Palladon Ventures Enters Into Letter Agreement With Luxor Capital Partners, LP

Palladon Ventures Enters Into Letter Agreement With Luxor Capital Partners, LP

Palladon Ventures Ltd. announce that effective immediately the Company and Luxor Capital Partners, LP (“Luxor”) have entered into a letter agreement (the “Letter Agreement”), subject to TSX Venture Exchange approval, to the extension agreement dated June 26, 2009 and to the standstill agreement dated October 15, 2009.

The Letter Agreement grants Palladon an irrevocable option (the “Payment Option”) to acquire from Luxor the entirety of its outstanding loans including interest, currently equal to approximately $39.4 million (the “Loan Amount”), by paying $30 million on or before March 31, 2010.

In the event that the Company does not exercise the Payment Option on or before March 31, 2010, Luxor has agreed to reduce the then outstanding $41 million Loan Amount to $25 million, in exchange for transfer and assignment by the Company of 50% of the equity of Palladon Iron Corporation to Luxor (the “Luxor Equity”), subject to terms and conditions to be set out in a definitive agreement. Palladon Iron Corporation is Palladon’s wholly owned subsidiary, through which it is pursuing development of the Iron Mountain Project, an iron ore deposit located in southwest Utah, USA.

The $25 million Loan Amount will then bear interest at the rate of three-month LIBOR plus 5%, with a minimum rate of 8%. At Palladon’s option, all or any portion of the interest due on any interest payment date may be paid by adding such interest to the principal amount, with such unpaid interest accruing interest from such Interest Payment Date at the foregoing rate and being treated for all purposes as principal.

Furthermore, in the event that Palladon does not exercise the Payment Option on or before March 31, 2010, it shall have a three-year option to purchase 50% of the Luxor Equity for $18.75 million.

Palladon will use its best efforts to secure the required financing by the March 31, 2010 deadline. With the execution of the Letter Agreement the Company plans to raise a minimum of $1 million to fund ongoing operations and to continue advancing the Iron Mountain project on a number of fronts.

Palladon CEO John Cutler stated: “We are pleased to have reached this agreement with Luxor Capital whereby we have a clear path forward, the opportunity to retire the Luxor Loans at a significant discount and move forward with no debt on the balance sheet. By quantifying a firm repurchase price, this Letter Agreement allows Palladon to communicate a clear capital structure to investors interested in funding the Payment Option. The Company will announce its plan to fund the Payment Option as soon as is practicable.”

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