Breakwater gets debt extension (December 23, 2002)

Zinc miner Breakwater Resources (BWR-T) has struck a deal with its banking syndicate and Dundee Bancorp to extend repayment of more than US$44 million on its existing credit facilities.

In late November, Breakwater admitted in its third-quarter financial report that it would not be able to repay its debt by the Jan. 2, 2002, deadline and that it was in talks aimed at securing an extension or a restructuring of the credit facilities.

Under the deal, the syndicate has agreed to continue its standstill on principal repayments on the existing term loan and revolving facility until Jan. 2, 2004.

Also, with the closing of the Nanisivik mine on Baffin Island, the US$45-million revolving facility will be reduced to US$30 million, which should be enough to keep Breakwater’s other mines running.

The plan also calls for the interest rate on the US$22.6-million non-revolving facility to climb to London Inter-bank Offer Rate (LIBOR) plus 2.75% from LIBOR plus 2.375%. Dundee will also extend its US$6.5-million letter of credit supporting the supplemental term facility of the same amount for the same period.

In return, the syndicate’s existing share purchase warrants will be re-priced, and the group will be granted an additional two million warrants; Dundee will get a million new warrants. The exercise price of the warrants will be based on the market price of the shares on the deal’s closing.

At the end of November 2002, US$29.1 million was owed under the term loans and US$15.2 million had been drawn down from the revolving facility.

The debt-extension plan has yet to be approved by regulators.

By mid-afternoon in Toronto on Dec. 23, 2002, Breakwater’s shares had risen half a penny to 13.