Huldra Silver gets up to C$4.8 million DIP loan from Waterton Global

By Caroline Salls

Pittsburgh, Aug. 16 - Huldra Silver Inc. obtained a secured debtor-in-possession loan from primary secured creditor Waterton Global Value, LP as part of its Companies' Creditors Arrangement Act proceedings.

According to a news release, the DIP loan was approved by an initial order of the Supreme Court of British Columbia.

Huldra said the DIP loan will include a first advance of up to C$2.3 million, which will be advanced in several tranches, and a second advance at Waterton's sole discretion, of up to C$2.5 million upon receipt by Waterton of a comprehensive plan of operations for the Treasure Mountain Property.

If the first advance is made, but not the second advance, the first advance will be repaid in full on the four-month anniversary of the advance. If both advances are made, they will be repaid in full in accordance with a repayment schedule to be determined by Waterton.

Under the first tranche of the first advance, Huldra said it drew down C$1.19 million, of which C$502,671 was used to repay the principal and interest owed to Waterton under a C$500,000 promissory note. The company said C$115,000 of that amount was used to pay the costs and expenses of Waterton under the credit agreement, and the balance was advanced to Huldra.

The proceeds of the first tranche will allow the company to continue its care and maintenance program at its mine and mill while attempting to restructure its financial affairs.

Any advances under the DIP loan are repayable in an amount in cash equal to the amount arrived at when dividing the amount being repaid by 76.5% of the spot price of silver on the business day immediately preceding the repayment date and multiplying the result by the spot price and a profit participation amount related to the repayment date.

Huldra said the DIP loan has received conditional approval of the TSX Venture Exchange and remains subject to final TSX approval.

Royalty agreement

In connection with and as partial consideration for the DIP loan, the company also entered into a royalty agreement with Waterton under which Huldra granted to Waterton a 2% net smelter return royalty on the production of all minerals from the Treasure Mountain Property.

The royalty will be terminated if no amounts are drawn by the company under the DIP loan on or before Aug. 22 and if the company repays Waterton in full all amounts owed under a June 16, 2011 credit agreement, a July 23 term sheet and the DIP loan by Aug. 22.

Strategic adviser

Huldra said it intends to enter into a strategic advisory services agreement with Haywood Securities Inc.

Under the agreement, Haywood would assist the company with the identification of alternatives to resolve its current debt obligations and to unlock value from its assets.

The terms of the agreement with Haywood are still being negotiated, and the final agreement is subject to TSX approval.

Vancouver, B.C.-based Huldra explores and develops silver deposits.

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