SPOKANE, WA,
May 17, 2012 /CNW/ - 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.
SOURCE Gold Reserve Inc.