The Company received
The transaction was completed to alleviate the financial distress caused by the impact of the COVID pandemic on the Company’s revenues and cash flow, and to allow the Company to maintain access to its banking facility and have sufficient liquidity.
The Company’s consolidated revenues (including its proportionate share in its joint ventures) declined approximately 36% in April and May. In order to maintain operating cash flow and liquidity, the Company has been implementing a comprehensive program including a) significant operating cost reductions including wage rollbacks, reduced work weeks, temporary layoffs and a variety of other cost reduction measures, b) government assistance including the wage subsidy and work share programs, c) capital raising through the ERIS and STP transaction and d) amendment of its bank facility. The Company acted quickly to implement the cost reductions and is monitoring costs on an ongoing basis to remain in line with revenues.
Due to the financial impact of the pandemic, the Company requested and received temporary covenant relief and worked with its banking syndicate to implement the financial restructuring and capital raising plan in order to reach agreement on the bank facility amendment terms in a timely basis. As a result of the transaction, the banking facility has been amended, concurrently, to provide the Company with additional ongoing borrowing capacity.
Under applicable securities legislation and as a result of Madison's 42% shareholding in Glacier Media Inc. ("Glacier Media"), which owns 38% of the Company’s voting shares and 98% of the Company’s non-voting shares, Madison is considered “a related party” of GVIC for the purpose of this transaction. A Special Committee of the board of directors of the Company, comprised of the director independent from Madison and Glacier Media, was formed to review the transaction and determine whether the terms of the transaction are reasonable in the circumstances. The Special Committee retained
The Company and Special Committee considered a variety of financial restructuring options but deemed the sale of the partial interest of ERIS and STP to be the most favourable in the market conditions caused by the pandemic. The Special Committee concluded that there were no viable alternatives available on commercially reasonable terms in the time required that would be more likely to improve the financial situation of the Company as compared to the transaction. The Special Committee determined that the transaction was reasonable for the Company in the circumstances and recommended that the Company proceed with the transaction.
Selling the 45% interest in the Businesses and retaining the related cash flow for two years allows the Company to retain value in the Businesses and maintain a higher level of cash flow and greater overall operating scale. The transaction structure also allows the Company to potentially buy back the interest sold in the Businesses after three years. Given Madison's relationship with the Company and its familiarity with the Businesses, Madison was able to move quickly and was motivated to support the Company given its ownership of Glacier Media, the Company's largest shareholder.
The transaction is a “related party transaction” under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). As such, the transaction would ordinarily be subject to valuation and minority approval requirements under MI 61-101. However, GVIC relied on the “financial hardship” exemptions in sections 5.5(g) and 5.7(e) of MI 61-101 from the valuation and minority approval requirements, respectively. The Special Committee and the Board of Directors of the Company, acting in good faith, determined that the Company was in serious financial difficulty, that the transaction was designed to improve the financial condition of the Company, and that the terms of the transaction were reasonable in the circumstances of the Company.
In the coming days, a material change report will be filed under the Company's profile at www.sedar.com in connection with the transaction. In light of the Company's financial situation, closing occurred before the expiration of 21 days from the date of filing of the material change report, a delay contemplated in section 5.2(2) of MI 61-101. This shorter period was reasonable and necessary in the circumstances.
The
While the pandemic has impacted the Company’s revenues and operations, and it is unclear how long the pandemic will last and the extent of its financial impact, the Company is starting to see increased activity in its core businesses. Revenues recovered to some degree in May and June from April levels. While print advertising revenues have declined the most, the Company’s data, information and digital media businesses have held up better, the Company believes that the underlying fundamentals and value of these products have not changed and performance is expected to improve further as the pandemic abates and market conditions improve. As a result of the transaction, the Company is now in a stronger financial position with which to operate during the pandemic and continue to develop its core businesses.
Shares in GVIC are traded on the
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Cautionary Note Concerning Forward Looking Statements
This news release contains forward-looking statements that relate to, among other things, the Company’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates. These forward-looking statements include, among other things, statements relating to our expectations regarding revenues, expenses, cash flows, future profitability, recovery of businesses, the fundamentals of the businesses, availability of credit, the effect of the sale of an interest in the Businesses, our strategic initiatives and restructuring, including our expectations to grow certain operations, invest in key strategic areas, and to realize cost efficiencies and actions taken to alleviate the impact on the pandemic. These forward-looking statements are based on certain assumptions, including continued economic growth and recovery and the realization of cost savings in a timely manner and in the expected amounts, which are subject to risks, uncertainties and other factors which may cause results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, and undue reliance should not be placed on such statements.
Important factors that could cause actual results to differ materially from these expectations include failure to implement or achieve the intended results from our strategic initiatives, the failure to reduce debt and the other risk factors listed in our Annual Information Form under the heading “Risk Factors” and in our MD&A under the heading “Business Environment and Risks”, many of which are out of our control. These other risk factors include, but are not limited to, the impact of Coronavirus, that future cash flow from operations, including the Businesses, and the availability under existing banking arrangements are believed to be adequate to support financial liabilities and that the Company expects to be successful in its objection with CRA, the ability of the Company to sell advertising and subscriptions related to its publications, foreign exchange rate fluctuations, the seasonal and cyclical nature of the agricultural and energy sectors, discontinuation of government grants, general market conditions in both
The forward-looking statements made in this news release relate only to events or information as of the date on which the statements are made. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
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