KGIC Inc.
TSX VENTURE : LRN

September 26, 2016 18:05 ET

KGIC Inc. Announces Plan for Capital Restructuring and $20.2M Debt Settlement

TORONTO, ONTARIO--(Marketwired - Sept. 26, 2016) - KGIC Inc. ("KGIC" or the "Company") (TSX VENTURE:LRN) announces that it plans to execute a capital restructuring and debt settlement plan (the "Debt Settlement Plan") that it expects will preserve the value to the existing stakeholders, by improving the balance sheet and debt-equity ratio and facilitate required financing.

The Debt Settlement Plan is expected to reduce the Company's existing debt by approximately $20.2M by offering equity conversion to holders existing unsecured convertible debentures (the "Debentures"), subordinated loans and preferred shares (collectively, the "Unsecured Debt Securities") and a debt settlement with Bank of Montreal ("BMO"), the Company's senior lender.

BMO has agreed to enter into a debt settlement agreement with the Company, pursuant to which it will reduce the debt owing by the Company by $5.4M and the Company will pay the balance owing in cash, subject in all respect to the successful restructuring of the Unsecured Debt Securities and necessary financing. The Debt Settlement Plan requires substantial participation from holders of Unsecured Debt Securities.

The Company has also made an offer to holders of the Unsecured Debt Securities, representing approximately $14.8M inclusive of accrued interest and dividends as of September 30, 2016, pursuant to which the Company has proposed to settle the Unsecured Debt Securities by issuing approximately 74,200,000 common shares.

In connection with the proposed restructuring of the Debentures in the principal amount of $5.25M, the Company intends to amend the terms of the debenture indenture governing the terms of the Debentures dated December 5, 2013, to authorize the Company to redeem the Debentures, in whole or in part, at a price equal to the principal amount thereof plus accrued and unpaid interest thereon at any time from time to time and elect to satisfy its obligation to pay all or any portion of the principal amount of Debentures and the accrued but unpaid interest thereon due upon redemption by issuing and delivering to holders of the Debentures that number of common shares obtained by dividing the principal amount of the redeemed Debentures and accrued but unpaid interest by $0.20. The Debentures will continue to bear interest at 7.5% per annum and will mature on November 30, 2018.

"With the successful execution of the Debt Settlement Plan, Management is confident that the impending financing of the Company will not only accelerate the Company's growth plans but also strengthen our position in the education market," said Alex MacGregor, President and Chief Executive Officer.

It is anticipated that the closing of the transactions contemplated by the Debt Settlement Plan will occur by the end of October 2016. The transactions contemplated by the Debt Settlement Plan, of which the Company has received conditional approval by TSX Venture Exchange, are subject to certain conditions, including obtaining the final approval of the TSX Venture Exchange and all other required governmental, regulatory, and third party approvals, as applicable. The Company can give no assurances that any of the transactions contemplated by the Debt Settlement Plan will be successfully completed. If not completed, the Company's ability to continue as a going concern may be significantly affected.

About KGIC Inc.

KGIC Inc. is an educational organization that provides premium education services at its private English as a Second Language ("ESL") Schools, High School, Career Colleges and Community Colleges across Canada in Ontario and British Columbia. The Company owns and operates twenty-one (21) campuses in Ontario and British Columbia and enrolls approximately 20,000 students yearly in various English language and career training educational courses.

Forward-Looking Information and Statements

This news release includes certain forward-looking information and statements within the meaning of Canadian securities laws. Such forward-looking information and statements are not representative of historical facts or information or current condition, but instead represent only the Company's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company's control. Generally, such forward-looking information or statements can be identified by the use of forward-looking terminology 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 may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken, "will continue", "will occur" or "will be achieved". The forward-looking information contained herein includes information relating to the Company's proposed restructuring and debt-settlement plans. By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.

Any number of important factors could cause actual results to differ materially from these forward-looking statements as well as future results including, but not limited to, risks relating to: the Company's ability to complete any proposed recapitalization or restructuring activities (including the Debt Settlement Plan) on terms acceptable to the Company or at all and the expected cost savings related thereto; the Company's ability to service its outstanding indebtedness and the impact of that indebtedness on the Company's ability to raise additional capital, fund and maintain operations or meet business objectives; the Company's ability to comply with the terms of the amended forbearance agreement with Bank of Montreal and the consequences of any breach or default thereunder; the Company's ability to successfully exit forbearance; the fact that new management of the Company, including the recently appointed Chief Executive Officer, have had limited experience with the Company and its operations and have not had sufficient time to fully analyze all facets of the Company's business; the impact of negative or unfavourable rumours in the marketplace on the Company's brands and student enrollment; any of the Company's announced or proposed acquisitions failing to close or becoming delayed before closing; carrying on business and activities in international jurisdiction where Canadian laws do not apply; any loss of certain key personnel; levels of student enrolment; delays in rolling out online education programs; delays to the completion of any planned initiatives or the inability to complete those initiatives; competition in the educational services market; and currency fluctuations. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on any forward-looking information or statements contained in this press release.

The forward-looking information and statements contained in this press release is made as of the date hereof, and the Company does not undertake to update any forward-looking information and/or statement that is contained or referenced herein, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. All subsequent written and oral forward looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.

Caution Regarding Non-IFRS Financial Measures - The Company references certain measures in this press release, which do not have a standardized meaning as prescribed by International Financial Reporting Standards ("IFRS") and are unlikely to be comparable to similar measures presented by other issuers. These non-IFRS measures have been presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company, but should not be considered in isolation or as a substitute for, or more meaningful than, measures prepared in accordance with IFRS, such as net income (loss) or cash flow from operating activities. Please refer to the Company's Management's Discussion and Analysis as at and for the three and nine months ended September 30, 2015 for a reconciliation of these non-IFRS measure to measures prescribed by IFRS.

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.

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