Gold Reserve Inc. (TSX VENTURE:GRZ) (NYSE-Amex:GRZ) (the
“Company”) announced today that it is notifying holders (“Holders”
or “Noteholders”) of its 5.50% Senior Subordinated Convertible
Notes due 2022 (the “Notes”) that the Holders have the option,
pursuant to the terms of the Indenture, dated as of May 18, 2007
(the “Indenture”), governing the Notes, to require the Company to
purchase, in cash, all or a portion of their Notes at a price equal
to 100% of the principal amount of the Notes, plus any accrued and
unpaid interest (the “Put Option”).
The Company is also very pleased to announce today that it has
agreed to a restructuring proposal with its three largest
Noteholders in connection with the Put Option. The agreement with
these Noteholders, representing 87.8% of the outstanding Notes,
subject to shareholder approval and subject to such consents as may
be required under the Indenture, will allow the Company to redeem
and restructure its Notes with a combination of cash, common
shares, new terms for the remaining balance of the Notes and a
Contingent Value Right, each as further described below.
As required by the rules of the U.S. Securities and Exchange
Commission (the “SEC”), the Company is filing its Tender Offer
Statement on Schedule TO with the SEC notifying the Holders of the
Put Option. The Company will pay for any Notes validly surrendered
for cash. Because of the agreement reached with its three largest
Noteholders, the Company anticipates that a maximum of $40.6
million will be required to fund the purchase of the Notes if all
of the Holders put their Notes pursuant to the Put Option and
assuming the restructuring is consummated with its three largest
Noteholders upon the terms described in this release. The Company
anticipates filing an amendment to the Schedule TO within 10 days
to provide other Holders with an election to participate in the
restructuring agreed among the Company and its three largest
Noteholders.
In order to surrender the Notes for repurchase pursuant to the
Put Option, Holders must deliver a Repurchase Notice to The Bank of
New York Mellon, as successor in interest to the Bank of New York,
the Trustee and paying agent for the Notes under the Indenture, no
later than 5:00 p.m., New York City time, on June 15, 2012. Holders
of Notes complying with the transmittal procedures of The
Depository Trust Company need not submit a physical Repurchase
Notice to The Bank of New York Mellon. Holders may withdraw any
Notes previously surrendered for repurchase at any time no later
than 5 p.m., EDT, on June 15, 2012.
Pursuant to the Indenture, the Notes are currently convertible
into 132.626 shares of the Company’s common stock per $1,000
principal amount of Notes, subject to adjustment under certain
circumstances.
The Company will make available to Holders, through The
Depository Trust Company, documents specifying the terms,
conditions and procedures for surrendering and withdrawing Notes
for repurchase. Holders are encouraged to read these documents
carefully before making any decision with respect to the surrender
of the Notes, because these documents contain important information
regarding the details of the Company’s obligation to repurchase the
Notes.
Proposed Alternative Election of Noteholders
The Company anticipates amending the Schedule TO within 10 days
to announce an alternative election (the “Alternative Election”)
that will be available to all Holders of Notes to reflect the terms
of a proposed restructuring of the Notes that has been agreed to
with its three largest Noteholders (the “Restructuring”). The
Company anticipates that, subject to shareholder approval, each
Holder will have the option to require the Company to purchase all
or a portion of their Notes for the following consideration for
each $1,000 in principal amount of Notes: (i) $200 in cash, (ii)
147.06 common shares, (iii) $300 of amended notes which will remain
outstanding under the indenture governing the Notes, as amended,
(iv) a Contingent Value Right (“CVR”) entitling the holder to a
percentage of an award or settlement of the Company’s ICSID
arbitration claim against the Government of Venezuela with respect
to the expropriation of the Company’s Brisas Project and any
proceeds from the sale of its mining data, and (v) a cash
“alternative election fee” payable based on each Holder’s pro rata
percentage of Notes restructured pursuant to the Alternative
Election in an aggregate amount of up to $1 million (collectively,
the “Alternative Consideration”). The maximum CVR net of taxes and
other deductions that will be paid if all Holders elect this
proposed alternative transaction will not exceed 5.81% of an award
or settlement and sale of the mining data. The Restructuring will
be subject to the approval of the Company’s shareholders at its
annual and special meeting scheduled to be held on June 27, 2012.
