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UPDATE: Cline Mining Enters Into Agreement for Financial Restructuring; Shares Up 6.25% Late Morning

By: MT Newswires
Posted: 12/27/2012 11:09:00 AM
Referenced Stocks:

Cline Mining Corporation (CMK.TO) has entered into an agreement with Marret Asset Management Inc. on behalf of certain funds advised by it, providing for a financial restructuring of the Company. Under the terms of the Restructuring, adjustments will be made to the terms of the Company's outstanding 10% senior secured bonds and, subject to TSX approval, the exercise price of the company's outstanding share purchase warrants will be changed and additional securities of the Company will be issued as described below.

The Bonds were issued under a trust indenture dated as of December 13, 2011 between Cline, Computershare Trust Company of Canada and Marret. In connection with the execution of the Trust Indenture and the issuance of the Bonds, the Company issued 10 million warrants (the Existing Warrants) to certain bondholders. Each Existing Warrant currently entitles the holder to purchase one common share of the Company at a price of C$1.15 until May 14, 2015.

Ken Bates, the President and Chief Executive Officer of the Company, commented: "This restructuring is an important step in the Company's efforts in developing a long-term financial solution to address the uncertainty regarding the magnitude and extent of the downturn in the coal markets."

As previously announced on December 18, 2012, the Company was unable to make the semi-annual payment of interest on the Bonds in the amount of US$2,500,000 that was due on December 17, 2012. The principal reason for Cline's present financial difficulties was the suspension of operations at Cline's New Elk metallurgical coal mine in Los Animas County, Colorado (announced by Cline on July 11, 2012).

Due to economic and recessionary pressures, demand for production from the mine, which was the only revenue generating mining asset of Cline, had dropped to such an extent that a temporary suspension of production was necessary in order to manage costs. The suspension is still in effect pending improved market conditions.

CMK is up half a cent to 8.5 cents late morning.