DIAZ RESOURCES LTD.
#1800, 633 Sixth Avenue SW Calgary, AB T2P 2Y5 Canada Tel: (403) 269-9889 Fax: (403) 269-9890The following is for immediate release October 19, 2012
DIAZ ANNOUNCES PROPOSED SHARE CONSOLIDATION AND CONVERSION OF DEBT TO EQUITY
Calgary, Alberta, October 19, 2012: Diaz Resources Ltd.
("Diaz" or the "Company") today announced a proposal to
reorganize the Company's capital structure and convert an
aggregate of $15,085,000 of debt into equity, eliminating
approximately $1,584,000 in annual interest payments, through
a plan of arrangement under the Alberta Business Corporations
Act (the "Share and Debt Reorganization"). Pursuant
to the Share and Debt Reorganization: (i) Diaz's common
shares ("Pre-Consolidation Shares") will be
consolidated on the basis of 25 Pre-Consolidation Shares for
one new post-consolidation common share ("New Diaz
Share"); (ii) the outstanding 10.5% convertible
unsecured subordinated debentures ("Unsecured
Debentures") and all accrued and unpaid interest earned
thereon will be converted into New Diaz Shares at a
conversion price of $0.50 per share; and (iii) the
outstanding 10.5% convertible secured subordinated debentures
("Secured Debentures") and all accrued and unpaid
interest earned thereon will be converted into New Diaz
Shares at a conversion price of $0.11 per share.
There are currently outstanding 87,789,352 Pre-Consolidation Shares, $7,085,000 aggregate principal amount of Unsecured Debentures and $8,000,000 aggregate principal amount of Secured Debentures. Diaz has entered into support agreements with holders of approximately 39% of Diaz's outstanding common shares, approximately 57% of its Unsecured Debentures and approximately 96% of its Secured Debentures whereby such holders have agreed to vote to approve and otherwise support the Share and Debt Reorganization.
Reason for the Share and Debt Reorganization
If completed, management believes the Share and Debt
Reorganization will strengthen the Company's balance sheet
and better position Diaz to pursue financing or strategic
alternatives that would facilitate the development of its
asset base. In addition, as a consequence of continued
challenging commodity prices and lower than expected
production results, if the Share and Debt Reorganization is
not completed Diaz may be unable to make the interest
payments due on its debentures on December 31, 2012, which
would result in Diaz being in breach of certain of its
covenants under both the debentures and its bank facility and
could result in the amounts owing under each being called for
immediate repayment. If this occurred, subject to Diaz
otherwise obtaining satisfactory alternative financing, Diaz
would be unable to make such payments and the bank and the
holders of its Secured Debentures could choose to act on
their security. If Diaz's bank and the holders of its
Secured Debentures exercised their security, and Diaz's
assets were liquidated and sold to satisfy its obligations to
the bank and the holders of Secured Debentures, Diaz does not
believe there would be any net proceeds remaining after such
payout for its shareholders or holders of Unsecured
Debentures.
In light of the foregoing and other factors, the Board of
Directors of Diaz (with non-independent directors abstaining
from the vote) approved proceeding with the Share and Debt
Reorganization. The board has engaged Sayer Securities Ltd.
to advise the Board in respect to the fairness of the
transaction.
Following the Share and Debt Reorganization, assuming a
closing date of December 14, 2012, there will be
approximately 94,572,083 New Diaz Shares outstanding, of
which current shareholders of the Company will hold
approximately 3,511,574 New Diaz Shares representing
approximately 4% of the
outstanding New Diaz Shares and the holders of the Unsecured
Debentures and Secured Debentures will hold approximately
14,848,882 New Diaz Shares and 76,211,627 New Diaz Shares,
respectively, representing approximately 16% and 80% of the
outstanding New Diaz Shares.
