Sherritt Provides Important Information and Update on Key Dates for its Transaction to Improve its Capital Structure and Stakeholder Meetings

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NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

TORONTO--(BUSINESS WIRE)--Sherritt International Corporation (“Sherritt” or the “Corporation”) (TSX:S) announced today the filing of an amended version of the plan of arrangement (the “Plan of Arrangement”) pursuant to which its previously announced transaction to improve its capital structure (the “Transaction”), described in the Corporation’s management information circular dated March 6, 2020 (the “Information Circular”), is to be implemented in the Corporation’s proceedings under the Canada Business Corporations Act (the “CBCA”). The amended Plan of Arrangement reflects the amendments to the terms of the Transaction (the “Amended Terms”) announced by the Corporation in its news release on June 10, 2020 (the “June 10 News Release”).  Sherritt has also filed the revised form of New Second Lien Notes Indenture (as defined below) and the form of New Junior Notes Indenture (as defined below), in each case also reflecting the Amended Terms.


In addition, the Corporation also announced today the revised date of July 23, 2020 (the “Meetings Date”) for (i) the previously postponed meeting of Debtholders (as defined below) for Debtholders to consider and vote on a resolution (the “Debtholders’ Arrangement Resolution”) to approve the Plan of Arrangement (the “Debtholders’ Meeting”), and (ii) the previously postponed meeting of the holders of the Corporation’s common shares (the “Shareholders”) to consider and vote on a resolution (the “Stated Capital Reduction Resolution”) to approve the reduction of stated capital of the Corporation’s common shares (the “Shareholders’ Meeting”, and together with the Debtholders’ Meeting, the “Meetings”). The Debtholders’ Meeting will be held at 10:00 a.m. (Toronto time) and the Shareholders’ Meeting will be held at 11:00 a.m. (Toronto time) on the Meetings Date.  In consideration of COVID-19 and to ensure the health and welfare of our securityholders, employees and other stakeholders, the Meetings will be held in a virtual only format.

In aggregate, Noteholders (as defined below) holding approximately $100 million of Existing Notes (as defined below) have entered into support agreements with the Corporation (the “Support Agreements”), pursuant to which such Noteholders have agreed to vote in favour of the Plan of Arrangement (the “Supporting Noteholders”).  The approximately $100 million of Existing Notes held by the Supporting Noteholders to be voted in favour of the Plan of Arrangement are in addition to the approximately $230 million of Existing Notes that have been voted in favour of the Plan of Arrangement as at the end of April 7, 2020.

Debtholders and Shareholders who have already cast their votes in respect of the Debtholders’ Arrangement Resolution or the Stated Capital Reduction Resolution, respectively, do not need to re-submit their votes.  For Debtholders and Shareholders who have not cast their votes, or who wish to change their votes, the voting deadline in respect of the Meetings has been extended to 5:00 p.m. (Toronto time) on July 21, 2020 (the “Voting Deadline”).

The early consent date by which Noteholders must vote in favour of the Plan of Arrangement in order to be eligible to receive Noteholder Early Consent Cash Consideration (as defined below) as additional consideration for the exchange of their Existing Notes pursuant to the Plan of Arrangement (subject to the terms and conditions thereof) has been extended to July 13, 2020 (the “Early Consent Date”). Noteholders who previously submitted their votes in favour of the Plan of Arrangement prior to the previous early consent date of April 7, 2020 do not need to re-submit their votes in order to be eligible for Noteholder Early Consent Cash Consideration, provided such Noteholders do not withdraw or change their previously submitted votes and otherwise comply with the requirements under the Plan of Arrangement.

Amendments to the Transaction and Plan of Arrangement and Filing of Related Documents

The terms of the Transaction announced on February 26, 2020 and key related information are set out in detail in the Information Circular previously mailed to Debtholders and Shareholders as at the record date of March 6, 2020 (the “Record Date”) and made available on Sherritt’s SEDAR profile at www.sedar.com and on Sherritt’s website at www.sherritt.com.  In addition, the Amended Terms are set out in the June 10 News Release. 

