CALGARY, May 30, 2016 /CNW/ - Sterling Resources Ltd. (TSX-V: SLG) ("Sterling" or the "Company") announces today that it has closed the recapitalization previously announced on March 11, 2016 (the "Recapitalization") and set out in the recapitalization agreement (the "Recapitalization Agreement") Sterling had entered into on March 11, 2016 with its subsidiary, Sterling Resources (UK) Ltd. ("SRUK") and Nordic Trustee ASA (the "Bond Trustee") in relation to the UK senior secured bond (ticker on Nordic ABM exchange: STRE01 PRO) (the "Bond") issued pursuant to a bond agreement originally dated May 2, 2013, as subsequently amended and restated most recently on November 30, 2015 and as further amended by amendment letters dated January 29, 2016, February 16, 2016, February 22, 2016, February 29, 2016 and March 15, 2016 (the "Bond Agreement").

Pursuant to the Recapitalization, the Company completed the following:

• Rights Offering. The Company issued an aggregate of 84,663,364 Common Shares to holders of rights (each, a "Right") as a result of the Company's rights offering previously announced on March 11, 2016 (the "Rights Offering") who exercised their Rights prior to 5:00 p.m. (Eastern time) (the "Expiry Time") on May 19, 2016 (the "Expiry Date").
  
  Each Right entitled the holder thereof to subscribe for 32.333333333 Common Shares at a subscription price of $0.015398 per common share ("Common Share") in the capital of Sterling (the "Subscription Price"). A total of 2,618,100 Rights were exercised prior to the Expiry Time on the Expiry Date and an additional 11,468 Common Shares were subscribed for pursuant to the Additional Subscription Privilege (as such term is defined in the Recapitalization Agreement) for aggregate gross proceeds of $1,303,646.48 (the "Rights Offering Proceeds").
  
  The Company used the Rights Offering Proceeds (after conversion into US dollars) solely to fund the release and cancellation of that portion of the liabilities of the Company and SRUK under or in connection with the Bonds, including the obligation to repay the principal amount thereof, together with any accrued and unpaid redemption premium, amendment fees and interest ("Bond Liabilities") equal to the Rights Offering Proceeds (the "Purchased Liabilities"). The Purchased Liabilities were selected pro rata by DNB Bank ASA from each holder of Bonds (each, a "Bondholder") based on the aggregate Bond Liabilities owed to each such Bondholder at the relevant time relative to the entire aggregate Bond Liabilities then outstanding.

• Bond Exchange. The Company issued an aggregate of 14,192,862,213 Common Shares to the Bond Trustee, for and on behalf of the Bondholders, or to Bondholders directly, being the number of Common Shares equal to the number of unsubscribed Common Shares under the Rights Offering (the "Exchange Shares"). The Bondholders paid the same Subscription Price per Common Share as shareholders who were entitled to exercise Rights (after conversion into US dollars), aggregating to US$173,088,620.59 (the "Exchange Amount"), reflected by the release and cancellation, as applicable, of Bond Liabilities equal to the Exchange Amount (the "Exchanged Bond Liabilities") by way of a unilateral deed of wavier signed by the Bond Trustee on behalf of the Bondholders.
  
  Following the release and cancellation of the Purchased Bond Liabilities and the Exchanged Bond Liabilities, there remain Bond Liabilities aggregating to US$40,261,519 (which shall all be considered as principal) (the "Remaining Bond Liabilities").

• Transfer of SRUK. The Company transferred the entire share capital of SRUK to a new wholly-owned subsidiary in order to provide additional security to Bondholders and lenders under the New Loan Agreement (as defined below) and greater flexibility in a future refinancing of the New Loan Agreement and the Bonds post-Recapitalization.

• Ancillary Agreements. The Company and SRUK:

• entered into:
  • An amended and restated bond agreement (the "Amended and Restated Bond Agreement") for the purpose of setting forth the revised terms and conditions governing the Remaining Bond Liabilities;

• A super senior credit facility with certain of the Bondholders or their affiliates in the amount of US$40 million (the "New Loan Agreement"); and

• An intercreditor agreement (the "Intercreditor Agreement");

• and caused each of the Company and its affiliates to execute the guarantees and security documents contemplated in the Amended and Restated Bond Agreement and the New Loan Agreement.
  
  A copy of each of the Amended and Restated Bond Agreement, the New Loan Agreement, the Intercreditor Agreement and certain related documents have been filed or will be filed with Canadian securities regulators under the Company's profile on the SEDAR website at www.sedar.com.

The Company now has 14,719,098,533 Common Shares issued and outstanding.  Meridian Capital International Fund ("Meridian"), which was both a shareholder of Sterling and a Bondholder prior to the Recapitalization, now holds in aggregate 5,145,424,727 Common Shares (approximately 35.0%).  YF Finance Limited, a party acting jointly or in concert with Meridian, beneficially owns an additional 38,105,003 Common Shares (together with Meridian, the "Meridian Concert Parties"). The Meridian Concert Parties have, as a result, become a Control Person (as such term is defined in the TSX Venture Exchange ("TSXV") policies) of the Company by virtue of such percentage ownership exceeding 20% of the Company's post-Recapitalization Common Shares.  

Following the completion of the Recapitalization, Bondholders now own approximately 96.4% of the Common Shares in aggregate (excluding Common Shares held by Bondholders prior to the Recapitalization), with other shareholders who held Common Shares prior to the Recapitalization owning the remaining approximately 3.6% of the Common Shares in aggregate (including Common Shares held by Bondholders prior to the Recapitalization).

As a result, the Company will, at the annual and special meeting of shareholders, to be held in The Royal Room of the Metropolitan Conference Centre located at 333 – 4^th Avenue S.W., Calgary, Alberta, on Tuesday, July 5, 2016 at 10:00 a.m. (Calgary time) (the "Company Meeting"), ask its shareholders to consider, among other things, a resolution approving the creation of the Meridian Concert Parties as a new Control Person (the "Control Person Resolution"), to be approved by a simple majority of shareholders (excluding from such vote the Common Shares held by the Meridian Concert Parties). Given the significant number of Common Shares issued pursuant to the Recapitalization and the low trading price of the Common Shares, the Company will also be seeking approval by the shareholders of a special resolution (the "Consolidation Resolution" and, together with the Control Person Resolution, the "Recapitalization Resolutions") approving the consolidation of the Common Shares on a 100:1 basis (the "Consolidation").

The Company anticipates the passage of both of the Recapitalization Resolutions at the Company Meeting.     

Further details in respect of the Recapitalization will be provided in an information circular anticipated to be delivered to shareholders of the Company in relation to the Company Meeting.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the accuracy of this release.

Filer Profile No. 00002072

Forward-Looking Statements

All statements included in this news release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements. In particular, this news release contains forward-looking statements with respect to the Company Meeting, the provision of an information circular to shareholders of the Company in relation to the Company Meeting, the Consolidation and the passage of the Recapitalization Resolutions.

These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition, there are risks and uncertainties associated with oil and gas operations.  Readers should also carefully consider the matters discussed under the heading "Risk Factors" in the Company's Annual Information Form.

Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.  Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements.  These statements speak only as of the date of the news release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.

SOURCE Sterling Resources Ltd.