Cline Mining Corporation

Cline Mining Corporation

February 05, 2015 10:21 ET

Cline Reorganization Plan Approved

TORONTO, ONTARIO--(Marketwired - Feb. 5, 2015) - Cline Mining Corporation ("Cline" or the "Company") announced that it has received approval of the proposed recapitalization plan announced on December 3, 2014, as amended (the "Recapitalization Plan").

Cline Mining Corporation ("Cline") and its wholly-owned subsidiaries, New Elk Coal Company LLC ("New Elk") and North Central Energy Company ("North Central" and collectively with Cline and New Elk, the "Applicants") obtained creditor protection in proceedings under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended pursuant to an initial order of the Ontario Superior Court of Justice (Commercial List) (the "Court") dated December 3, 2014. On January 20, 2015, Cline amended its proposed recapitalization plan. On January 21, 2015, the creditors voting on the Recapitalization Plan approved it unanimously, and on January 27, 2015 the Court approved and sanctioned the Recapitalization Plan. On January 28, 2017, the Court's approval of the Recapitalization Plan was given full force and effect pursuant to an Order of the U.S. Bankruptcy Court for the District of Colorado.

Readers are cautioned that the description below is a summary only and that readers should consult the specific court orders and the Recapitalization Plan and other items referred to below, all of which are available on the website of FTI Consulting Canada Inc., the court-appointed Monitor of Cline, New Elk and North Central, available at the following address:

On December 3, 2014 the Court approved a claims process for the identification of claims against the Applicants and their present and former directors. On the same date the Court made a meetings order (the "Meetings Order") and accepted the filing of a plan of compromise and arrangement in respect of the Applicants (the "Original Plan") and authorized the Applicants to call, hold and conduct meetings of their creditors in order to provide them the opportunity to consider and vote on a resolution to approve the Original Plan.

The Original Plan was amended on January 20, 2015 to reflect the terms of a proposed resolution in respect of a class action proceeding against Cline and New Elk alleging violation of the U.S. federal Worker Adjustment and Retraining Notification Act (the "WARN Act"). The Applicants' Recapitalization Plan was filed with the Court on January 20, 2015.

The following is a summary of the principal terms of the Recapitalization Plan:

  1. the Recapitalization Plan is filed on a consolidated basis in respect of the Applicants;
  2. the Recapitalization Plan provides for three separate classes of creditors, namely (i) secured noteholders, (ii) affected unsecured creditors and the WARN Act plaintiffs;
  3. the Recapitalization Plan apportions the aggregate secured noteholders' claim between an allowed secured claim, which is $92,673,897 for purposes of the Recapitalization Plan, and the allowed unsecured claim, which is $17,500,000 and which represents the secured noteholders' unsecured deficiency claim;
  4. the allowed secured claim will be compromised, released and discharged in exchange for new Cline common shares representing 100% of the equity in Cline, and new indebtedness in favour of the secured noteholders evidenced by a credit agreement with a term of seven years in the principal amount of $55 million, bearing interest at 0.01% per annum plus an additional variable interest payable only once the Applicants have achieved certain operating revenue targets;
  5. the claims of affected unsecured creditors, which exclude the WARN Act claims but include the secured noteholders allowed unsecured claim, will be compromised, released and discharged in exchange for each such affected unsecured creditor's pro rata share of an unsecured, subordinated, non-interest bearing entitlement to receive $225,000 from Cline on the date that is eight years from the date the Plan is implemented (the "Unsecured Plan Entitlement");
  6. notwithstanding the allowed unsecured claim, the secured noteholders will waive their entitlement to the proceeds of the Unsecured Plan Entitlement, and all such proceeds will be available for distribution to the other affected unsecured creditors on a pro rata basis;
  7. all affected unsecured creditors with valid claims of up to $10,000 will, instead of receiving their pro rata share of the Unsecured Plan Entitlement, be paid in cash for the full value of their claims, provided that this cash payment will not apply to any secured noteholders allowed unsecured claim;
  8. all WARN Act claims will be compromised, released and discharged in exchange for the payment on the Recapitalization Plan implementation date of a cash payment in the amount of $90,000, and an unsecured, subordinated, non-interest bearing entitlement to receive $120,000 on the date that is eight years from the Recapitalization Plan implementation date, provided that, in each case, certain reasonable fees, costs and expenses arising from the WARN Act class action case will be funded from such consideration;
  9. certain claims against the Applicants, including employee priority claims, government priority claims, claims covered by insurance, certain prior-ranking secured claims of equipment providers and the secured claim of Bank of Montreal in respect of corporate credit card payables, will remain unaffected by the Recapitalization Plan;
  10. existing equity interests in Cline will be cancelled for no consideration;
  11. the shares of New Elk and North Central will not be affected by the Recapitalization Plan and will remain owned by Cline and New Elk, respectively; and
  12. the Recapitalization Plan provides for the release of certain parties in relation to certain claims.