In connection with the Amended Terms, the Corporation has made available the following documents on Sherritt’s SEDAR profile at www.sedar.com and/or on Sherritt’s website at www.sherritt.com:

  • the amended Plan of Arrangement and a blackline of the amended Plan of Arrangement to the version included in the Information Circular;
  • the amended form of new second lien notes indenture (the “New Second Lien Notes Indenture”) pursuant to which the new 8.50% second lien notes (the “New Second Lien Notes”) will be issued to Noteholders by Sherritt as partial consideration in exchange for the Corporation’s outstanding (i) 8.00% senior unsecured debentures due 2021, (ii) 7.50% senior unsecured debentures due 2023, and (iii) 7.875% senior unsecured notes due 2025 (collectively, the “Existing Notes”) pursuant to the Plan of Arrangement, and a blackline of the revised form of New Second Lien Notes Indenture to the version filed by Sherritt on SEDAR on March 24, 2020; and
  • the form of new junior notes indenture (the “New Junior Notes Indenture”, and together with the New Second Lien Notes Indenture, the “Indentures”) pursuant to which the new 10.75% unsecured notes (the “New Junior Notes”) will be issued to Noteholders by Sherritt as additional consideration in exchange for the Existing Notes pursuant to the Plan of Arrangement.

In addition to the Amended Terms discussed in the June 10 News Release, the Indentures also reflect, as applicable, that Sherritt’s subsidiary, CNWL Oil (España), S.A., will not be a guarantor and will be an unrestricted subsidiary pursuant to the terms of the Indentures, and that Sherritt’s subsidiary, SICOG Oil and Gas Limited (formerly Sherritt International (Cuba) Oil and Gas Limited), will not deliver security in connection with its guarantee of the New Second Lien Notes.  CNWL Oil (España), S.A. will also not guarantee, and SICOG Oil and Gas Limited will not deliver security in connection with its guarantee of, Sherritt’s bank facility.   

Certain key terms of the New Junior Notes are also set out in a Schedule to this news release.   

The summary of the Amended Terms, the amended terms of the New Second Lien Notes and the terms of the New Junior Notes described in the June 10 News Release and this news release is not intended to be complete in and of itself.  Debtholders are urged to review in detail the amended Plan of Arrangement, the amended form of New Second Lien Notes Indenture and the form of New Junior Notes Indenture for the detailed terms of the Transaction, the New Second Lien Notes and the New Junior Notes.  The summary information contained in the June 10 News Release and this news release is qualified in its entirety by reference to the detailed information contained in the amended Plan of Arrangement, the amended form of New Second Lien Notes Indenture and the form of New Junior Notes Indenture made available on Sherritt’s SEDAR profile and on Sherritt’s website.

Certain Canadian Federal Income Tax Considerations

Debtholders and Shareholders are urged to carefully read the summary of certain Canadian federal income tax considerations of the Transaction located under the heading “Certain Canadian Federal Income Tax Considerations” in the Information Circular, as supplemented by the Material Change Report of the Corporation filed on or about the date hereof in connection with the Amended Terms, and to consult their own tax advisors for advice as to the tax considerations in respect of the Transaction having regard to their particular circumstances.

Opinions of Paradigm Capital

Paradigm Capital Inc. (“Paradigm Capital”), an independent financial advisor to the board of directors of Sherritt (the “Board of Directors”), has provided updated opinions to the Board of Directors that: (i) the Noteholders and the CFA Lenders (as defined below), respectively, would be in a better position, from a financial point of view, under the Transaction, as amended by the Amended Terms, than if the Corporation were liquidated; and (ii) the Transaction, as amended by the Amended Terms, is fair, from a financial point of view, to the Corporation (the “Updated Paradigm Capital Opinions”). 

The Updated Paradigm Capital Opinions supplement the opinions provided by Paradigm Capital to the Board of Directors dated February 25, 2020, copies of which were included in the Information Circular. The full text of the Updated Paradigm Capital Opinions which set out, among other things, the assumptions made, information reviewed and matters considered by Paradigm Capital in rendering the Updated Paradigm Capital Opinions, as well as the limitations and qualifications the opinions are subject to, are attached as Schedule D to the Material Change Report of the Corporation filed on or about the date hereof and have been made available on Sherritt’s SEDAR profile at www.sedar.com and on Sherritt’s website at www.sherritt.com. Debtholders are urged to read the Updated Paradigm Capital Opinions in their entirety. The summaries of the Updated Paradigm Capital Opinions in this news release are qualified in their entirety by reference to the full text of such opinions. The Updated Paradigm Capital Opinions do not constitute a recommendation to any Debtholder as to how such Debtholder should vote with respect to the Debtholders’ Arrangement Resolution.

