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.
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.
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