Gale Force Nixes Property Purchase, Postpones Restructure Plans
Gale Force Petroleum has provided an update to shareholders regarding its previously announced plans to concurrently write-down or convert its $2,030,000 secured loan into equity, obtain new equity financing and purchase a 50% working interest in the Stout Property. The engineering due diligence performed on the Stout Property determined that the property did not meet the Corporation's requirements for investment. The Corporation has postponed its plans for equity financing and must attempt to renegotiate with its secured creditor for the write-down or conversion of its secured debt into equity.
"The acquisition of the Stout Property would have meant taking on too much risk at this stage in the Corporation's development, in particular, the property did not provide adequate certainty of generating sufficient near term cash flows ", said Michael McLellan, Chairman and CEO. "Without a new property acquisition to quickly increase both revenues and the asset base of the Corporation, we cannot justify the proposed equity financing and we do not have a deal with the secured creditor to write-down or convert its loan into equity."
The Corporation remains in bankruptcy protection as part of the Proposal to Creditors it filed on February 4, 2009, under the Bankruptcy and Insolvency Act (Canada). All potential claimants have now filed their claims and the Proposal to Creditors is expected to be concluded within the coming weeks, after which time the Corporation will no longer have the benefit of bankruptcy protection to stave off new potential claims.
If the Corporation is unable to locate a new property, renegotiate a write down or conversion into equity of its secured loan and obtain equity financing, it will be unable to continue operations and will possibly be required to file anew for bankruptcy in the coming weeks or months.
"The Corporation does not have sufficient cash resources and must obtain financing immediately," said Mr. McLellan. "Unfortunately, the Corporation is running out of time to find a solution to continue as a going concern."
The Corporation had obtained price protection and conditional approval from the TSX Venture Exchange for a private placement to issue shares at a price of one-half cent ($0.005) per common share. This price protection has now expired. At higher share issuance prices, the terms of the private placement are apparently not attractive enough for investors to enable the Corporation to obtain equity financing or for the secured creditor to agree write-down and convert its secured loan into equity.