HALIFAX, NOVA SCOTIA--(Marketwire -07/16/12)- Royal Host Inc. ("Royal Host" or the "Corporation") (RYL.TO) (RYL-DBB.TO) (RYL-DBC.TO) (RYL-DBD.TO) announced today the final results of its previously announced substantial issuer bids (the "Offers" and each individually an "Offer") to purchase for cancellation up to $2,000,000 aggregate principal amount of the issued and outstanding Series C 6.25% convertible unsecured subordinated debentures of the Corporation due September 30, 2013 (the "Series C Debentures"),up to $4,000,000 aggregate principal amount of the issued and outstanding Series D 5.90% convertible unsecured subordinated debentures of the Corporation due June 30, 2014 (the "Series D Debentures") and up to $7,000,000 aggregate principal amount of the issued and outstanding Series B 6.00% convertible unsecured subordinated debentures of the Corporation due October 31, 2015 (the "Series B Debentures" and together with the Series C Debentures and Series D Debentures, the "Debentures"), which expired at 11:59pm Eastern Daylight Time on Friday, July 13, 2012.
As at 8:30am (Eastern Daylight Time) today, based on reports provided by Computershare, the Depositary for the Offers, a total of $10,321,000 principal value of the Series C Debentures, a total of $7,237,000 of the Series D Debentures and a total of $7,567,000 principal value of the Series B Debentures had been deposited pursuant to the Offers. The Corporation will be taking up $2,000,000 Series C Debentures, $5,631,000 Series D Debentures and all of the $7,567,000 Series B Debentures deposited as of 11:59pm (Eastern Daylight Time) Friday July 13, 2012. As the aggregate principal value of Series C Debentures and Series D Debentures deposited under the Offer exceeds the amount the Corporation is taking up under the Offers, a pro-rata factor will apply such that debentureholders who deposited Series C Debentures will have approximately 19.38% of the Series C Debentures they deposited purchased and debentureholders who deposited Series D Debentures will have approximately 77.81% of the Series D Debentures they deposited purchased in accordance with applicable securities laws and as set forth in the Offer documents. Aggregate consideration for the Debentures acquired pursuant to the Offers will be $13,739,480.
The number of Series C Debentures and Series D Debentures deposited to the Offers and the pro-rata factor may be subject to adjustment should there be any Series C Debentures and Series D Debentures invalidly deposited. Series C Debentures and Series D Debentures deposited but not purchased, including Series C Debentures and Series D Debentures invalidly deposited, will be returned as soon as practicable by the depositary to the depositing debentureholder.
Payment for the Debentures tendered and accepted for purchase will be made as soon as practicable and in accordance with the Offers. The purchase for cancellation of Debentures represents approximately 4.2% of the Series C Debentures, 15.3% of the Series D Debentures and 22.7% of the Series B Debentures outstanding as of June 6, 2012, the date of the announcement of the Offers. After giving effect to the purchase for cancellation, approximately $45,204,000 principal value of the Series C Debentures, $31,147,000 principal value of the Series D Debentures and $25,807,000 principal value of the Series B Debentures will remain outstanding.
$2 Million Standby Facility
Royal Host has entered into a standby facility effective immediately (the "$2 Million Standby Facility") which provides a $2,000,000 commitment from Clarke Inc. ("Clarke"), the Company's 30% shareholder. The $2 Million Standby Facility provides the Company with greater flexibility in the financing of purchases of the Company's convertible debentures under the SIBs. The purchases of convertible debentures will have no impact on the Company's operating businesses and will provide benefits to its overall capital structure.
Pursuant to the terms and conditions of the $2 Million Standby Facility, Clarke has agreed that the Company may, a maximum of two times, draw any amount or amounts up to $2,000,000 for general corporate purposes including in order to make cash payments for any Debentures tendered pursuant to the Offers. Interest on the outstanding principal amount drawn shall accrue at a rate per annum equal to 10% from the drawdown date to January 15, 2013; at a rate per annum equal to 10.25% from January 15, 2013 to July 15, 2013; The Company has the right to prepay, from time to time, any portion of the principal amount drawn (plus all accrued interest thereon) under the $2 Million Standby Facility without penalty or fee. Any amount drawn under the Facility is repayable no later than July 15, 2013. The Company will pay Clarke a commitment fee on execution in the amount of $10,000, and it will pay a funding fee in the amount of 1.00% of the amount drawn (which is due on funding). The $2 Million Standby Facility is not convertible into securities of the Company.
Under the terms of this $2 Million Standby Facility, Clarke will not have approval rights over any additional indebtedness incurred by the Company. Royal Host shall provide a negative pledge of its entire interest in an asset located in Red Deer, Alberta as collateral on funding.
Additional terms of the $2 Million Standby Facility are substantially as set out in the $2 Million Standby Facility Agreement which will be filed on the SEDAR website at www.sedar.com.
The $2 Million Standby Facility constitutes a "related party transaction" under MI 61-101 as Clarke is a related party of Royal Host because Clarke owns more than 10% of the issued and outstanding common shares of the Company. Clarke also has a representative (George Armoyan) on the Company's Board of Directors. Geosam, a private investment company, has publicly announced that, pursuant to the Securities Act (Ontario), it is presumed to be acting jointly or in concert with Clarke and family members of George Armoyan, President of Geosam, with whom he resides.
The Corporation determined that exemptions from the formal valuation and minority approval requirements available under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101")apply to the $2 Million Standby Facility, as a formal valuation is not required under section 5.4 of MI 61-101 and minority approval is not required as the $ 2 Million Standby Facility is on reasonable commercial terms that are not less advantageous to Royal Host than if the loan or credit facility were obtained from a person dealing at arm's length with Royal Host. The Directors of the Company voted unanimously in favour of the $2 Million Standby Facility at a Board of Directors' meeting. George Armoyan, President and CEO of Clarke, and Blair Cook, a Director of Clarke, both abstained from voting.
Finally, for the purposes of clarity, the Company notes that the $2 Million Standby Facility is in addition to the previously disclosed $5 Million Standby Facility which, although it has separate terms, is also being provided by Clarke.
All dollar amount referenced in this release are in Canadian funds.
About Royal Host Inc.
Royal Host is a diversified hospitality company that delivers shareholder value through hotel ownership, investment and franchising. The Corporation's hotels, which contain 3,092 rooms, are located in five Provinces and Territories across Canada. Twenty-two of the Corporation's hotels operate under internationally recognized brands such as Travelodge®, Super 8®, Holiday Inn®, Hilton® and Country Inns & Suites®. Two of the Corporation's hotels are unbranded. In addition to its real estate holdings, the Corporation owns and operates the Travelodge Canada franchise business which is currently comprised of over 90 hotels across nine Provinces and Territories.
Royal Host's common shares and convertible debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL", "RYL.DB.B", "RYL.DB.C" and "RYL.DB.D" respectively.
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