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Brookfield Capital Provides $130MM Term Loan to North American Palladium

June 10, 2013, 07:49 AM
Filed Under: Specialty Industries
Related: Metals, Term Loan

North American Palladium announced the followoing financings to fund the company's ongoing expansion of its Lac des Iles ("LDI") mine in Ontario.

The transactions are summarized as follows:

  • Closing of a US$130 million senior secured term loan from Brookfield Capital Partners Ltd. ("Brookfield"), the private equity group of Brookfield Asset Management Inc.;
  • Payment and satisfaction of the existing $72 million senior secured notes due October 4, 2014;
  • Fully subscribed private placement of approximately $20 million in flow-through shares at a 2% premium to the relevant market price; and
  • Extension of the existing operating credit facility until July 4, 2014.

The company closed a US$130 million term loan financing with Brookfield which bears interest at 15% per annum and is due June 7, 2017. The loan is secured by first priority security on the fixed assets and second priority security on accounts receivable and inventory. NAP has the option to accrue interest during the first two years of the loan; in which case, the interest rate on the loan and accrued interest would increase by 4%. The loan contains covenants typical of this type of facility including senior debt to EBITDA ratios, minimum tangible net worth requirements and capital expenditure limits.

"We have been actively seeking debt and equity investment opportunities in the mining sector and North American Palladium's LDI mine met our criteria," said Peter Gordon, managing partner of Brookfield Asset Management. "This advanced stage development project has high quality reserves, attractive mining attributes, proven mill operations and significant exploration potential."

NAP intends to use the net proceeds from this debt financing to pay and satisfy in full the existing $72 million senior secured notes due October 4, 2014, including the redemption premium related thereto, to fund capital expenditures at the LDI mine and for general corporate purposes.

In addition to the term loan, the company has entered into a subscription agreement in respect of a fully subscribed private placement of flow-through shares for aggregate gross proceeds to the company of approximately $20 million. The company intends to issue these shares in two tranches, in each case at a 2% premium to the relevant market price (defined as the simple average of the five daily VWAPs on the TSX for the five trading day period ending on the fourth trading day prior to each tranche's closing date). The tranches are expected to close on the third business day after the end of the five day pricing period, to be completed on or about June 19, 2013 and July 23, 2013, respectively. The shares will be registered in the US for resale on the NYSE MKT via a resale shelf prospectus supplement on Form F-10, and resales in Canada will be restricted for four months. Not more than 9.99% of the total issued and outstanding shares will be issued in these transactions.

The company also extended its US$60 million revolving operating line of credit by an additional year to July 4, 2014. The credit facility is secured by first priority security on the company's accounts receivables and inventories and second priority security on all other assets.

NAP is an established precious metals producer that has been operating its flagship Lac des Iles mine ("LDI") located in Ontario, Canada since 1993.

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