Dominion Diamond obtains initial order of protection under CCAA

By Wendy Van Sickle

Columbus, Ohio, April 22 – Dominion Diamond Corp. filed for insolvency protection under the Companies’ Creditors Arrangement Act and obtained an order from the Alberta Court of Queen’s Bench granting it protection, according to a news release.

Dominion said it plans to use the CCAA process to talk with its lenders, creditors, equity owner and other stakeholders and to solicit and evaluate strategic alternatives to restructure the company financially and operationally and position it for long-term success when global economic and industry conditions improve.

The company said it has received and is considering a proposal from an affiliate of the Washington Cos., its current equity owner, to provide debtor-in-possession financing to help provide liquidity through the CCAA process.

The proposal is conditional upon Dominion agreeing to a memorandum of understanding regarding a possible sale of its assets to an affiliate of the Washington Cos. as a stalking horse bidder and bidding procedures for the solicitation of competing offers either to purchase the company’s assets or to make an investment in the company.

If the Washington proposal is agreed to by Dominion, the DIP financing, memorandum of understanding for an asset sale and bidding procedures will be subject to approval from the court with notice to interested parties.

The Washington Cos. proposes in the memorandum of understanding for an asset sale that its affiliate will pay or otherwise satisfy, among other things, all obligations to employees and governmental authorities and all obligations under the company’s agreements with the First Nations and aboriginal groups.

The proposed asset sale would be a stand-alone bid that would operate as a “floor bid” as part of a competitive process to maximize value for Dominion’s stakeholders.

Dominion said it is reviewing the proposal with its advisers.

Whether or not Dominion agrees to the Washington proposal, it said it expects as part of the restructuring to obtain new financing to continue to operate during the CCAA process for the benefit of local communities and other stakeholders.

“The CCAA filing was necessitated primarily by the impact of the Covid-19 pandemic,” the release states.

“Although the company has strong diamond inventory, sorting houses and diamond markets are closed. These are key channels to facilitate the sale of the company’s inventory, so currently there is no ability to generate sufficient revenue to support Dominion’s ongoing financial obligations.”

As the spread of Covid-19 subsides and diamond markets reopen, Dominion said it plans to resume mining operations at the Ekati Diamond Mine and recall its furloughed workers.

FTI will serve as the court-appointed monitor of Dominion to oversee the CCAA proceedings.

Proceeds will be used to fund the leveraged buyout of the Calgary, Alta.-based producer of rough diamonds by the Washington Cos.

© 2015 Prospect News.
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