SPOKANE, WA,
June 1, 2012 /CNW/ - Gold Reserve
Inc. (TSX VENTURE:GRZ) (NYSE-MKT: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 Company is modifying the Notice of Right of
Repurchase and its terms which were announced on May 17, 2012. On May 17,
2012 the Company announced that it had agreed with Holders
of 87.8% of the notes ("Majority Noteholders") to restructure their
Notes, subject to shareholder approval and such consents as may be
required under the Indenture, that will allow the Company to
restructure the Notes with a combination of cash, common shares,
modified terms for the remaining balance of the Notes and a
Contingent Value Right as described further below. The Company is
now offering the terms of that restructuring arrangement to all
remaining Noteholders such that the Holders of the remaining 12.2%
of the Notes now can elect to have their Notes repurchased for 100%
cash or accept the same arrangement as was agreed with the Majority
Noteholders.
Proposed Alternative Election of Noteholders
The Company has amended its Tender Offer Statement with respect
to the Right of Repurchase ("Amended Notice") to include an
alternative election (the "Alternative Election") that will be
available to all remaining 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) additional cash consideration
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
June 15, 2012 Noteholder put option
(the "Put Option") will be deferred until September 14, 2012 for Holders, including the
three largest Noteholders, that have made the Alternative Election
and the terms of the Notes subject to the Alternative Election will
be amended in certain other respects as described in the Amended
Notice.
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.
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 pursuant to the Put
Option at any time no later than 5 p.m.,
EDT, on June 15, 2012.
Holders that wish to elect the Alternative Election must deliver
a letter of transmittal no later than 5:00
p.m., New York City time,
on June 29, 2012 pursuant to the
instructions in the Amended Notice.
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.
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
"This transaction will minimize to the extent practicable
shareholder dilution and management and the Board of Directors
recommend that shareholders approve this transaction and will be
voting their own shares in favor of this transaction. This
transaction is good for all stakeholders in that it rationalizes
the capital structure of the Company, with greater certainty going
forward, while dealing with the refinancing of $102.5 million in convertible debt that can be
put to the Company on June 15,
2012."
Holders of Notes are urged to read the Amended Notice, letters
of transmittal and related offer materials when they become
available because they contain important information. An amendment
to our Tender Offer Statement, which includes the offer materials,
is being filed with the Securities and Exchange Commission ("SEC")
today. The Amended Notice, letters of transmittal and related
documents may be obtained free of charge at the SEC's website,
www.sec.gov or by directing a request to the Company.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of these securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful.
Further information regarding the Company can be located at
www.goldreserveinc.com, www.sec.gov and www.sedar.com.
"Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release."
SOURCE Gold Reserve Inc.