Loyalist Group Limited
TSX VENTURE : LOY

Loyalist Group Limited

August 11, 2015 21:00 ET

Loyalist Announces Third Stage Closing of Non-Brokered Private Placement, Appointment of Ron Schwarz to Board, and Amendment to Forbearance Agreement

TORONTO, ONTARIO--(Marketwired - Aug. 11, 2015) -

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

Loyalist Group Limited ("Loyalist" or the "Company") (TSX VENTURE:LOY) announces that the Company has completed the third stage closing of its non-brokered private placement (the "Offering") for approximately $4.6 million with funds managed by Montrusco Bolton Inc. ("Montrusco"), bringing the total amount raised to date under the Offering to approximately $7.7 million. The company also expects to complete one final tranche of the Offering over the next several weeks for total proceeds of up to $8 million inclusive of proceeds raised to date.

In conjunction with the Montrusco investment, the Company is pleased to announce the appointment of Ron Schwarz, CFA, to the Board of Directors, and execution of an amended forbearance agreement (the "Amendment Agreement") with Bank of Montreal (the "Senior Lender") which, among other things, includes an extension of the credit facility repayment date to June 30, 2016, from September 30, 2015 as per the forbearance agreement. The credit facility repayment date may be further extended to September 30, 2016 under certain circumstances as described below. The Amendment Agreement will be available on SEDAR at www.sedar.com.

"We continue to make solid progress on our recapitalization. In particular, we are grateful to have the support of Montrusco as our cornerstone investor, which is a key element to achieving the significant extension to the repayment date in the Amendment Agreement. I would like to personally thank each of Montrusco and Bank of Montreal for their support by providing us with the liquidity and timing flexibility, respectively, to move into the next phase of our turnaround. As we begin to transition from recapitalization to restructuring, we have plenty of work ahead to streamline operations, develop a culture of ownership and accountability throughout the Company, and ultimately develop a clear path to a sustainable business model," said Shawn Klerer, Chief Executive Officer.

Non-Brokered Private Placement

Under the third tranche of the Offering, the Company issued 455,000 units to funds managed by Montrusco, with each unit consisting of one first preferred share, Series A (each, a "Preferred Share") and 83.33 common share purchase warrants (each, a "Warrant"), for a total of 37,916,667 Warrants. Each whole Warrant will entitle the holder to acquire one common share of the Company at a price of $0.12 per share for a period of 24 months following the closing of this tranche of the Offering.

If at any time following July 3, 2016 the closing price (or the average of the 'bid' and the 'ask', if not traded) of the common shares of the Company exceeds $0.25 per share for a period of 20 consecutive trading days, the Company may in its sole discretion elect to accelerate the expiry of the Warrants issued under this tranche of the Offering to the date that is 20 trading days after the date of issuance of a news release announcing the new expiry date.

No finders' fees were paid in connection with the Montrusco investment.

Pursuant to applicable Canadian securities laws, the Preferred Shares and Warrants (and the common shares issuable upon exercise of the Warrants) will be subject to a hold period until December 13, 2015.

The Offering is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the final approval of the TSXV.

Appointment of Ron Schwarz to the Board of Directors

The Company is pleased to appoint Ron Schwarz to the Board of Directors effective as of August 11, 2015. Mr. Schwarz as an Independent Director will also serve on the Audit Committee and the Compensation and Governance Committee of the Company.

Mr. Schwarz is a well-qualified addition to the Board, with a strong corporate governance background and capital markets experience. He currently serves on the Boards of Directors of Noble Iron Inc. (NIR-TSXV) and CHC Student Housing (CHC-TSXV) and is an outgoing Board member and Chair of the Communications Committee at CFA Society Toronto. Ron has also been an advisor to private companies including Stack Wines. Previously Ron was an Executive Director and Portfolio Manager at UBS Global Asset Management and held several senior roles at CIBC including Managing Director, Canadian Cash Equities and Co-Head Canadian Equities.

Mr. Schwarz will also act as Montrusco's nominee Director, which is pursuant to a nomination right which the Company has granted to Montrusco in conjunction with its investment.

Amendment to Forbearance Agreement with Senior Lender

As announced in a press release dated June 29, 2015, the Company had entered into a forbearance agreement with the Senior Lender which provided for a repayment date of September 30, 2015, provided that certain conditions and milestones were met. There is approximately $8.9 million of debt outstanding under the credit facility with the Senior Lender.

On August 11, 2015, the Company entered into the Amendment Agreement with the Senior Lender, which will become effective upon completion of the Montrusco investment. The Amendment Agreement provides, among other things, that the credit facility repayment date will be extended to June 30, 2016, from September 30, 2015.

The credit facility repayment date in the Amendment Agreement will be further extended to September 30, 2016 if Montrusco exercises their common share purchase warrants prior to June 30, 2016 and at least $4 million of the cash proceeds from the warrant exercise is used by the Company to reduce the amount owing under the credit facility. As incorporated into the Amendment Agreement, Montrusco intends to early exercise their warrants once the trading price of the Company's common shares listed on the TSXV fractionally exceeds $0.12 on a 10-day VWAP basis.

"Montrusco's intention to early exercise their warrants is an innovative solution to the Company's ability to repay roughly half of the $8.9 million owing under the credit facility with the Senior Lender. We value the transparent partnership approach and their confidence in us to navigate through forbearance. Importantly, an early warrant exercise would leave us with less than $5 million of credit facility debt that would need to be repaid, significantly reducing our solvency risk. We will have discussions with other investors who have participated in the non-brokered private placement, including insiders, to determine whether they would also be interested in an early warrant exercise alongside Montrusco," said Shant Poladian, Chairman and Chief Restructuring Officer.

Shares for Debt Transaction

As announced in the Company's press release dated July 10, 2015, the Company entered into separate debt conversion agreements with a former independent director of the Company and the Company's corporate counsel to issue an aggregate of 6,589 units in settlement of approximately $65,895 in aggregate indebtedness owing by the Company to such parties. As a result of the completion of this tranche of the Offering, the Company has elected to instead satisfy this indebtedness in cash and thereby reduce dilution to existing shareholders.

This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

About Loyalist

Loyalist owns and operates private English as a Second Language (ESL) Schools, Career Colleges and Community Colleges in Toronto, Vancouver, Victoria and Halifax.

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 concerning the Offering and the proposed completion thereof, information concerning changes to the board of the Company and information concerning the terms of the Company's forbearance agreement with Bank of Montreal. 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 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 forbearance agreement with Bank of Montreal and the consequences of any breach or default thereunder; the ability of the Company to complete the Offering on terms acceptable to the Company or at all; the Company's ability to complete any proposed recapitalization or restructuring activities on terms acceptable to the Company or at all; the fact that new management of the Company, including the recently appointed Chief Executive Officer and Chief Financial 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 contained in this press release is made as of the date hereof, and the Company does not undertake to update any forward-looking information 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.

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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