RCF would be entitled to receive approximately 138,009,315 additional Common Shares (including Common Shares issuable on exercise of the 50 million Warrants and 8,980,315 of prorated quarterly interest payments due March 31 for RCF IV and RCF V), which represents approximately 26.0% of the current issued and outstanding Common Shares. Assuming full conversion of the RCF IV Convertible Facility into 107,054,545 Common Shares, the issuance would result in RCF holding, together with its existing holdings, in aggregate, approximately 43.1% of the Common Shares on a fully diluted basis; and-- West Face would be entitled to receive approximately 74,425,000 additional Common Shares (including Common Shares issuable on exercise of the 50 million Warrants and 1,002,913 of prorated quarterly interest payments due March 31), which represents approximately 14.2% of the current issued and outstanding Common Shares. Assuming full conversion of the RCF IV Convertible Facility into 107,054,545 Common Shares issuable to RCF, the issuance of additional Common Shares to West Face would result in West Face holding, together with its existing holdings, in aggregate, approximately 20.6% of the Common Shares on a fully diluted basis.



As the utilization fee payable to RCF can only be determined following a calculation of the outstanding balance under the BNS Credit Facility, FNI is not able to calculate the exact number of Common Shares issuable to RCF and West Face. However, assuming that the BNS Facility is fully drawn from the date of closing through the maturity date of the BNS Facility and assuming a Common Share Price of $0.04, RCF and West Face would each be entitled to receive 11,250,000 additional Common Shares, resulting in RCF and West Face holding approximately 43.3% and 21.1% of the of the Common Shares on a fully diluted basis, respectively.

As the number of Common Shares issuable on conversion of the Shareholder LC Facilities can only be determined following a calculation of the amounts drawn under the Letters of Credit, FNI is not able to calculate the exact number of Common Shares issuable to RCF and West Face. However, assuming that the Letters of Credit are fully drawn from the date of closing through the maturity date of the Shareholder LC Facilities, that RCF and West Face both elect to have the interest payments under the Shareholder LC Facilities satisfied in Common Shares and assuming a Common Share Price of $0.04, RCF and West Face would each be entitled to receive 67,500,000 additional Common Shares, resulting in RCF and West Face holding approximately 43.5% and 24.0% of the of the Common Shares on a fully diluted basis, respectively.

Financial Hardship

Under the TSX Company Manual, as the proposed Refinancing, together with the prior financing transactions with RCF and West Face, provides consideration to insiders in aggregate of 10% or greater of the market capitalization of the listed issuer during a six-month period and results in the issuance to insiders of more than 10% of Company's issued and outstanding Common Shares, the Company is required to obtain shareholder approval for the Refinancing. However, FNI has applied to the TSX under the provisions of Section 604(e) of the Company Manual for an exemption from shareholder approval requirements on the basis that the Company is in serious financial difficulty. The Refinancing remains subject to conditional listing approval of the TSX.

Further to the Company's press releases dated January 3, 2013 and February 7, 2013, FNI announced that it would be seeking to restructure outstanding indebtedness and to obtain additional, longer-term sources of financing in the near term in order to improve liquidity and continue the build-out of the Lockerby Mine. The Refinancing is designed to, among other things, refinance and recapitalize FNI so as to substantially improve its financial condition, alleviate the refinancing risk faced by FNI with respect to the BNS Facility and the Shareholder Loans and ultimately reposition FNI to enable it to pursue its business strategy on a stand-alone basis. In addition, the Refinancing will remedy FNI's financial issues through extending the maturity dates of all of FNI's indebtedness and providing immediate liquidity.

Based upon the comprehensive review of the Company's commitments, prospects and funding requirements FNI's board of directors (the "Board") has determined (with any directors interested in the Refinancing having recused themselves from consideration of the Refinancing) that the Company is in serious financial difficulty, that the Refinancing is designed to improve FNI's financial situation, that the transactions contemplated under the proposed Refinancing are reasonable for FNI in the circumstances and represent the only practical and timely financing solution to meet the needs of the Company.

Although the Company recognizes that reliance upon the financial hardship exemption is not a preferred route, the Board and management of FNI believe it is a necessary route given the serious immediate financial needs the Company faces.

As a consequence of relying upon the financial hardship exemption under Section 604(e) of the TSX Company Manual, the TSX has informed the Company that it will, in the ordinary course, commence a delisting review. The Company is confident that it will be in compliance with all of the TSX continued listing requirements upon conclusion of the delisting review.

About FNI

FNI is a Canadian mining and exploration Company. The Company's mission is to be the most dynamic North American emerging base metal mining Company in which to work and invest and to be respected in the communities in which we operate. FNI is in the process of ramping up to full production at its Lockerby Mine in the Sudbury Basin in northern Ontario. Once the Lockerby Mine reaches full production, it is expected to produce at a rate of approximately 10 million pounds of payable nickel and approximately 7 million pounds of payable copper annually, providing a strong base of cash flow from which to grow the Company. In addition to the Lockerby Mine, the Company owns exploration properties in the Sudbury Basin, the Timmins region of northern Ontario, and the Belmont region of Eastern Ontario. FNI's shares are traded on the TSX under the symbol FNI.

Forward-Looking Statements

Certain statements contained in this news release may contain forward-looking information about FNI. Forward-looking information can often be identified by the use of forward-looking terminology such as "anticipate", "believe", "continue", "estimate", "expect", "goal", "intend", "is confident", "target", "potential", "objective", "may", "plan" or "will" or the negative thereof or variations thereon or similar terminology. Forward-looking information may include, but is not limited to: the continued operation of the Lockerby Mine; expectations of obtaining financing in the near term, including completion of the Refinancing on terms satisfactory to the Company, if at all; expectations regarding future compliance with TSX continued listing requirements, future financial or operating performance of the Company and its projects; the future price of metals; the long term supply and demand for nickel; continuation of exploration activities; mineral reserve and mineral resource estimates; the realization of mineral resource estimates; costs of production and key supplies; capital, operating and exploration expenditures; forecasts of sales and production; costs and timing of the development of new and existing deposits; costs and timing of future exploration; the requirements for additional capital; government regulation of mining operations; environmental risks, reclamation expenses and/or title disputes or claims.

By its nature, forward-looking information is based on certain factors and assumptions which involve known and unknown risks, uncertainties and other factors which may cause the actual results, realization of mineral resources, performance or achievements of the Company, financial position or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Accordingly, actual events may differ materially from those implied by any forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information, which speak only as of the date the statements were made and readers are also advised to consider such forward-looking information while considering the risk factors set forth in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release. The Company disclaims any intention or obligation to publicly update or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.



Contacts:
CHF Investor Relations
Robin Cook
Senior Account Manager
416 868 1079 x 228
robin@chfir.com

First Nickel Inc.
Thomas Boehlert
President & CEO
416 362 7050
tboehlert@firstnickel.com

First Nickel Inc.
Paul Davis
VP, Exploration
416 362 7050
pdavis@firstnickel.com





Source: Marketwire


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