Sherritt and Board of Directors’ Recommendation

Sherritt believes that the Transaction is in the best interests of the Corporation and its stakeholders considering all current circumstances.  Sherritt believes that the Amended Terms provide additional benefits to the holders of the Existing Notes, are fair and reasonable, and are in the best interests of the Corporation and its stakeholders in the circumstances. Sherritt and its Board of Directors recommend that all affected Debtholders vote in favour of the amended Plan of Arrangement to implement the Transaction.

Court Approval and Implementation 

If the Plan of Arrangement is approved by the requisite majority at the Debtholders’ Meeting, Sherritt and its subsidiary, 11722573 Canada Ltd. (collectively the “Applicants”), will attend a hearing before the Ontario Superior Court of Justice (Commercial List) (the “Court”) on July 29, 2020 at 9:00 a.m., or on such other date as may be approved by the Court, to seek Court approval of the Plan of Arrangement.

Completion of the Transaction pursuant to the Plan of Arrangement will be subject to, among other things, approval of the Plan of Arrangement by the requisite majority of the Debtholders at the Debtholders’ Meeting, approval of the Plan of Arrangement by the Court and the satisfaction or waiver of the other applicable conditions precedent to the Plan of Arrangement. If all requisite approvals are obtained and the other conditions to completion of the Transaction are satisfied or waived, it is expected that the Transaction will be completed at the end of August 2020. Upon implementation, the Plan of Arrangement would bind all Debtholders of the Corporation.

As part of the Court approval of the Plan of Arrangement, the Applicants expect to seek a permanent waiver of potential defaults resulting from the commencement of the CBCA proceedings or the steps or transactions related to the CBCA proceedings or Transaction, on the terms set forth in the Plan of Arrangement.

Extension of the Early Consent Date

In connection with the amendments to the Plan of Arrangement, and in order to provide holders of the Existing Notes (“Noteholders”) with additional time to become entitled to receive early consent cash consideration in an amount equal to 3% of the principal amount of the Existing Notes voted in favour of the Plan of Arrangement by the Early Consent Date and held by such Noteholders on the implementation date of the Plan of Arrangement (the “Noteholder Early Consent Cash Consideration”) as additional consideration for the exchange of their Existing Notes pursuant to the Plan of Arrangement, the Corporation is extending the Early Consent Date to July 13, 2020. Noteholders must vote in favour of the Plan of Arrangement before 5:00 p.m. (Toronto time) on the Early Consent Date, and otherwise comply with the requirements under the Plan of Arrangement, in order to be eligible to receive Noteholder Early Consent Cash Consideration pursuant to the Plan of Arrangement. Noteholders who previously submitted their votes in favour of the Plan of Arrangement prior to the previous early consent date of April 7, 2020 will not be required to re-submit their votes in order to be eligible for Noteholder Early Consent Cash Consideration, provided such Noteholders do not withdraw or change their previously submitted votes and otherwise comply with the requirements under the Plan of Arrangement.

Further information regarding the Noteholder Early Consent Cash Consideration is also set out in the Information Circular. Noteholders with questions regarding early consent matters are reminded that they may contact Kingsdale Advisors, the Corporation’s proxy, information and exchange agent (the “Proxy, Information and Exchange Agent”), by telephone at 1-800-749-9197 or 416-867-2272, or by email at contactus@kingsdaleadvisors.com.

Meetings

On April 8, 2020, Sherritt announced that, in connection with ongoing discussions with key stakeholders in respect of the Transaction, it had postponed the Meetings. The Debtholders’ Meeting will now be held at 10:00 a.m. Toronto time) on July 23, 2020 and the Shareholders’ Meeting will now be held at 11:00 a.m. (Toronto time) on July 23, 2020.

