Ice cream maker CoolBrands International has announced that 2118769 Ontario, a company controlled by Michael Serruya, has entered into an agreement to acquire all the indebtedness of its senior lenders under the credit facility provided to Americana Foods, which is guaranteed by CoolBrands.
At the request of 2118769, CoolBrands’ four current independent directors and the current co-chairman, president and CEO, David Stein, have resigned as directors to facilitate the agreement by the lenders to forbear from exercising their rights under the credit facilities.
CoolBrands said it thanks the directors for their services. Serruya has agreed to assume the positions of president and CEO of CoolBrands, on an interim basis, replacing Stein who will continue as head of strategic planning at CoolBrands.
Americana, CoolBrands’ 50.1% owned joint venture facility in Dallas, Texas, is currently in US bankruptcy proceedings and is in default of its obligations to the senior lenders, the company said.
In connection with the purchase, 2118769 has entered into a forbearance agreement with CoolBrands, agreeing not to take any action to demand repayment of the indebtedness on account of existing defaults under the Americana credit facility for six months.
The terms of the Americana credit facility have remained unchanged and JPMorgan Chase Bank NA has continued as administrative agent under the credit facility.
The total debt of CoolBrands is approximately US$25m, of which approximately $21.7m is debt of Americana and was acquired by 2118769.
CoolBrands said that the transaction documents have all been signed in escrow pending the completion of the agreement, which is expected to occur on 20 November 2006.
Effective today, CoolBrands’ independent directors were replaced by Romeo DeGasperis, Garry Macdonald and Ronald Binns.
DeGasperis is the CEO and a vice-president of Con-Drain Company in Ontario, while Macdonald is the president and principal of Maccess Management and between 1989 and 1998 was the president and CEO of the Franchise Operations Division of Maple Leaf Foods. Binns is currently the CFO of Nevada Capital Corporation.
The newly reconstituted board of directors of CoolBrands has authorised the issuance by CoolBrands to 2118769 of warrants to purchase 5,500,000 subordinate voting shares of CoolBrands, which represents approximately 9.8% of the shares currently outstanding.
The board said it believes that these transactions should provide CoolBrands with sufficient time to restructure its financial affairs and address its liquidity issues.
CoolBrands also announced that it has entered into a letter of intent with Healthy Food Holdings with respect to a sale of its CoolBrands Dairy subsidiary for consideration of $45m in cash, a $5m subordinated note and a warrant to purchase up to 2,000,000 shares of stock.
The transaction remains subject to the entering into of definitive agreements, which the parties intend to negotiate and execute on or before 30 November 2006, CoolBrands said.
The company has closed the previously-announced sale by its subsidiary, Eskimo Pie Frozen Distribution, of its “direct store door” frozen distribution assets in Florida, California, Oregon and Washington to Southwest Traders for net consideration of approximately $5m.