Calgary, Alberta–(Newsfile Corp. – February 28, 2019) – Divestco Inc. (TSXV: DVT) (“Divestco” or the “Company“) announces that its Board of Directors has approved the Company’s initiation of proceedings at the Court of Queen’s Bench of Alberta to seek creditor protection under the Companies’ Creditors Arrangement Act (the “CCAA“).
After careful consideration of all other available alternatives, Divestco’s Board of Directors has determined that it is in the best interests of the Company and its stakeholders to apply for creditor protection under the CCAA and has, therefore, instructed Divestco to initiate proceedings under the CCAA at the Court of Queen’s Bench of Alberta as soon as possible.
In recent years Divestco has been significantly impacted by the ongoing financial downturn affecting the oil and gas industry in Canada, which Divestco operates within. The loss of revenue experienced by Divestco as a result of industry conditions coupled with legacy administrative overheads has placed significant stress on the Company’s cash flow. Consequently, Divestco has needed to raise significant amounts of capital to fund the business losses due to its profitability being affected by the downturn. This has placed Divestco at a competitive disadvantage and Divestco has effectively been operating under increasing financial distress.
As part of the CCAA application, Divestco intends to seek approval of the appointment of Grant Thornton Limited as the Monitor to oversee the CCAA proceedings and report to the Court. Further, Divestco expects to secure commitments for up to an aggregate amount of $1,500,000 of debtor-in-possession financing (“DIP Financing“) from certain of its directors, officers and existing shareholders to assist it with meeting its ongoing operating obligations while a restructuring plan is executed. As at the time of this news release, Divestco has obtained an initial advance of $200,000 of DIP Financing. The DIP Financing is being provided on the basis that all amounts borrowed by the Company thereunder will be secured by a priority security interest over all of the property of Divestco and will accrue interest at a rate of 18% per annum. Divestco is required to pay an initial facility fee in the aggregate amount of $25,000.
During the CCAA proceedings, as a result of the DIP Financing, it is expected that every day obligations to employees, key suppliers of goods and services and Divestco’s customers will, after the filing date, continue to be met. While under CCAA protection, management of the Company will remain responsible for the day- to-day operations of the Company under the general oversight of the Monitor. At this time, there are no intended changes to the management team or the composition of the Board of Directors of the Company and the Company anticipates that such individuals will continue in their respective roles throughout the CCAA process.
The Company intends to seek approval to initiate a sale and investment solicitation process to be conducted in conjunction with the CCAA proceedings, intended to generate interest in the business and/or the assets of the Company, with the goal of maximizing value for all stakeholders of the Company.
CCAA protection is the form proposed by Divestco as the Company believes that it will provide Divestco the additional time and access to funds required to address the financial challenges, and to pursue its reorganization. There can, however, be no guarantee whatsoever that the CCAA Proceedings and any restructuring thereunder will resolve Divestco’s financial issues or result in the realization by Divestco stakeholders of any particular value.
In accordance with the policies of the TSX Venture Exchange (“TSX-V“), as a result of the commencement of a CCAA process, Divestco’s exchange listing and tier classification will be downgraded from the TSX-V to the NEX.
About the Company
Divestco is an exploration services company that provides a comprehensive and integrated portfolio of data, software, and services to the oil and gas industry. Through continued commitment to align and bundle products and services to generate value for customers, Divestco is creating an unparalleled set of integrated solutions and unique benefits for the marketplace. Divestco’s breadth of data, software and services offers customers the ability to access and analyze the information required to make business decisions and to optimize their success in the upstream oil and gas industry. Divestco is headquartered in Calgary and trades on the TSX Venture Exchange under the symbol “DVT”. Additional information on Divestco is available on its website at www.divestco.com and on SEDAR at www.sedar.com.
For more information please contact:
Divestco Inc. (www.divestco.com)
Mr. Stephen Popadynetz
CEO and President
Mr. Steve Sinclair-Smith
Chief Operating Officer
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Forward Looking Information
This news release contains certain information that constitute forward-looking information under applicable securities legislation. All information other than statements of historical fact is forward-looking information. In some cases, forward- looking information can be identified by terminology such as “will”, “expect”, “plan”, “intend”, “should”, “plan”, “estimate”, “potential”, “continue”, or the negative of these terms or other comparable terminology. The forward-looking information included in this news release includes, without limitation, information concerning Divestco’s plans to implement CCAA proceedings, the availability and terms and impact of the DIP Financing, the appointment of Grant Thornton Limited as the Monitor, the downgrade of Divestco to the NEX, the management and ability of Divestco to continue to operate its business in the manner contemplated above and the investment solicitation process.
The forward-looking information included in this news release is based on current expectations, estimates, projections and assumptions, which the Company believes are reasonable but which may prove to be incorrect and therefore such forward- looking information should not be unduly relied upon. The forward-looking information provided by Divestco in this news release is based on a number of assumptions regarding, among other things: industry activity; the general stability of the economic and political environment; the effect of market conditions on demand for the Company’s products; the level of interest Divestco may receive during its investment solicitation process; that the DIP Financing will be sufficient to meet Divestco’s forecasted and budgeted expenses and that such expenses will not exceed the level of financing received; the ability of Divestco to obtain and retain qualified staff, equipment and services in a timely and cost efficient manner; continuity in the management of Divestco; the ability of Divestco to operate its business in a safe, efficient and effective manner; the effect of current plans; the timing and costs of capital expenditures; and the ability of the Company to successfully market its products.
The forward-looking information contained herein also involves a significant number of known and unknown risks, uncertainties which may cause actual results or performance to be materially different from any future results or performance expressed or implied herein. These risks, uncertainties and other factors relating to the Company include, but are not limited to: the level of indebtedness of the Company; the implementation and impact of obtaining any reorganization or restructuring of the assets, business and financial affairs of the Company; future co-operation of the creditors of the Company and the ongoing willingness of its lenders under the DIP Financing to provide funds to Divestco; the Company’s ability to generate sufficient cash-flow from operations or to obtain adequate financing on an ongoing basis to fund capital expenditures and working capital needs and to meet the Company’s ongoing obligations during the CCAA process and thereafter; the downgrade of the Company’s listing to the NEX is likely to have a significant and negative impact on the liquidity of Divestco’s shares and there can be no certainty as to Divestco’s ability to meet the listing requirements of the NEX; the ability to maintain relationships with suppliers, customers, employees, shareholders and other third parties in light of the Company’s current liquidity situation and the CCAA proceedings; the success of the investment solicitation process; as well as other general risks including issues relating to the ongoing industry and political climate in Alberta. Additional risks and uncertainties affecting the Company and its business and affairs are described in further detail in the Company’s ongoing continuous disclosure documents, including its Annual and Interim Reports, as filed under the Company’s profile on the System for Electronic Document Analysis and Retrieval.
Any forward looking information included in this news release is expressly qualified in its entirety by this cautionary statement. Any forward looking information included herein is made as of the date of this news release and the Company assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.