In the event that the Restructuring is not approved by the
shareholders, in lieu of the transaction described above, the Put
Option will be deferred until September 14, 2012, for those
Holders, including the three largest Noteholders as well as any
other Holders that make the Alternative Election and the terms of
the Notes subject to the Alternative Election will be amended in
certain other respects.
Holders of approximately 87.8% of the outstanding Notes have
agreed to elect, in the aggregate, to require the Company to
repurchase 14.1% of their Notes pursuant to the Put Option and to
require the Company to repurchase approximately 85.9% of their
Notes for the Alternative Consideration, if approved. The Company
anticipates providing additional details of the Alternative
Election in the near future.
Assuming that all Notes other than those held by the three
largest Holders are surrendered for repurchase, then together with
the maximum principal amount of $12.7 million of Notes that are to
be surrendered by the three largest Holders in connection with the
Put Option, the Company anticipates that it will utilize a maximum
of $40.6 million of cash and, depending on the election of the
Holders, may issue from 11.4 million to 13.2 million common shares
to repurchase the Notes in connection with the restructuring.
This press release does not constitute an offer to purchase the
Notes. The offer to repurchase is made solely by the “Company
Repurchase Notice to the Holders of Gold Reserve Inc. 5.50% Senior
Subordinated Convertible Notes due June 15, 2022,” dated May 16,
2012, as the same may be amended.
Annual and Special Shareholders Meeting
At the annual and special shareholders meeting scheduled to be
held on June 27, 2012, the Board of Directors and management of the
Company will recommend shareholders approve the Restructuring.
Members of the Board and management intend to vote all of the
Company’s shares held by them in favor of the Restructuring. In
connection with these transactions, members of the Board and
management have also agreed to a one-time waiver of rights under
their Change of Control and Retention Units Agreements that would
contractually arise as a result of a party acquiring more than 25%
of the Company’s shares.
Shareholders of record on May 21, 2012, will be receiving a
Management Information Circular shortly that will describe the
Restructuring in more detail, as well as other matters, including
an amendment and continuance of the Company’s Shareholder Rights
Plan.
Doug Belanger, President, stated, “The successful repurchase of
the 5.50% Senior Subordinated Convertible Notes pursuant to the Put
Option and restructuring agreement will minimize shareholder
dilution, to the extent practicable, and position the Company
financially to complete its arbitration activities and to execute
its business plan to continue as an operating mining company. This
process for this transaction has been very constructive and we
believe beneficial to both the existing shareholders and
Noteholders. A majority of our Noteholders, some of whom are also
large shareholders, confirmed their strong support for the
Company’s ongoing efforts related to our $2.1 billion ICSID
arbitration claim against Venezuela for the expropriation of our
Brisas Project and the ongoing operating plan, including the recent
agreement with Soltoro Limited related to their La Tortuga
property, located in Mexico.” Mr. Belanger further stated that,
“The Company is continuing to pursue settlement discussions with
Venezuela with the objective of reaching an amicable settlement
that is beneficial to our stakeholders. On behalf of the Board of
Directors we also thank the shareholders for their continuing
support.”
Further information regarding the Company can be located at
www.goldreserveinc.com, www.sec.gov and www.sedar.com.
Certain information discussed in this press release constitutes
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995 and forward-looking information as
defined in Canadian securities laws. Although the Company believes
that the expectations reflected in such forward-looking statements
are based on reasonable assumptions, it can give no assurance that
its expectations will be achieved. Forward-looking information is
subject to certain risks, trends and uncertainties that could cause
actual results to differ materially from those projected. Among
those factors are those outlined in the “Cautionary Statement
Regarding Forward-Looking Statements” and “Risks Factors” contained
in Gold Reserve’s filings with the Canadian provincial securities
regulatory authorities and U.S. Securities and Exchange Commission,
including Gold Reserve’s Annual Information Form and Annual Report
on Form 10-K, as amended, for the year ended December 31, 2011,
filed with the Canadian provincial securities regulatory
authorities and U.S. Securities and Exchange Commission,
respectively, as well as this release. The Company undertakes no
obligation to update any forward-looking statements except as
required by law.
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