Primary Corp.

Primary Corp.

November 25, 2010 14:32 ET

Primary Corp. and Marret Asset Management Propose to Build Resource Lending Business

TORONTO, ONTARIO--(Marketwire - Nov. 25, 2010) - Primary Corp. (TSX VENTURE:PYC) ("Primary") announced today that it has signed a letter of intent (the "LOI") with Marret Asset Management Inc. ("Marret") to build Primary's natural resource lending business. The LOI contemplates that Primary will shift its business strategy to place its principal focus on natural resource lending and will retain Marret to manage its repositioned business.

Barry Allan, President and Chief Executive Officer of Marret, stated: "We are pleased to be working with Primary in building its natural resource lending business. This transaction leverages Marret's extensive experience in structuring and hedging resource debt as demonstrated by Marret's previous transactions with companies such as Athabasca Oil Sands, Consolidated Thompson Iron Mines, Coalcorp, NewGold and Xinergy. It also allows our clients to participate in these activities through a public company."

Rob Pollock, President and Chief Executive Officer of Primary, added: "We are excited to partner with one of the leading lenders in the high yield space in Canada. The coupling of Marret's lending expertise with Primary's resource investment experience will allow Primary to capitalize on the growing non-traditional resource financing sector."

Letter of Intent

The LOI provides that Primary and Marret will negotiate in good faith and use their best efforts to enter into a definitive management services agreement (the "MSA"), which is to include, among others, the following terms:

  • Primary's business will be primarily directed to investing in debt securities of and making term loans (including bridge and mezzanine debt) to precious and base metal mining, exploration and development and oil and gas companies, both onshore and offshore, and may also include financing other resource related businesses and investing in public debt securities.

  • An annual management fee equal to the greater of $100,000 and 1.5% of Primary's net asset value will be payable to Marret.

  • Marret will also be entitled to an annual performance fee, determined as of the last day of each financial year of Primary (the "Determination Date"). The performance fee for a given year will be an amount for each common share of Primary outstanding as of the Determination Date equal to 15% of the amount by which the sum of (i) the net asset value (calculated without taking into account the performance fee) per common share, and (ii) the distributions paid with respect to the common shares of Primary during the relevant financial year on a per common share basis, exceeds 105% of the greatest of (i) the net asset value per common share immediately following the signing of the MSA, (ii) the net asset value per common share on the Determination Date for the previous financial year (after payment of any performance fee with respect to such financial year); and (iii) the net asset value per common share on the Determination Date in the last financial year in which a performance fee was paid (after payment of such performance fee).

  • Marret will be responsible for the management of Primary and will provide to Primary managerial services including those of a CEO, CFO and Secretary, which persons will be compensated by Marret. It is currently anticipated that Rob Pollock and Dave Guebert, President and CEO and CFO, respectively, of Primary will be retained by Marret to provide the services of CEO and CFO, respectively, to Primary.

  • Marret will have the right to appoint two nominees for election as directors of Primary. It is currently anticipated that those directors will, subject to shareholders' approval, initially be Barry Allan, President and CEO of Marret, and David Gluskin, a Vice-President of Marret.

  • The MSA will have an initial term of five years (the "Initial Term"), automatically renewable in respect of each successive one year period thereafter unless terminated pursuant to the terms of the MSA. Either Marret or Primary may terminate the MSA effective at the end of the Initial Term or current successive term, as applicable, upon notice, and, in the event of such a termination by Primary, Marret will be entitled to a termination fee.

  • A change of control fee will be payable to Marret in the event of a change of control of Primary.

The completion of the proposed transaction contemplated by the LOI is subject to the satisfaction of a number of conditions, including any applicable regulatory and other legal requirements and the settlement of definitive documentation on or before December 31, 2010. Pursuant to the terms of the LOI, Marret will be entitled to the payment by Primary of a break fee of $500,000 in the event that Primary enters into a competing transaction.

TD Securities is acting as Primary's financial adviser in connection with the proposed transaction.

Appointment of Barry Allan to Board of Directors

In connection with the signing of the LOI, the directors of Primary have increased the size of the board of directors from five to six directors and have appointed Barry Allan a director of Primary. Mr. Allan is the founder, President and Chief Investment Officer of Marret. He has over 30 years of investment experience in credit and fixed income markets obtained at Altamira, Nesbitt Thomson and a Canadian chartered bank.

Rob Pollock, President and Chief Executive Officer of Primary, stated: "Barry Allan and the Marret team have great expertise in this sector and we look forward to our association with Barry and his team."

Mr. Allan has been granted 1,000,000 incentive stock options under Primary's stock option plan, with one such option vesting for every $100 of new equity capital raised by Primary following the signing of the MSA. The options are exercisable into common shares of Primary at $0.85 per share and have a five year term. Pursuant to the policies of the TSX Venture Exchange, the options (and the common shares issuable upon exercise thereof) are subject to a four month hold period beginning on the day of grant.

About Marret

Marret Asset Management Inc. is an employee-owned firm based in Toronto and has over $5.1 billion of assets under management. Marret and its experienced team of investment professionals led by Barry Allan specialize exclusively in fixed income and, particularly, in high yield debt strategies.

About Primary

Primary Corp. trades on the TSX Venture Exchange under the symbol PYC. Primary is a diversified venture capital and merchant banking firm focused on the Canadian small cap market that will seek to make equity investments and bridge loans in appropriate companies.

Forward-Looking Information

This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities laws. Forward-looking information is frequently, but not always, characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking information in this news release includes, but is not limited to, statements with respect to the completion of the proposed transaction with Marret and Primary's business plans and strategies. The reader is cautioned not to place undue reliance on forward-looking information. Forward-looking information is based on certain assumptions, opinions and estimates of management at the date the information is given and is subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking information. These assumptions include, but are not limited to, no material adverse change occurring in Primary's business or affairs. Factors that could cause the forward-looking information to differ materially in actuality include failure to negotiate definitive documentation with respect to the proposed transaction with Marret prior to December 31, 2010, risks typical of operating in the financial industry and general market risk. More information about the risks and uncertainties affecting Primary can be found in Primary's filings posted on SEDAR at Primary does not undertake any obligation to update forward-looking information if circumstances or management's estimates or opinions should change, except in accordance with applicable laws.

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For further information about Primary and its ongoing business, please contact: Robert Pollock.

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.

Contact Information

  • Primary Corp.
    Robert Pollock
    President & CEO