Winnipeg, Manitoba, August 10, 2009 � Empire Industries Ltd. (TSX-V: EIL) (�Empire� or the �Company�), announced today that it has successfully concluded negotiations for a forbearance agreement (the �Forbearance Agreement�) between the Company, the Company�s subsidiaries, George Third & Sons Ltd. and Dynamic Structures Ltd. (the �BC Group�), and HSBC Bank of Canada (�HSBC�) under the senior secured credit agreement (�HSBC Credit Agreement�) between HSBC and the BC Group.
As previously disclosed, certain events of default are continuing under the HSBC Credit Agreement. The aggregate amount outstanding and owed by the BC Group under the HSBC Credit Agreement is approximately $13.9 million, comprised of $11.4 million drawn on a $15 million revolving credit facility and $2.5 million drawn on a $6 million leasing facility. Under the terms of the Forbearance Agreement, HSBC is reviewing the BC Group�s operations and outlook and has agreed not to enforce its rights under the HSBC Credit Agreement and to continue to provide advances thereunder for a period up to October 31, 2009, provided that there is no event of default under the Forbearance Agreement.
As previously disclosed, certain events of default are also continuing between the Company�s subsidiary, Empire Iron Works Ltd. (�Empire Iron�), and the Royal Bank of Canada (�RBC�) under the senior secured credit agreement (the �RBC Credit Agreement�) between RBC and Empire Iron. The aggregate principal outstanding under the RBC Credit Agreement is approximately $7.2 million, comprised of $4.5 million drawn on a $6 million revolving credit facility and a $2.7 million term loan.
The Company, on behalf of Empire Iron, has provided a letter (the �EIL/RBC Letter�) to RBC agreeing to make every reasonable effort to repay in full the amounts due under the RBC Credit Agreement by September 30, 2009. In return for the receipt of the EIL/RBC Letter, RBC has agreed not to enforce its rights under the RBC Credit Agreement for a period up to September 30, 2009, provided that, during this period, the Company and Empire Iron comply with the conditions in the EIL/RBC Letter and there is no further material adverse change to RBC�s risk as it relates to the RBC Credit Agreement.
In addition to pursuing options for refinancing Empire Iron and the Company�s other assets, the Company continues its efforts to reduce funded debt through revenue enhancement, cost containment, working capital management and the disposition of redundant or non-core assets. On July 31, 2009, the Company reported that net proceeds of $9.5 million from the sale and leaseback of its Kingsway facility were used to both repay the Company�s secured long-term debt in B.C. and reduce the BC Group�s indebtedness under the HSBC Credit Agreement.
The Company expects to report the results of its second quarter ended June 30, 2009 on or about August 29, 2009.