Princeton files plan for Cassiar

Pursuant to the Companies’ Creditors Arrangement Act, Princeton Mining (TSE) has filed a reorganization plan with the British Columbia Supreme Court for the company’s wholly owned subsidiary, Cassiar Mining.

Cassiar sought court protection from bankruptcy proceedings in mid-October as a result of continuing operating losses at its underground asbestos mine in northern British Columbia.

For the 9-month period ended Sept. 30, Cassiar reported an operating loss of $6.9 million before depreciation and taxes.

Under the reorganization plan, Cassiar hopes to reach a settlement with the company’s unsecured creditors as well as restructure secured debt obligations. The plan, when combined with new loan guarantees and changes to employee and customer contracts, is expected to leave Cassiar as a profitable entity.

If Cassiar is not successful in implementing the plan, the company stated it will be unable to attain any long-term viability and will be forced into bankruptcy.

As at Sept. 30, Cassiar had a working capital deficit of $6.9 million and long-term debt totalling $26.2 million.

Since seeking court protection, Cassiar has taken steps to sell its dock facilities in North Vancouver for an estimated $4.1 million. In addition, Cassiar’s union employees have agreed, subject to repayment, to extend the collective agreement for one year and defer a 4% wage increase due in the new year until Jan. 1, 1993.

Cassiar’s customers have agreed to price increases of 12-15% effective Jan. 1, 1992.

The proposed reorganization calls for the Province of British Columbia to convert its current loan into Cassiar preferred shares with a face value of $26 million. The preferred shares will be redeemed from 30% of the company’s cash flow after capital expenditures and after payback of new loan commitments set out in the reorganization.

Current terms of the government loan agreement call for the funds to be paid back out of 50% of the project’s cash flow after the bank loan has been repaid.

The preferred shares will also be convertible into a 25% common share equity position in Cassiar.

The Bank of Montreal is owed $14.1 million under a demand loan facility and Cassiar is requesting the bank convert $5 million of the loan to a term loan paying interest at the prime rate. The principal will be repaid at $100,000 per month starting in November, 1992.

The reorganization also calls for the province to replace its existing $5-million guarantee, in favor of the bank’s demand loan, with a guarantee of the proposed term loan from the bank.

Trade creditors will be paid amounts owed as of Oct. 15, 1991, with no interest.

In order to complete the reorganization, British Columbia must also agree to provide a loan of $17 million with interest charged at the prime rate and capitalized until repayment.

The loan will be repaid out of 100% of cash flow starting in January, 1994. Security for the loan is provided by common equity in Cassiar with each $1 million convertible into 1% of the equity of Cassiar.

The company needs the funds for further underground development in the McDame mine. The cost of the work is estimated at $12 million, and if it is not completed, developed reserves will be exhausted by late 1992. Cassiar hopes to compete the reorganization by the Jan. 15 deadline set out in the court protection order.