Fareport Capital Inc.
TSX VENTURE : CAB

Fareport Capital Inc.

July 06, 2007 16:40 ET

Fareport Capital Inc. Announces Terms of Restructuring and Refinancing

TORONTO, ONTARIO--(Marketwire - July 6, 2007) - Fareport Capital Inc. ("Fareport" or the "Corporation") (TSX VENTURE:CAB) has reached an agreement with A to Z Capital Corp., and its affiliate A to Z SPI 3 Inc. ("A to Z") to refinance and restructure the Corporation. The agreement contemplates a restructuring involving (i) the issuance of certain pre-consolidation common shares ("Common Shares") in the capital of Fareport in exchange for existing indebtedness held by A to Z and other existing secured and unsecured creditors of Fareport (the "Shares for Debt Transaction"), (ii) a proposed private placement financing transaction to be completed by A to Z (the "Private Placement Transaction") with Fareport for the issuance of Common Shares, and (iii) a proposed consolidation of the Common Shares by Fareport (the "Share Consolidation", and together with the Shares for Debt Transaction and the Private Placement Transaction, collectively, the "Transactions"). The Transactions and any share issuances related thereto shall be subject to both Exchange and disinterested shareholder approval.

The result of the Transactions will be to effect a change in control in Fareport such that the Corporation would then be controlled by A to Z.

BRIDGE FINANCING BY A TO Z

To date, A to Z has invested $200,000 ($189,775 plus fees of counsel) into Fareport by way of a secured Demand Debenture (the "Demand Debenture") to bridge finance certain of Fareport's essential services, to permit Fareport to continue to operate as a going concern. It is proposed that the principal amount on the Demand Debenture be converted to 266,667 Common Shares at a price of $0.0075 being the Maximum Discounted Market Price. The share price of $0.0075 is predicated upon the understanding that the Share Consolidation will be effectuated immediately thereafter. A to Z will waive all accrued and unpaid interest thereon existing as of the date hereof calculated at the rate of 12% per annum.

LITIGATION SETTLED

As previously disclosed, Fareport has been engaged in ongoing litigation commenced in the Superior Court of Ontario by Fareport and related or counter claims with certain of its secured creditors, directors and other interested parties since 2005 bearing Court File No. 05-CV-293520PD1 (the "Action"). The litigants have mutually agreed to the dismissal of the Action, subject to the Transactions being closed.

SHARES FOR DEBT TRANSACTION

Fareport has seventeen secured creditors each of whom hold debentures payable by Fareport. Fareport has ceased to make payments on these secured debentures and such debentures are currently in default.

Fareport and A to Z have negotiated settlement agreements with all seventeen of Fareport's secured creditors as well as five of Fareport's largest unsecured debt holders, which agreements are subject to certain conditions as described further below. The settlement agreements will have the effect of cancelling each of the secured creditor's debentures and the unsecured debt through payments of a combination of cash and common shares of Fareport which shall be financed concurrently with the completion of the Proposed Private Placement. After the secured creditor's debentures and the applicable unsecured debt has been cancelled, Fareport will have no outstanding long term debt (excluding its trade accounts payable (including certain professional fees) incurred in the ordinary course of business).

The total amount of debt to be settled is $2,578,884.64, specifically $200,000 for A to Z (in respect of the bridge financing described above), $1,588,884.64 for the secured Debenture holders and $790,000 for the unsecured creditors for which the Corporation is indebted to. As part of the settlement, secured and unsecured creditors are to receive 30% of the total outstanding debt owed to them by the Corporation (i.e. 30 cents on the dollar, being $773,665.39), with 10% (or 10 cents on the dollar or $253,888.46) being paid in the form of Common Shares and 20% (i.e. 20 cents on the dollar or $515,776.93) being paid in the form of cash.

The Creditors have accepted the proposed Shares for Debt Transaction involving each of the above mentioned settlement agreements are conditional upon: (a) the dismissal or dissolution of the cease trade order of the Ontario Securities Commission dated September 26, 2005 regarding Fareport (which has already been effectuated); (b) the dismissal of the Action; (c) approval of the Proposed Private Placement Transaction by the TSX-V; (d) requisite disinterested shareholder approval at a special meeting of shareholders of Fareport called for such purpose; and (e) other customary conditions for similar transactions. The Ontario Securities Commission has already dismissed the cease trade order dated September 26, 2005.

PRIVATE PLACEMENT

If TSX-V conditional approval of the Proposed Private Placement Transaction is received, A to Z will complete the proposed Private Placement Transaction in the total amount of $1,800,000 (excluding the funds invested under the Demand Debenture). The effective market price of the Common Shares to be issued by Fareport to A to Z at the maximum Discounted Market Price will be $0.0075 per Common Share for a total of 240,000,000 Common Shares prior to the Share Consolidation being effected or 2,400,000 Post Consolidation Shares.

As part of the Proposed Private Placement Transaction, Fareport shall issue to A to Z a common share purchase warrant (the "Warrant") equalling 12% of the proposed Private Placement Transaction, being 21,600,000 Common Shares or 216,000 Post Consolidation Shares, which shares Fareport has reserved, allotted and approved for issuance on the exercise of the Warrant. The Warrant will be non-transferable and exercisable at the price at which the proposed Private Placement Transaction is completed, without discount, being $0.01 per share, subject to customary adjustment for the completion of the proposed Share Consolidation described below. The Warrant will have a term of two years in accordance with the TSX-V policies.

