North American Palladium announced in mid-April 2015 a recapitalization agreement with Brookfield Capital Partners Ltd. aimed at significantly reducing the company’s debt and enhancing its liquidity. If fully realized, the agreement will result in Brookfield owning 92% of North American Palladium’s common shares.
North American Palladium owns and operates the Lac des Iles mine 90 km northwest of Thunder Bay, Ontario, Canada. Production is predominantly palladium (174,194 oz in 2014) but also includes platinum, gold, nickel, and copper.
North American Palladium has retained CIBC World Markets to act as its financial advisor in connection with the recapitalization and to conduct a strategic review process to solicit interest in a sale of the company. The company has until June 30 to obtain a superior proposal to the recapitalization agreement, with closing of such superior proposal to occur within a specified timeframe thereafter.
North American Palladium also has obtained covenant relief from its senior secured lenders until August 15 regarding certain financial and other covenants. Although North American Palladium produced approximately 45,600 payable oz of palladium in the first quarter of 2015, covenant relief was required as a result of a decline in palladium prices, weakening of the Canadian dollar, and lower production volumes combined with higher expenses in March, which impacted the minimum shareholders’ equity and leverage ratio covenants.
North American Palladium also entered into an immediately available $25-million interim credit facility with Brookfield. Normal business operations are ongoing at Lac des Iles, and the company anticipates that its obligations to employees, trade creditors, equipment leases, and suppliers will not be affected by the recapitalization.
North American Palladium president and CEO Phil du Toit commented, “The sale process and recapitalization plan represent the best alternatives available at this time to preserve substantial value in the assets and operations of the company, and to pursue longer-term growth and expansion opportunities at Lac des Iles. We believe decreasing the debt burden and strengthening the capital structure is essential for the company’s future.”