West Hawk Development Corp.
TSX VENTURE : WHD

West Hawk Development Corp.

July 20, 2009 11:45 ET

West Hawk Announces Term Sheet for a US$1.8 MM Loan Facility for Natural Gas Project Reorganization

DENVER, COLORADO--(Marketwire - July 20, 2009) - West Hawk Development Corp. (TSX VENTURE:WHD) (the "Company") is pleased to announce that the Company's subsidiaries, West Hawk Energy (USA) LLC and WHE Holdings (USA) LLC (together, "WHE") have signed an offer letter for debtor-in-possession ("DIP") financing of up to US$1,800,000. The proposed DIP lender, First KT Lending LLC (the "Lender"), is a wholly owned subsidiary of Chiron Equities, LLC ("CE"). Chiron Financial Advisors, LLC ("CFA"), WHE's financial advisor in connection with its Chapter 11 bankruptcy proceedings, is an affiliate of CE.

The DIP loan will be structured as a 12 month term loan draw note, with conditions precedent to funding. Proceeds from the DIP loan will be used in accordance with a two-phase budget. The Lender will initially fund $300,000, in staged advances, to bring the first three wells at the Company's Figure Four natural gas project back into production. On completion of Phase I and assuming conditions to further funding are satisfied, the Lender will fund, in staged advances, the balance of the loan amount for Phase II, which includes bringing a further five wells (already drilled) into commercial production.

Conditions precedent to the initial funding include, but are not limited to, the execution and delivery of a definitive loan agreement and other appropriate legal documentation and Lender satisfaction with all due diligence prior to August 30, 2009. Conditions precedent to the Phase II funding of the balance of the DIP loan include, but are not limited to, WHE having filed a plan of reorganization approved by the Lender, WHE having filed a plan support agreement between the Lender and WHE approved by the US Bankruptcy Court and Lender satisfaction with its due diligence review.

The DIP loan will be due and payable in full on the earlier of (a) 12 months from the closing of the financing, or (b) termination of the loan agreement. The Company anticipates repayment of the loan through revenues generated by well production to the extent possible, and/or entering into a further transaction with the Lender. The Lender has stated its interest in investigating a larger potential transaction with West Hawk, to which the loan is an interim step.

Monthly interest will accrue on the outstanding principal amount of the loan at an annual interest rate equal to the floating 30 day LIBOR as published in the Money Rates section of the Wall Street Journal plus 10.00%. Upon the occurrence of any event of default, principal, interest and fees will be due and payable at 4.0% per annum above the then otherwise applicable rate. A DIP loan facility fee equal to 5.0% of the total committed DIP loan amount shall be deferred and payable upon the sooner of (a) termination, or (b) prepayment. The Borrowers may prepay some or all of the DIP loan at any time, subject to an early termination fee ranging between US$50,000 and US$250,000 depending on the timing of any such prepayment. No early termination fee would be charged if the loan is paid pursuant to a plan of reorganization supported by the Lender.

Events of default include the filing of a plan of reorganization without the Lender's consent; conversion of the Chapter 11 bankruptcy protection to Chapter 7 bankruptcy; termination of any of the leases or contracts for the Figure Four project; denial by the Court of the plan support agreement; a change of control of WHE; and a motion to sell WHE assets without the approval of Lender.

WHE will continue to operate their respective businesses and manage their respective properties and hydrocarbon interests as debtors in possession under sections 1107 and 1108 of the Bankruptcy Code.

"The DIP financing will provide the Company with the resources necessary to bring into commercial production five wells (already drilled) that will be added to the current thee wells that were in commercial production until December 2008 and will be reopened for commercial sales. This financing will provide the Company with the opportunity to have a permanent solution for the gas project and focus in the development of the Company's Groundhog coal project located in northwest British Columbia," said Gonzalo Torres Macchiavello, President and CEO of West Hawk Development Corp.

On behalf of the Board of Directors,

Gonzalo Torres Macchiavello, President and Chief Executive Officer

About the Company: West Hawk Development Corp. is focused on providing valuable, high-demand energy products from a variety of sources. Assets include the Figure Four natural gas property located in the Piceance Basin, Colorado, being developed under a drilling and development agreement and the Groundhog coal property located in northwest British Columbia.

Cautionary Note: This news release contains forward looking statements, particularly those regarding completion of the proposed debtor-in-possession financing, bringing the wells at the Company's Figure Four natural gas project into commercial production and future development of the Company's Groundhog coal project in northwest British Columbia. The Company has filed a National Instrument 51-101 Report on the Figure Four property. Resource estimates in these reports, unless specially noted, are considered speculative. Any and all other resource or reserve estimates are historical in nature, and should not be relied upon. By their nature, forward looking statements involve risk and uncertainties because they relate to events and depend on factors that will or may occur in the future and in many circumstances are beyond the control of the Company. These risks and uncertainties include, without limitation, negotiation of a definitive loan agreement with the Lender on terms satisfactory to the Company and satisfaction of all other conditions precedent to advancement of the DIP loan, including Court approval of a plan support agreement between the Lender and WHE Actual results may vary depending upon, among other factors, the favorable outcome of the foregoing risks and uncertainties, favorable results from proposed exploration and development activities, industry production, commodity demand and pricing, currency exchange rates and general economic factors.

Cautionary note to U.S. investors: The U.S. Securities and Exchange Commission specifically prohibits the use of certain terms, such as "reserves" unless such figures are based upon actual production or formation tests and can be shown to be economically and legally producible under existing economic and operating conditions.

The TSX Venture Exchange has not yet reviewed and does not take responsibility for the adequacy or accuracy of the content of this news release.

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