Loyalist Group Limited
TSX VENTURE : LOY

Loyalist Group Limited

June 15, 2015 17:00 ET

Loyalist Provides Update on Initiatives Underway to Restore Liquidity and Strengthen the Company's Financial Position

TORONTO, ONTARIO--(Marketwired - June 15, 2015) - Loyalist Group Limited ("Loyalist" or the "Company") (TSX VENTURE:LOY) is providing an update to all stakeholders in an effort to provide timely and transparent communication regarding the Company's initiatives underway to restore liquidity and strengthen its financial position.

"Our new senior management team is focused on moving quickly, aggressively, and prudently to put Loyalist back on sound footing. We have many stakeholders both inside and outside the Company who want to see us succeed in this endeavour. It is important we do so in a manner fair and transparent to all stakeholders," said Shawn Klerer, Chief Executive Officer.

NEGOTIATIONS WITH SENIOR CREDIT FACILITY LENDER

As noted in the audited financial statements for the year ended December 31, 2014, the Company is not in compliance with certain covenants in its operating credit facility. The senior lender has not taken any formal action to exercise its rights or remedies under the terms of the credit facility.

Management has been working closely with the senior lender and is currently negotiating a forbearance agreement. This forbearance agreement will document the defaults and will allow the Company to operate in the normal course in the near term. Executing the forbearance agreement will allow the Company to seek new sources of liquidity and to develop a comprehensive plan for the eventual repayment and full discharge of the credit facility.

The forbearance agreement is expected to be executed before the end of June.

NEAR TERM LIQUIDITY PLAN

Based on current discussions underway, management expects the senior lender may be willing to provide the Company with additional time during a forbearance period if new liquidity in the range of $2-3 million is injected into the Company prior to the end of June 30, 2015.

These funds would be added to the Company's working capital. During the forbearance period, none of the new funds will be applied against the $8.9 million total amount owing under the acquisition credit facility.

As the Company is currently headed into its strongest seasonal demand period, activity levels are highest, and management wants to ensure that normal course operations are not impeded in any manner by any potential working capital constraints.

Management believes that a number of the Company's directors, officers, management, employees and several outside parties are prepared to contribute $2-4 million of new liquidity to the Company in conjunction with execution of the forbearance agreement as noted above. These funds would be firmly committed in order to achieve the best possible outcome prior to finalization of the forbearance agreement.

It is anticipated that this fundraising would be in the form of a non-brokered private placement which results in the least amount of dilution to existing common shareholders yet is an attractive investment to the providers of this new liquidity. Additional details will be provided later this week once key terms and conditions are determined.

FINANCIAL PROJECTIONS AND PATH TO STABILIZATION

The Company has met with various equity investors and alternative lenders over the past week, and management believes there will be multiple options available to fully restore liquidity and permanently strengthen its financial position.

Management is currently working on developing three preliminary financial projection scenarios which follow from the discussions it has had with various equity investors and alternative lenders:

  1. Base case scenario:
    • No changes are made to the current portfolio of school locations and brands. This scenario reflects the focused approach to cost constraint and expense rationalization which is already underway. The Company will put its pipeline of acquisitions on hold until further notice
  2. Stabilized scenario:
    • Prudent initiatives are undertaken to reduce and/or eliminate unnecessary expenses and enhance revenues through more effective yield management
  3. Enhanced scenario:
    • Following stabilization, management believes there is significant unused capacity in its current base of schools to leverage fixed costs. With targeted new capital investment into development of new programs, management believes there is an opportunity to materially grow revenues and margins through increased enrollment levels during off peak periods

It is anticipated these preliminary financial projection scenarios will be completed in the very near term. These preliminary financial projections will be fine-tuned in the months ahead as new management spends additional time performing comprehensive bottom-up and top-down reviews of all business segments.

In an effort to ensure full transparency to all of the Company's stakeholders, management will issue a press release communicating these preliminary projections (revenues, gross margin, EBITDA) prior to finalizing the terms of the proposed non-brokered private-placement noted above.

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 relating to the Company's initiatives to restore liquidity and strengthen its financial position and its proposed fundraising efforts. 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 operations or meet business objectives; the Company's ability to successfully negotiate a forbearance agreement with Bank of Montreal on terms acceptable to the Company; the Company's ability to comply with the terms of any such forbearance agreement and the consequences of any breach or default thereunder; the ability of the Company to raise additional capital or secure alternative financing within the period required; the Company's ability to complete the initiatives referenced in this press release on terms acceptable to the Company or at all; any of the Company's announced or proposed acquisitions failing to close or becoming delayed before closing; the Company's reliance on its South Korean contract; 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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