SHARE CONSOLIDATION

In accordance with TSX-V Policy 5.8, Fareport will immediately upon completion of the Shares for Debt Transaction and the Private Placement Transaction, effect the proposed Share Consolidation on the basis of 100 pre-consolidation Common Shares for each one Post Consolidation Share. Following the completion of the Transactions, Fareport will have a total of 3,216,714 Post Consolidation Shares outstanding on a fully diluted (and as converted) basis. In connection with TSX-V Policy 5.8, Fareport will comply with the applicable exchange, disclosure and filing requirements contained therein for the proposed Share Consolidation.

In accordance with TSX-V Policy 5.1, Fareport will not pay any finder's fee, placement fee or similar fee to A to Z or to any third party as part of the completion of the Transactions.

A TO Z CAPITAL CORP.

A to Z Capital Corp. is a private issuer engaged in private equity transactions, including the restructuring and reorganization of distressed entities, acquisitions and business combinations, change in control transactions and mezzanine and subordinated debt financings.

A to Z SPI 3 Inc. is a special purpose vehicle incorporated for the primary purpose of, among other things, effecting the contemplated Transactions with Fareport.

Andrew DeFrancesco is the sole director and President and Chief Executive Officer of A to Z Capital Corp. Mr. DeFrancesco controls all of the issued and outstanding Common Shares of A to Z Capital Corp., while the Preferred Shares of A to Z Capital Corp. are owned by certain accredited investors, none of which investors to the knowledge of A to Z Capital Corp. hold any securities in Fareport. A to Z Capital Corp. has five subsidiaries, four of which are each special purpose vehicles holding direct investments in other private issuers and one of which, A to Z Lending Corp., is engaged only in mezzanine and gap debt financing, primarily in the North American film and television production industry. Each subsidiary also has preferred shareholders who are accredited investors.

A to Z is not currently a shareholder of Fareport, but a preferred shareholder of A to Z Capital Corp. holds one-third of the voting securities of a company which holds 2,500 of the 9,000 outstanding units of Hazelton Capital Ltd. Hazelton Capital Ltd. holds outstanding secured debentures in Fareport in the total principal amount of $75,000, and unsecured debt totalling $122,000.

REQUEST FOR PRICE PROTECTION

The Corporation has made a formal request to the TSX-V for price protection in respect of the Transactions at $0.01 for (i) the issuance of Common Shares in connection with the Shares for Debt Transaction, (ii) issuance of Common Shares in connection with the Private Placement Transaction, and (iii) the Share Consolidation, all as set out and described above. The price of the Common Shares of $0.01 equals the pre-consolidation market value of Fareport's Common Shares as of the close of markets on June 5 and June 27, respectively.

In connection with the Share for Debt Transaction, Fareport will issue Common Shares as part of the consideration for the settlement of the secured debentures held by Fareport's series 1 debenture holders and for the settlement of Fareport's current outstanding indebtedness with certain unsecured creditors, together with the settlement of A to Z's Demand Debenture, the latter of which will be effected at an effective price of $0.0075, which amount represents the maximum Discounted Market Price.

In connection with the Private Placement Transaction, Fareport will issue Common Shares to A to Z as part of its proposed Private Placement Transaction totalling $2,000,000 (excluding the issuance of the Warrant) at the effective price of $0.0075, which amount again represents the maximum Discounted Market Price.

In connection with the proposed Share Consolidation, Fareport has also formally requested approval of a 100:1 rollback of Fareport's Common Shares, which rollback will occur immediately after the issuance of the pre-consolidation Common Shares for the Shares for Debt Transaction and the Private Placement Transaction (including the issuance of the Warrant) as described above.

Upon receiving conditional approval and price protection from the TSX-V for the proposed Transactions, Fareport will seek the requisite shareholder approval of each of the component parts of the proposed Transactions, including the consolidation of Fareport's common shares, at a special meeting of the shareholders called for that purpose. Each of the component parts of the proposed Transactions, including the consolidation of Fareport's Common Shares, shall occur concurrently. Upon receiving the requisite shareholder approval, Fareport will seek final approval of the proposed Transactions from the TSX-V and expects to close the proposed Transactions in late July of this year.

POST-FINANCING GOVERNANCE

If the Proposed Financing receives all applicable shareholder and regulatory approvals and all conditions to closing are satisfied, Fareport will constitute a new board of directors concurrently with the transactions contemplated hereunder. It is currently expected that Emlyn David will remain as the President and a director of Fareport and that Andrew DeFrancesco, a nominee of A to Z, will be elected to the board of directors, together with at least one additional independent director, specifically David Lucatch of Toronto, Ontario, who is currently a director of another TSX listed company.

Messrs. Donaldson and Michael Rabinovici are expected to resign from the board of directors effective on the completion of the Transactions and constitution of the new slate of directors.

Fareport cannot guarantee that forward-looking statements contained in this news release will materialize. Nor is it possible for Fareport to commit itself to updating information about risks and other factors pertaining to its business that might appear in this or any other public disclosure documents.



Capitalization Report for Fareport Capital Inc.
Shares Issued: 38056653
Shares Escrow: 0

TSX Venture closing price for Fareport Capital
Date: 2007/03/26
Closing Price: 0.015


Neither the TSX Venture Exchange, nor any other Regulatory Authority has approved or disapproved of the contents of this news release.

Contact Information

  • Fareport Capital Inc.
    Emlyn David
    President
    (416) 750-1167 Ext. 400