In connection with the Transaction, Bellatrix has entered into a subscription agreement dated as of June 22, 2022 (the “Subscription Agreement“) with the Purchaser and 2350810 Alberta Ltd. (“Newco“), a wholly-owned subsidiary of Bellatrix. Pursuant to the Transaction: (i) certain assets (including, without limitation, all existing cash and the subscription proceeds in respect of the Purchased Shares), and all existing liabilities of Bellatrix (other than certain retained liabilities) will be transferred and novated to Newco, (ii) the Purchaser will subscribe for the Purchased Shares for $6,000,000, (iii) all equity interests existing immediately prior to the closing time of the Transaction (for certainty, not including the Purchased Shares) will be cancelled for no consideration or claims therefor, and (iv) any directors of Bellatrix immediately prior to the closing time of the Transaction will be deemed to resign, and two new directors will be, and will be deemed to be, appointed as directors of Bellatrix. The available net proceeds from the Transaction will be distributed pursuant to the Company’s CCAA proceedings to holders of the Company’s second lien notes, whose claims rank in priority to claims of holders of the Company’s third lien notes, unsecured creditors and shareholders.
The Transaction is the result of Bellatrix’s efforts to maximize additional value for the benefit of its stakeholders, following the sale transaction completed by Bellatrix in June 2020 pursuant to its CCAA proceedings, and following the Company’s previously announced transaction with 1184262 B.C. Ltd., an affiliate of Hillcore Group Ltd., which was approved by the Court and announced by the Company in June 2021 (the “June 2021 Transaction“) but not ultimately completed. Following the termination of the June 2021 Transaction, the Company, with the assistance of its advisors and in consultation with the Court-appointed monitor in its CCAA proceedings (the “Monitor“), reviewed the potential transaction options and alternatives available to Bellatrix, and determined that the Transaction represents the best available alternative in the circumstances.
The Company intends to seek Court approval of the Transaction on July 7, 2022 pursuant to an Approval and Vesting Order (the “Court Order“).
Among other requested relief under the Court Order, the Company is seeking authority to complete the Transaction with such Court Order as the only authorization required by Bellatrix or Newco to proceed with the Transaction. The proposed Court Order provides that no director or shareholder approval shall be required and no authorization, approval or other action by or notice to or filing with any governmental authority or regulatory body exercising jurisdiction in respect of Bellatrix is required for the due execution, delivery and performance by Bellatrix and by Newco of the Subscription Agreement and the completion of the Transaction. Without limiting the foregoing, pursuant to the proposed Court Order, the Transaction shall not be subject to, and Bellatrix shall not be required to comply with the requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, National Policy 11-207 – Failure-to-File Cease Trade Orders or the cease trade order issued by the Executive Director of the Alberta Securities Commission in respect of Bellatrix dated July 22, 2020 (the “CTO“) in connection with implementing the transaction steps contemplated as part of the Transaction; however, the CTO shall remain in effect after the Transaction is fully implemented (other than with respect to any subsequent dissolution of Bellatrix or amalgamation with the Purchaser).
Subject to the Company obtaining the Court Order, no action is required from existing equity securityholders to complete the Transaction. Pursuant to the Transaction, the existing holders of common shares of Bellatrix shall dispose of their common shares for no consideration, which may result in potential tax filing obligations for certain holders that are non-residents of Canada. Holders who are non-residents of Canada should consult with their tax advisors.
The proposed Court Order also provides for releases in favour of (i) the present and former directors, officers, employees, legal counsel and advisors of Bellatrix and Newco (or either of them), and (ii) the Monitor and its legal counsel, in respect of any claims relating to any act or omission, transaction, dealing or other occurrence in connection with the Transaction or completed pursuant to the Court Order, other than those claims that are not permitted to be released pursuant to section 5.1(2) of the CCAA.
Materials publicly filed in the CCAA proceedings are made available on the Monitor’s website at http://www.pwc.com/ca/bellatrix.
Goodmans LLP is acting as legal counsel to Bellatrix in connection with the Transaction and the CCAA proceedings.