The Debtholders’ Meeting is being held for Debtholders to consider and vote upon the Debtholders’ Arrangement Resolution, and the Shareholders’ Meeting is being held for Shareholders to consider and vote upon the Stated Capital Reduction Resolution.  As described in the Information Circular, the reduction of stated capital of the Corporation’s common shares to $575 million (the “Stated Capital Reduction”) is a preliminary step to the implementation of the Transaction.

All Noteholders and holders of the Corporation’s Ambatovy Joint Venture partner loans (the “CFA Lenders” and, collectively with the Noteholders, the “Debtholders”) will vote as one class in respect of the Plan of Arrangement at the Debtholders’ Meeting. The aggregate principal amount of debt held by all Debtholders entitled to vote on the Plan of Arrangement as one class at the Debtholders’ Meeting is approximately $733 million.

Procedures for Voting Before the Meetings, and for Attending and Voting at the Meetings

On March 24, 2020, the Corporation announced that due to the impact of COVID-19 and the need to ensure the health and welfare of our securityholders, employees and other stakeholders, the Meetings would be held in a virtual only format whereby parties may attend and participate in the Meetings via live audio webcast.

Set out below are the procedures to be followed to vote before, vote at and attend each Meeting. The procedures outlined below supersede the procedures set out in the Corporation’s news release dated March 24, 2020.

Debtholders and Shareholders who have already cast their votes in respect of the Debtholders’ Arrangement Resolution or the Stated Capital Reduction Resolution, respectively, do not need to re-submit their votes. 

How to Vote Before the Meetings and Voting Deadline

The holding of the Meetings in a virtual format does not impact the ability of Debtholders or Shareholders as of the Record Date to vote in advance of their respective Meeting. The steps for voting by proxy in advance of the Meetings remain as set forth in the Corporation’s Information Circular, subject to the revised Early Consent Date and revised Voting Deadline discussed above.

Debtholders and Shareholders who have already cast their votes in respect of the Debtholders’ Arrangement Resolution or the Stated Capital Reduction Resolution, respectively, do not need to re-submit their votes.  For Debtholders and Shareholders as at the Record Date who have not cast their votes, or who wish to change their votes, the deadline to submit their proxies or voting instructions in order to vote by proxy on the items to be considered at the applicable Meeting is 5:00 p.m. (Toronto time) on the Voting Deadline of July 21, 2020.

Sherritt has designated the individuals named on the proxy, voting information and/or election forms previously distributed to Debtholders and Shareholders, as applicable, as persons whom a Debtholder or Shareholder may appoint as their proxyholders for the applicable Meeting. The individuals named in the proxy, voting information and/or election forms are directors and/or officers of the Corporation. If a Debtholder or Shareholder wishes to appoint an individual not named on the relevant proxy, voting information and/or election form (including himself or herself) to represent such Debtholder or Shareholder at the applicable Meeting that the Debtholder or Shareholder is entitled to attend, such Debtholder or Shareholder must follow the instructions set out below under “How to Appoint a Proxyholder”.

Before the Debtholders’ Meeting, Noteholders as of the Record Date, or those who have acquired beneficial ownership of Existing Notes prior to the Voting Deadline (or such earlier date as their bank, broker or other intermediary (collectively, “Intermediaries”) may advise), may vote in accordance with the instructions provided on the Noteholder voting information and election form (the “Noteholder VIEF”). In order to cast a vote at the Debtholders’ Meeting by proxy, beneficial Noteholders must submit to their respective Intermediaries by the Voting Deadline, or such earlier deadline as their Intermediary may advise, their duly completed Noteholder VIEF (or such other documentation or information as their Intermediary may customarily request for purposes of obtaining voting and election instructions) in accordance with the instructions set forth in the Noteholder VIEF and any instructions provided by the Intermediary or the Proxy, Information and Exchange Agent, as applicable.  

As described in the Information Circular, beneficial Noteholders shall be deemed to transfer their rights to vote on the Debtholders’ Arrangement Resolution and attend the Debtholders’ Meeting associated with their Existing Notes upon the transfer of their beneficial ownership of such Existing Notes to any transferee of such Existing Notes on or prior to the Voting Deadline, or such earlier date as their Intermediary may advise.

