Gold Reserve wraps restructuring offer for 5.5% convertibles due 2022

By Susanna Moon

Chicago, Nov. 27 - Gold Reserve Inc. said that investors tendered $38,000 of its outstanding 5.5% senior subordinated convertible notes due 2022 in the offer that ended at 11:59 p.m. ET on Nov. 23.

The final tally remained unchanged from the count as of Nov. 5. The offer was originally set to end at 5 p.m. ET on Oct. 16 and was extended to Oct. 26, Nov. 5, Nov. 16 and then Nov. 23.

As noted before, the restructuring offer was open to holders of $1.08 million, or 1.3%, of the outstanding notes not held by the four largest noteholders.

The company restructured $101.3 million of its $102.3 million notes for $33.8 million cash, $42.2 million of equity, $25.3 million 5.5% two-year modified convertible notes and a contingent value right for 5.468% of any award or settlement of the company's ICSID arbitration, according to a press release.

After the restructuring, there will be outstanding $1,042,000 million principal amount of existing notes, $25,315,000 million of modified notes, 5.468% contingent value right and about 72,711,709 of class A shares.

The modified notes are convertible into common shares at $4.00 per share. The $42.2 million of equity represents 12,412,501 shares at $3.40 per share.

Under the put option in the second quarter, holders put $16.9 million of the notes for cash.

"The board and management are pleased that with this transaction we minimized to the extent practicable shareholder dilution, significantly reduced the company's interest cost and created positive equity going forward," Doug Belanger, the company's president, said in the release.

"This transaction is good for all stakeholders in that it rationalizes the capital structure of the company, with greater certainty going forward."

Offer background

As reported previously, the company initially reached an agreement with holders of 98.7% of the outstanding notes to restructure the notes through a combination of cash, common shares, modified terms for the remaining balance of the notes and a contingent value right.

Each holder had the option to tender their notes for the following consideration per $1,000 principal amount of convertibles:

• $200 of cash;

• 147.06 common shares;

• $300 of convertibles that will remain outstanding under an amended indenture;

• A contingent value right entitling the holder to a percentage of an award or settlement of the company's ICSID arbitration claim against the Government of Venezuela with respect to the expropriation of the company's Brisas Project and any proceeds from the sale of its mining data.

The maximum contingent value right net of taxes and other deductions that will be paid if all holders elect to participate in the tender offer will not exceed 5.535% of an award or settlement and sale of the mining data; and

• A cash alternative election fee. The total fee was up to $1 million.

The restructuring was approved by shareholders at a special meeting held on June 27.

The notes are convertible into 132.626 shares of the company's common stock per $1,000 principal amount of notes.

Gold Reserve is a gold and copper mining company based in Spokane, Wash.

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