Lydian Company Files for Protection in Canadian Court

Lydian announces the commencement of the restructuring process under the Companies’ Creditors Arrangement Act. Dear partners, what this means is detailed in the press release and the Q&A below. We urge you to refrain from presenting various 'analysts' unverified information and ignorant comments as fact, and we call on everyone to seek answers to all questions within this release.

The most important takeaway is that Lydian continues to fully exercise its rights regarding the Amulsar project, which remains viable. All solutions to the underlying issue—selling the project, refinancing, and arbitration against the Government, or a combination of these options—remain possible paths forward.

Lydian International has released a press statement indicating that the company and its direct and indirect subsidiaries (Lydian Canada and Lydian UK) have been granted protection under the Companies’ Creditors Arrangement Act (CCAA) by the Ontario Superior Court of Justice. Similar protection has been extended to Lydian Armenia.

Under the CCAA protection, creditors and others are required to refrain from making any claims against Lydian International, Lydian Canada, Lydian UK, and a number of their subsidiaries, including Lydian Armenia.

Since June 2018, the company has been prevented from accessing the Amulsar project area due to illegal roadblocks. Despite numerous statements about the lack of legal grounds obstructing the implementation of the Amulsar project, the Government of Armenia has not lifted these illegal blockades. Consequently, Lydian’s creditors have refused to extend the previously declared moratorium contract, which expired on December 20, 2019.

Commitments to employees and suppliers will continue as usual within the framework of the CCAA processes. The company's management will maintain its regular operations under the overall oversight of Alvarez & Marsal Canada Inc., which has been appointed as the CCAA monitor.

During the CCAA protection period, the company will continue to negotiate with creditors and others, including the Government of Armenia, with the aim of finding the most acceptable resolution for all stakeholders, particularly the hundreds of employees, contractors, and suppliers affected by the ongoing illegal blockades.

Lydian also aims to end the violations that have led to the blockade of the Amulsar project area, explore options for the refinancing and/or sale of the Amulsar project, or conclude financial discussions related to initiating arbitration proceedings concerning foreign investments against the Government of Armenia.

In addition, according to another statement released by Lydian International, on December 23, 2019, the Toronto Stock Exchange suspended trading of Lydian’s common shares, and currently, the possibility of listing Lydian’s common shares on the Toronto Stock Exchange is being considered under CCAA protection. Hearings regarding the evidential listing are expected in early January 2020.

Below are answers to several questions that may interest you:

• Why did Lydian apply for protection from the Canadian court?
  On December 20, the extension of the loan repayment agreement with Lydian’s creditors expired and was not renewed. As a result, Lydian no longer has access to operating credit facilities, and creditors could take actions to satisfy their repayment demands through various means. The court’s protection prohibits any claims against the company and allows access to financial resources that were previously restricted.
• Does this mean bankruptcy?
  No, it does not mean that. While the company is under court protection, it can continue normal operations, pay for work and services, and aims to restructure into a viable business unit by the end of this protection phase. The company will work towards restructuring of its operations, loans, and other obligations to maximize the opportunity for Lydian Armenia to continue operating.
• When will the company return to court?
  Short technical hearings are scheduled for January 2, but substantive discussions in Canadian court will occur on January 23, 2020.
• What will happen thereafter?
  Lydian will work in various directions, including possible sale of the project, refinancing, and/or arbitration proceedings against the Government of Armenia. The option that provides the best outcome for stakeholders is likely to be selected.
• How long can the company operate under these conditions?
  The cash model presented within the Canadian court process provides sufficient liquidity for the company's normal operations for at least a few months. Lydian Armenia has sufficient funds to operate until at least spring, and discussions are ongoing to secure additional sources of funding in several directions.
• What will the company do during this period?
  As in prior phases of deferring credit obligations, Lydian will continue to discuss the issue of lifting the illegal blockade with the Armenian government and will continue its discussions with its creditors regarding existing issues. Lydian will continue to work on three possible solutions: sale, project refinancing, and/or arbitration proceedings, aiming to balance the rights and interests of all stakeholders.
• Will the company be delisted from the Toronto Stock Exchange?
  Yes, TSX has announced it will begin the delisting process. This is a standard restructuring procedure for companies listed on the TSX and will have no impact on Lydian Armenia's daily operations or the company’s restructuring process.
• Will the company be able to resume operations if the government restores the rule of law?
  There is a significant loss of confidence among the company’s creditors and shareholders regarding Armenia. Major efforts will need to be made to restore confidence for the sale or refinancing of the project.

Particular attention:
Does Lydian continue to possess all rights to the Amulsar project? Is the project viable? Yes, Amulsar is an internationally recognized gold mine, and Lydian has all rights to exploit it, regardless of whether it is listed on the TSX. As previously mentioned, the company will work towards a possible resolution in three directions: sale, refinancing, and/or arbitration, or a combination of all of these options. The objective will be to ensure the best outcome for the company's stakeholders.