Mr. Robert Lamond, the Chairman, President and Chief
Executive Officer of Diaz, together with Humboldt Capital
Corporation ("Humboldt"), a company controlled by
Mr. Lamond, beneficially own or control or direct
approximately 31,924,467 Pre-Consolidation Shares
representing approximately 36% of the outstanding
Pre-Consolidation Shares and $7,340,000 principal amount of
Secured Debentures representing approximately 92% of the
outstanding Secured Debentures. Accordingly, following the
proposed Share and Debt Reorganization, assuming a closing
date of December 14, 2012 and accrued and unpaid interest on
such Secured Debentures of $351,658, Mr. Lamond and Humboldt
will beneficially own or control or direct approximately
71,201,144 New Diaz Shares representing approximately 75% of
the outstanding New Diaz Shares.
In addition, Mr. Charles Teare, a director of both Diaz and
Humboldt, beneficially owns 1,322,794 Pre- Consolidation
Shares and $50,000 principal amount of Unsecured Debentures,
and following the Share and Debt Reorganization will
beneficially own approximately 157,703 New Diaz Shares
representing less than 0.2% of the outstanding New Diaz
Shares.
The proposed Share and Debt Reorganization requires the
approval of at least two-thirds of the votes cast by Diaz
shareholders, holders of Unsecured Debentures and holders of
Secured Debentures at a special meeting (the
"Securityholder Meeting") of shareholders and
debentureholders to be called to consider the Share and Debt
Reorganization (with each class of securityholders voting
separately) as well as the approval of a majority of the
votes cast by Diaz shareholders after excluding the votes of
Humboldt and the directors and senior officers of each of
Diaz and Humboldt who are also shareholders of Diaz
(including Messrs. Lamond and Teare). The Share and Debt
Reorganization is also subject to customary stock exchange
and court approvals.
An information circular further describing the Share and Debt
Reorganization and the background thereto is expected to be
mailed to shareholders and debentureholders in November.
Shareholders and debentureholders of record will be entitled
to vote on the Share and Debt Reorganization at the
Securityholder Meeting, which is expected to be held on or
about December 14, 2012. Assuming that all approvals are
obtained and that all other conditions precedent are
satisfied, closing of the Share and Debt Reorganization is
expected to occur as soon as possible following the
Securityholder Meeting.
ADVISORY: Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast", "plan", "believe" and similar expressions are intended to identify such forward-looking statements. This press release contains forward-looking statements pertaining to, without limitation: the proposed terms of the Share and Debt Reorganization; the proposed timing for holding the Securityholder Meeting and for closing the Share and Debt Reorganization; the anticipated benefits of completing the Share and Debt Reorganization; the amount of interest that will have accrued on the debentures at the time of completion of the Share and Debt Reorganization; the number of New Diaz Shares that will be issued under the Share and Debt Reorganization; and the possible consequences of failing to complete the Share and Debt Reorganization. We have made various assumptions relating to the forward-looking statements contained herein, including in respect of: our ability to obtain all requisite approvals and otherwise satisfy the conditions precedent to closing the Share and Debt Reorganization; commodity prices and production rates for the remainder of the year; and the availability to us of alternative means of financing . Although we believe that the expectations reflected in these forward-looking statements, and the assumptions on which they are made, are reasonable, undue reliance should not be placed on them as we can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions and are based on various assumptions, by their very nature they involve inherent risks and uncertainties that contribute to the possibility that the forward-looking statements may not be accurate, which may cause our actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: failure to obtain requisite third party and
regulatory consents and approvals required to complete the Share and Debt Reorganization and otherwise satisfy all of the conditions precedent to closing the Share and Debt Reorganization; failure to complete the Share and Debt Reorganization on the terms described herein or at all; failure to realize the anticipated benefits of the Share and Debt Reorganization; the possibility that we will not be able to complete the Share and Debt Reorganization and that as a result we may default in performing our covenants under the debentures and our bank facility; as a result of any such default, the debentureholders and our bank will be entitled to exercise their respective remedies under the debentures and the bank facility, including exercising any security they have against our assets; and the other factors described in our public filings available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive. The forward-looking statements contained in this press release are made as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
FOR FURTHER INFORMATION PLEASE CONTACT:
Robert W. Lamond, Chairman, President and Chief Executive
Officer
-or-
Brad R. Perry, Chief Financial Officer
DIAZ RESOURCES LTD. Telephone: (403) 269-9889
Email: bperry@diazresources.com
Website: www.diazresources.com
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.
distributed by |