Before the Debtholders’ Meeting, CFA Lenders as of the Record Date may vote in accordance with the instructions provided on the CFA Lender proxy, voting and election form. In order to cast a vote at the Debtholders’ Meeting by proxy, CFA Lenders must submit to the Proxy, Information and Exchange Agent, by the Voting Deadline, their duly completed CFA Lender proxy, voting and election form in accordance with the instructions set forth in such form. CFA Lenders must also submit their election for consideration under the Plan of Arrangement by the Voting Deadline (as described further in CFA Lender proxy, voting and election form and the Information Circular).

Before the Shareholders’ Meeting, registered and non-registered Shareholders may vote in accordance with the instructions provided on the Shareholder proxy or voting instruction form, as applicable, using one of the available methods described therein. Registered Shareholders may submit their proxy to AST Trust Company (Canada) (the “Transfer Agent”) in accordance with the details provided in the Information Circular. In order to be effective, Shareholder proxies or voting instruction forms, as applicable, must be received by the Transfer Agent prior to the Voting Deadline.

Intermediaries that hold Existing Notes or common shares of Sherritt on a securityholder’s behalf may have internal deadlines that require such securityholders to submit their votes by an earlier date in advance of the Early Consent Date and/or Voting Deadline, as applicable, and may have internal requirements for the submission of voting instructions. Such securityholders are encouraged to contact their Intermediaries directly to confirm any such internal deadlines or voting instruction requirements.

Debtholders and Shareholders should refer to the Information Circular, which has been mailed to Debtholders and Shareholders and is also available on SEDAR (www.sedar.com) and Sherritt’s website (www.sherritt.com), for additional information and instructions with respect to the process for submitting voting and election instructions and eligibility for Noteholder Early Consent Cash Consideration, as applicable. Debtholders and Shareholders with any questions are also encouraged to contact Kingsdale Advisors, the Corporation’s Proxy, Information and Exchange Agent, at the contact information provided in this news release.

Entitlement to Attend and Vote at the Virtual Meetings

Debtholders and Shareholders who have already cast their votes in respect of the Debtholders’ Arrangement Resolution or the Stated Capital Reduction Resolution, respectively, do not need to re-submit their votes.  Debtholders and Shareholders who have not cast their votes, or who wish to change their votes, are encouraged to vote by proxy in advance of the applicable Meeting as discussed above, by following the instructions on the proxy, voting information and/or election forms previously distributed to Debtholders and Shareholders, as applicable. Such Debtholders and Shareholders, along with all other non-registered Shareholders (who hold their common shares through an Intermediary), Noteholders and CFA Lenders who have not duly appointed themselves as their own representatives for the applicable Meeting will be able to attend such Meeting as guests and submit questions in writing. Guests of a Meeting will not be able to vote at such Meeting.

Debtholders as of the Record Date, or those Noteholders who have acquired beneficial ownership of Existing Notes prior to the Voting Deadline (or such earlier date as their Intermediaries may advise), that in each case have duly appointed themselves as their proxyholder, or their duly appointed proxyholders, will be entitled to attend the Debtholders’ Meeting, submit questions in writing and vote on the Debtholders’ Arrangement Resolution, all in real time, online at https://web.lumiagm.com/104887086.

Registered Shareholders as of the Record Date or their duly appointed proxyholders, and non-registered Shareholders (who hold their common shares through an Intermediary) who have duly appointed themselves as their proxyholder, or their duly appointed proxyholders, will be entitled to attend the Shareholders’ Meeting, submit questions in writing and vote on the Stated Capital Reduction, all in real time, online at https://web.lumiagm.com/196537476.

See also “How to Attend the Virtual Only Meetings” below for additional information.

How to Vote at the Meetings

Debtholders

Noteholders and CFA Lenders who wish to vote or have a proxyholder vote on their behalf at the Debtholders’ Meeting may do so by logging in, or having such proxyholder log in, as applicable, to the Debtholders’ Meeting using the control number to be obtained by contacting the Proxy, Information and Exchange Agent and voting by completing an online ballot, as further described below under “How to Attend the Virtual Only Meeting”, and following any additional instructions provided at the Meeting.


Contacts

For more information, please contact:
Joe Racanelli, Director of Investor Relations
Telephone: 416-935-2457
Email: investor@sherritt.com
www.sherritt.com


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