Cline Mining Corp. (CLNMF)

[adijas]

Cline Reorganization Plan Approved

TORONTO, ONTARIO, Feb 05, 2015 (Marketwired via COMTEX) -- Cline Mining Corporation ("Cline" or the "Company") announced that it has received approval of the proposed recapitalization plan announced on December 3, 2014, as amended (the "Recapitalization Plan").

Cline Mining Corporation ("Cline") and its wholly-owned subsidiaries, New Elk Coal Company LLC ("New Elk") and North Central Energy Company ("North Central" and collectively with Cline and New Elk, the "Applicants") obtained creditor protection in proceedings under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended pursuant to an initial order of the Ontario Superior Court of Justice (Commercial List) (the "Court") dated December 3, 2014. On January 20, 2015, Cline amended its proposed recapitalization plan. On January 21, 2015, the creditors voting on the Recapitalization Plan approved it unanimously, and on January 27, 2015 the Court approved and sanctioned the Recapitalization Plan. On January 28, 2017, the Court's approval of the Recapitalization Plan was given full force and effect pursuant to an Order of the U.S. Bankruptcy Court for the District of Colorado.

Readers are cautioned that the description below is a summary only and that readers should consult the specific court orders and the Recapitalization Plan and other items referred to below, all of which are available on the website of FTI Consulting Canada Inc., the court-appointed Monitor of Cline, New Elk and North Central, available at the following address: http://cfcanada.fticonsulting.com/cline/.

On December 3, 2014 the Court approved a claims process for the identification of claims against the Applicants and their present and former directors. On the same date the Court made a meetings order (the "Meetings Order") and accepted the filing of a plan of compromise and arrangement in respect of the Applicants (the "Original Plan") and authorized the Applicants to call, hold and conduct meetings of their creditors in order to provide them the opportunity to consider and vote on a resolution to approve the Original Plan.

The Original Plan was amended on January 20, 2015 to reflect the terms of a proposed resolution in respect of a class action proceeding against Cline and New Elk alleging violation of the U.S. federal Worker Adjustment and Retraining Notification Act (the "WARN Act"). The Applicants' Recapitalization Plan was filed with the Court on January 20, 2015.

The following is a summary of the principal terms of the Recapitalization Plan:

a. the Recapitalization Plan is filed on a consolidated basis in respect of
the Applicants;
b. the Recapitalization Plan provides for three separate classes of
creditors, namely (i) secured noteholders, (ii) affected unsecured
creditors and the WARN Act plaintiffs;
c. the Recapitalization Plan apportions the aggregate secured noteholders'
claim between an allowed secured claim, which is $92,673,897 for
purposes of the Recapitalization Plan, and the allowed unsecured claim,
which is $17,500,000 and which represents the secured noteholders'
unsecured deficiency claim;
d. the allowed secured claim will be compromised, released and discharged
in exchange for new Cline common shares representing 100% of the equity
in Cline, and new indebtedness in favour of the secured noteholders
evidenced by a credit agreement with a term of seven years in the
principal amount of $55 million, bearing interest at 0.01% per annum
plus an additional variable interest payable only once the Applicants
have achieved certain operating revenue targets;
e. the claims of affected unsecured creditors, which exclude the WARN Act
claims but include the secured noteholders allowed unsecured claim, will
be compromised, released and discharged in exchange for each such
affected unsecured creditor's pro rata share of an unsecured,
subordinated, non-interest bearing entitlement to receive $225,000 from
Cline on the date that is eight years from the date the Plan is
implemented (the "Unsecured Plan Entitlement");
f. notwithstanding the allowed unsecured claim, the secured noteholders
will waive their entitlement to the proceeds of the Unsecured Plan
Entitlement, and all such proceeds will be available for distribution to
the other affected unsecured creditors on a pro rata basis;
g. all affected unsecured creditors with valid claims of up to $10,000
will, instead of receiving their pro rata share of the Unsecured Plan
Entitlement, be paid in cash for the full value of their claims,
provided that this cash payment will not apply to any secured
noteholders allowed unsecured claim;
h. all WARN Act claims will be compromised, released and discharged in
exchange for the payment on the Recapitalization Plan implementation
date of a cash payment in the amount of $90,000, and an unsecured,
subordinated, non-interest bearing entitlement to receive $120,000 on
the date that is eight years from the Recapitalization Plan
implementation date, provided that, in each case, certain reasonable
fees, costs and expenses arising from the WARN Act class action case
will be funded from such consideration;
i. certain claims against the Applicants, including employee priority
claims, government priority claims, claims covered by insurance, certain
prior-ranking secured claims of equipment providers and the secured
claim of Bank of Montreal in respect of corporate credit card payables,
will remain unaffected by the Recapitalization Plan;
j. existing equity interests in Cline will be cancelled for no
consideration;
k. the shares of New Elk and North Central will not be affected by the
Recapitalization Plan and will remain owned by Cline and New Elk,
respectively; and
l. the Recapitalization Plan provides for the release of certain parties in
relation to certain claims.

The Meetings Order authorized the Applicants to convene a meeting of secured noteholders, a meeting of affected unsecured creditors and a meeting of WARN Act plaintiffs to consider and vote on the Recapitalization Plan. The Recapitalization Plan was approved on January 21, 2015 by the creditors voting in each class, as follows:

Secured Noteholders Class: 100% in number and 100% in value (consisting of 16 secured noteholders.

Affected Unsecured Creditors Class: 100% in number and 100% in value (consisting of 16 secured noteholders, 62 convenience creditors and 4 other affected unsecured creditors).

WARN Act Plaintiffs Class: 100% in number and 100% in value (consisting of the two representative plaintiffs in the WARN Act class action).

Subsequent to the vote, the Court approved and sanctioned the Recapitalization Plan on January 27, 2015.

Each of the orders of the Court have been given full force and effect in the United States pursuant to reciprocal orders of the United States Bankruptcy Court for the District of Colorado pursuant to Chapter 15 of the United States Code.

The implementation of the Recapitalization Plan remains conditional upon the completion of certain conditions precedent. The Applicants are in the process of working towards the satisfaction of those conditions precedent and are targeting implementation of the Recapitalization Plan within the next 30 to 60 days. This process is not expected to affect Cline's day-to-day business. Cline has access to the funding necessary to continue without disruption while the Recapitalization Plan is being executed. Cline intends to continue to pay employees for services rendered during implementation of the Recapitalization Plan and intends to continue paying its suppliers for goods and services purchased by Cline and its subsidiaries after December 3, 2014 through the implementation period.