Cash Offer for Debentures, Warrant Repurchase, Indenture Amendments

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TORONTO, Nov. 30, 2021 (GLOBE NEWSWIRE) -- Stone Investment Group Limited (the "Corporation") announced today the separation of its Debentures and Warrants, the repurchase of its Warrants for cancellation for $0.05 per Warrant, and an offer to acquire 7,293 Debentures for $670 per Debenture.

Separation of Debentures and Warrants on November 24, 2021

The Corporation issued 12,000 units (the "Units") on December 28, 2006, each Unit comprising one $1,000 principal amount senior secured debentures (each a "Debenture") and 600 common share purchase warrants (the "Warrants"). Effective November 24, 2021, the Units separated into 12,000 Debentures and 7,200,000 Warrants, with the holder of a Unit becoming a holder of one Debenture and 600 Warrants on that date. The separation of the Debentures and Warrants required technical amendments to the warrant indenture dated December 28, 2006 (as supplemented and amended, the "Warrant Indenture") and the trust indenture dated December 28, 2006 (as supplemented and amended, the "Trust Indenture").

Warrant repurchase for cancellation at $0.05 cash per Warrant

On November 24, 2021, the Corporation initiated the repurchase for cancellation of all of the Warrants at a repurchase price of $0.05 per Warrant payable in cash. The holder of a former Unit is now the holder of 600 Warrants and will receive an aggregate of $30 cash for those 600 Warrants. The repurchase of the Warrants for cancellation applies to all Warrantholders and will be completed on December 21, 2021. No action is required of the Warrantholders.

Cash Offer to purchase 7,293 Debentures at $670 per Debenture

Stone-SIG Acquisition Limited (the "Offeror"), a wholly-owned subsidiary of the Corporation, is offering to purchase 7,293 Debentures at an offer price of $670 per Debenture payable in cash (the "Cash Offer"). The holder of a former Unit is now the holder of one Debenture and is being offered $670 cash for that Debenture. The Cash Offer is being made to all Debentureholders but only the first 7,293 Debentures duly deposited to the Cash Offer will be accepted by the Offeror. A Debentureholder cannot participate in the Cash Offer unless the Debentureholder completes and delivers a letter of transmittal (the "Letter of Transmittal"), the form of which is being delivered to the Debentureholders together with an offer document describing the Cash Offer (the "Offer Document"). The Offer Document contains additional information regarding the Cash Offer and related transactions. The Offeror will not accept Letters of Transmittal until December 2, 2021, three business days following the launch of the Cash Offer. The Cash Offer is expected to be completed on or about December 21, 2021 but it could be completed earlier.

Financing for the Cash Offer has been arranged

The Offeror has entered into a credit agreement dated November 29, 2021 (the "Financing") with an arm's length commercial lender (the "Lender"). The Debentures acquired pursuant to the Cash Offer will be pledged to the Lender as security for the loan. The Lender will be granted voting authority in respect of the pledged Debentures. The obligations of the Offeror on the Financing are guaranteed by the Corporation. The funding amount provided is limited such that not all Debentures can be acquired.

Extension of the maturity date of the Debentures to December 28, 2026

The Financing is conditional on, among other things, the amendment of the Trust Indenture to extend the maturity date of the Debentures from December 28, 2021 to December 28, 2026.

Other amendments to the Trust Indenture

The Financing is also conditional on the amendment of the Trust Indenture to clarify and supplement the provisions relating to a subsidiary of the Corporation, such as the Offeror, acquiring and holding the Debentures pursuant to the Cash Offer, pledging those Debentures to the Lender and conferring voting authority on the Lender while the Debentures remain pledged.

Fifth Supplemental Trust Indenture

The extension of the maturity date of the Debentures and the other amendments to the Trust Indenture are set out in a supplemental trust indenture (the "Fifth Supplemental Trust Indenture"). The Letter of Transmittal includes voting authorization to vote in favour of an Extraordinary Resolution (as that term is defined in the Trust Indenture) to approve and authorize the signing of the Fifth Supplemental Trust Indenture. The form of Fifth Supplemental Trust Indenture is attached to the Letter of Transmittal sent to Debentureholders.

Related party transactions

Richard Stone is a director and senior officer of the Corporation and of the Offeror. Mr. Stone also holds approximately 45.4% of the outstanding common shares of the Corporation. As such, Mr. Stone is a related party of the Corporation and of the Offeror.

Mr. Stone beneficially owns, or has control or direction over, 728 Debentures (6.067% of the issued and outstanding Debentures). Where an issuer amends the terms of a class of securities and a related party of the issuer beneficially owns or has control or direction over securities of that class, the amendment is a related party transaction under category (h) of the definition of "related party transaction" in section 1.1 of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Mr. Stone will hold or control the Stone Debentures at the time Extraordinary Resolution is passed, thereby causing the amendment to constitute a related party transaction (the "Debenture Amendment Related Party Transaction").

The independent directors of the Corporation have determined that the Corporation is in serious financial difficulty and, on that basis, is able to rely upon the financial hardship exemption from the minority approval requirement of MI 61-101 (section 5.7(1)(e) of MI 61-101) and the formal valuation requirement of MI 61-101 (section 5.5(g) of MI 61-101). The Corporation and the Offeror are relying on those exemptions in proceeding with the Debenture Amendment Related Party Transaction without seeking minority approval and without preparing a formal valuation. The independent directors of the Corporation have determined that the Financing and the completion of the Cash Offer will improve the financial outlook of the Corporation and that the Debenture Amendment Related Party Transaction is reasonably necessary in order to achieve this result.

Material Change Report

Section 5.2(2) of MI 61-101 requires an explanation where the issuer will file a material change report less than 21 days before the expected date of the closing of the transaction that is a related party transaction as described in the material change report. In this case, the related party transaction is the Debenture Amendment Related Party Transaction, which will be completed on the date on which the Fifth Supplemental Trust Indenture is approved. It is expected that such approval will be effected on or about December 15, which is just short of the 21 day period, but it is possible that it could occur a few days earlier depending on how quickly duly completed Letters of Transmittal are received. The Corporation believes that this shorter period is reasonable and necessary in the circumstances as the Corporation wishes to improve its financial position by completing the transaction as soon as possible. In any event, it is not practicable to defer the approval of the Fifth Supplemental Trust Indenture because the completion of the purchase of the Debentures is fixed at a minimum of three business days after such date and there isn't time to get that done in advance of the holiday season if these key events are delayed. The ability to execute the purchase of the Debentures becomes more precarious as the completion date slides into the holiday season.

About Stone Investment Group Limited

The Corporation is an independent wealth management company. The Corporation, through its wholly-owned subsidiary, Stone Asset Management Limited, structures and manages high quality investment products for Canadian investors.

For more information:
Stone Investment Group Limited
Jason Stone
Investor Relations
T 416 867 2533 T 800 336 9528
E jasons@stonecom.com
www.stoneco.com

Disclaimer for Forward-Looking Information

This news release includes certain “forward-looking statements” under applicable Canadian securities legislation that are not historical facts. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results, performance, prospects, and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements in this news release include, but are not limited to, statements regarding: the Debentures, the Cash Offer and the operations of the Corporation. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors that may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic and social uncertainties; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments and other risks outside of the Corporation's control. Additional risk factors are included in the Company’s Management’s Discussion and Analysis, available under the Corporation's profile on SEDAR at www.sedar.com. Although the Corporation believes that the assumptions and factors used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. Except as required by applicable laws, the Corporation disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.


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