Lenders to Acquire Stornoway

RAPAPORT... Stornoway Diamond Corporation's major lenders have agreed to take over the company amid mounting debts that prompted the miner to file for protection from creditors.The owner of the Renard mine in Quebec is seeking torestructure under the Companies' Creditors Arrangement Act (CCAA), a programsimilar to Chapter 11 in the US. It allows businesses in financial distress to rearrangetheir affairs and avoid bankruptcy.The company's secured creditors, which include Diaquemand Osisko Gold Royalties, will acquire the miner's assets and debts,including Renard, and will offer a CAD 20 million ($15.2 million) creditfacility to maintain operations at the deposit. Stornoway will continue tomanage the mine, and expects to meet its financial obligations to employees,suppliers and customers for the time being, it said Monday.The miner's net loss deepened to CAD 346.3 million($259.9 million) in the second quarter, compared with a loss of CAD 35.9million ($26.9 million) during the same period last year. It made anunsuccessful attempt to find a suitable buyer for the business earlier thisyear, and therefore defaulted on a CAD 11.7 million ($8.8 million) bridge loan."The continueddownward pressure on the market price for rough diamonds, as well as a varietyof other factors and circumstances, have contributed to the corporation'sinability to generate positive free cash flow in 2019," Stornoway explained. The company filed the petition to the Superior Court of Quebec on Monday, with the court granting the CCAA order later that day.Stornoway has consistently failed to repay debts becauseof the lack of liquidity, the company added. It has halted trading in itsshares on the Toronto Stock Exchange, and foresees it will be delisted soon,with the equity likely to hold no recoverable value, it noted. DeloitteRestructuring will oversee the CCAA.Image: Rough diamonds. (Stornoway Diamond Corporation)