OTTAWA -- Enablence Technologies Inc. ("Enablence" or the "Company") (TSX VENTURE:ENA), a leading supplier of optical components and subsystems for access, metro and long-haul markets, is pleased to announce an overall financing and debt conversion package (the "Financing") of up to $10.0 million, which includes a conditional new senior secured lender to the Company. The Financing includes a combined Equity Financing and Loan Facility of up to $7.0 million (described below) which would fund the Company's growth, including the ability to meet increasing volume requirements from key customers. The Equity Financing will also facilitate the ongoing Research and Development work being undertaken at Enablence's Ottawa office.
The Financing includes three components, the first of which is a non-brokered private placement financing (the "Equity Financing") for a minimum of $4.0 million at a price of $0.05 per unit ("Unit"). Each Unit would be comprised of one common share and one half of one common share purchase warrant ("Warrants"). Each Warrant would be exercisable for a period of 18 months at an exercise price of $0.06 per Warrant. All securities issued pursuant to the Equity Financing would be subject to a four month hold period.
The conditional component of the Financing is the provision of a loan facility for up to $3.0 million (the "Loan Facility") by a senior, investment grade lender. Enablence has received a "Non-Binding Indication" letter from the prospective lender. The Loan Facility is subject to a number of closing conditions including the completion of the Equity Financing for a minimum $4.0 million. The Loan Facility is designed to finance purchase orders from ZTE Corporation to Enablence. The Loan Facility would be in the form of a term loan with principal repayment commencing 18 months after funds are drawn. The Loan Facility would be secured against the assets of the Company with first ranking priority. Finally, as part of the Financing certain existing non-secured debt arrangements (not to exceed $3.0 million) may be required to be converted into equity, the details of which will be described in a further press release.
The Equity Financing, the Loan Facility and the debt conversion are each subject to TSX Venture Exchange approval.
The proceeds from the Financing are expected to enable the Company to increase capacity to meet current and expected future demand associated with a number of recent contracts awarded by a telecommunication equipment vendor. Enablence will also accelerate development of next generation integrated products to meet customer demands. Finally, in order to meet a condition of the new senior, secured lender, Enablence will use proceeds to repay its existing senior secured debt, the principal of which has a current balance of approximately US$1.6 million. This existing secured debt has recently been acquired by a lending group in Canada, secured against the assets of the Company in Canada and the United States, to replace the existing secured facility with a bank in the United States.
The lending group includes a company controlled by one of the directors of Enablence, De Jong & Co. As a result of this participation, this may be considered a related party transaction within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The independent directors of the Company have unanimously approved the debt acquisition and have determined that an exemption is available from the formal valuation requirements and minority shareholder approval requirements under MI 61-101. Louis De Jong abstained from voting on these matters. This information is being filed less than 21 days prior to the expected closing of the Related Party Transaction. The shorter period was necessary in order to permit the Company to move forward with the debt acquisition in a timely manner.
Enablence is also pleased to announce that Mr. Xu Ming, Vice President of ZTE Corporation, has agreed to join the board of directors of the Company. ZTE Corporation is a globally-leading provider of telecommunications equipment and network solutions which has, as previously announced by the Company, entered into a Business Cooperation Agreement with Enablence outlining existing and future research and development and product supply collaboration between Enablence and ZTE Corporation.
Enablence Technologies Inc. (Toronto: ENA)