KGIC Inc. Announces Plan for Capital Restructuring and $20.2M Debt Settlement

TORONTO, ONTARIO--(Marketwired - Sept. 26, 2016) - KGIC Inc. ("KGIC" or the "Company") (TSX VENTURE:LRN) announces that it plans to execute a capital restructuring and debt settlement plan (the "Debt Settlement Plan") that it expects will preserve the value to the existing stakeholders, by improving the balance sheet and debt-equity ratio and facilitate required financing.

The Debt Settlement Plan is expected to reduce the Company's existing debt by approximately $20.2M by offering equity conversion to holders existing unsecured convertible debentures (the "Debentures"), subordinated loans and preferred shares (collectively, the "Unsecured Debt Securities") and a debt settlement with Bank of Montreal ("BMO"), the Company's senior lender.

BMO has agreed to enter into a debt settlement agreement with the Company, pursuant to which it will reduce the debt owing by the Company by $5.4M and the Company will pay the balance owing in cash, subject in all respect to the successful restructuring of the Unsecured Debt Securities and necessary financing. The Debt Settlement Plan requires substantial participation from holders of Unsecured Debt Securities.

The Company has also made an offer to holders of the Unsecured Debt Securities, representing approximately $14.8M inclusive of accrued interest and dividends as of September 30, 2016, pursuant to which the Company has proposed to settle the Unsecured Debt Securities by issuing approximately 74,200,000 common shares.

In connection with the proposed restructuring of the Debentures in the principal amount of $5.25M, the Company intends to amend the terms of the debenture indenture governing the terms of the Debentures dated December 5, 2013, to authorize the Company to redeem the Debentures, in whole or in part, at a price equal to the principal amount thereof plus accrued and unpaid interest thereon at any time from time to time and elect to satisfy its obligation to pay all or any portion of the principal amount of Debentures and the accrued but unpaid interest thereon due upon redemption by issuing and delivering to holders of the Debentures that number of common shares obtained by dividing the principal amount of the redeemed Debentures and accrued but unpaid interest by $0.20. The Debentures will continue to bear interest at 7.5% per annum and will mature on November 30, 2018.