The Meetings Order authorized the Applicants to convene a meeting of secured noteholders, a meeting of affected unsecured creditors and a meeting of WARN Act plaintiffs to consider and vote on the Recapitalization Plan. The Recapitalization Plan was approved on January 21, 2015 by the creditors voting in each class, as follows:

Secured Noteholders Class: 100% in number and 100% in value (consisting of 16 secured noteholders.

Affected Unsecured Creditors Class: 100% in number and 100% in value (consisting of 16 secured noteholders, 62 convenience creditors and 4 other affected unsecured creditors).

WARN Act Plaintiffs Class: 100% in number and 100% in value (consisting of the two representative plaintiffs in the WARN Act class action).

Subsequent to the vote, the Court approved and sanctioned the Recapitalization Plan on January 27, 2015.

Each of the orders of the Court have been given full force and effect in the United States pursuant to reciprocal orders of the United States Bankruptcy Court for the District of Colorado pursuant to Chapter 15 of the United States Code.

The implementation of the Recapitalization Plan remains conditional upon the completion of certain conditions precedent. The Applicants are in the process of working towards the satisfaction of those conditions precedent and are targeting implementation of the Recapitalization Plan within the next 30 to 60 days. This process is not expected to affect Cline's day-to-day business. Cline has access to the funding necessary to continue without disruption while the Recapitalization Plan is being executed. Cline intends to continue to pay employees for services rendered during implementation of the Recapitalization Plan and intends to continue paying its suppliers for goods and services purchased by Cline and its subsidiaries after December 3, 2014 through the implementation period.

About Cline

Cline is a Canadian mining company headquartered in Toronto, Ontario with resource development interests in Canada, the United States and Madagascar. For further details on Cline, please refer to Cline's web site ( and Cline's Canadian regulatory filings on SEDAR at

Forward-Looking Information

This press release contains forward-looking statements (including "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995) relating to, among other things, the proposed Recapitalization and the Company's future financial condition. Generally, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Such statements are based on assumptions, estimates, forecasts and projections made in light of the trends, conditions and expected developments that are considered to be relevant and reasonable in the circumstances at the date that such statements are made. Forward-looking statements are not guarantees of future performance and such information is inherently subject to known and unknown risks, uncertainties and other factors that are difficult to predict and may be beyond the control of the Company. A number of factors and assumptions may cause actual results, level of activity, performance or outcomes of the Company to be materially different from those expressed or implied by such forward-looking statements including, without limitation, executing the Recapitalization Plan and otherwise satisfying the conditions precedent to the implementation of the Recapitalization Plan. There can be no guarantee the Company will complete the Recapitalization Plan. Consequently, undue reliance should not be placed on such forward-looking statements. In addition, all forward-looking statements in this press release are given as of the date hereof. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, save and except as may be required by applicable securities laws.

Contact Information

  • Cline Mining Corporation
    Matt Goldfarb
    Chief Restructuring Officer and
    Acting Chief Executive Officer
    +1 (416) 572-2456

    Cline Mining Corporation
    Corporate office
    161 Bay Street, 26th Floor, Toronto, ON M5J 2S1