CALGARY, Aug. 2, 2018 /CNW/ – Connacher Oil and Gas Limited (“Connacher” or the “Company”) is pleased to announce that East River Oil and Gas Ltd. (the “Plan Sponsor”) has been selected as the “Successful Bidder” pursuant to the sale and investment solicitation process (the “SISP”) conducted in Connacher’s proceeding under the Companies’ Creditors Arrangement Act (the “CCAA”).
On May 17, 2016, Connacher previously announced that it had obtained creditor protection under the CCAA pursuant to an initial order granted by the Court of Queen’s Bench of Alberta (the “Court”). On March 28, 2018, Connacher obtained a further Court order approving the SISP, which process was conducted within the CCAA proceedings by Houlihan Lokey Capital, Inc., Connacher’s financial advisor, under the supervision of Ernst & Young Inc., the Court-appointed CCAA monitor (the “Monitor”).
Connacher and the Plan Sponsor have entered into a CCAA Acquisition and Plan Sponsorship Agreement dated August 2, 2018 (the “Plan Sponsorship Agreement”) pursuant to which the Plan Sponsor will acquire the Company upon and subject to the terms and conditions set out in the Plan Sponsorship Agreement under a plan of compromise and arrangement (the “CCAA Plan”) under the CCAA. The Plan Sponsorship Agreement also provides that in the event that, among other things, the CCAA Plan is not approved by Connacher’s creditors or the Court, or if Connacher and the Plan Sponsor jointly determine that it is no longer viable to implement the transactions contemplated by the CCAA Plan, the Plan Sponsor will acquire substantially all of the assets of Connacher pursuant to a Purchase and Sale Agreement dated August 2, 2018 (“Sale Agreement”).
The CCAA Plan provides that, subject to the terms and conditions set out therein, the Plan Sponsor will acquire a 100% equity interest in the Company via a concurrent reorganization pursuant to the Canada Business Corporations Act for cash consideration in excess of the credit bid transaction previously announced by the Company on March 28, 2018. The CCAA Plan provides for payments and distributions to Connacher’s creditors with proven claims from the cash consideration plus Connacher’s existing cash as determined and adjusted pursuant to the CCAA Plan.
As the cash consideration being paid by the Plan Sponsor under the CCAA Plan, along with Connacher’s adjusted existing cash, is insufficient to pay all of the claims of creditors of Connacher in full, no value will accrue to Connacher’s shareholders as a result of the implementation of the CCAA Plan and the outstanding shares and options of the Company will be cancelled for no consideration and without any vote of the existing shareholders.
In the event the CCAA Plan does not proceed, subject to the terms and conditions set out in the Sale Agreement, the Plan Sponsor will acquire substantially all of the assets of Connacher for cash consideration that would be less than the cash consideration that is payable under the Plan Sponsorship Agreement. As the cash consideration being paid by the Plan Sponsor under the Sale Agreement, along with Connacher’s adjusted existing cash, is insufficient to fully pay the claims of Connacher’s first lien lenders and creditors with claims in priority to the security of the first lien lenders, in the event that the transaction under the Sale Agreement occurs Connacher does not expect any value will accrue to any of Connacher’s other creditors and Connacher’s business and assets will be transferred to the Plan Sponsor free and clear of all claims.
The completion of the transactions contemplated by the Plan Sponsorship Agreement, the CCAA Plan and the Sale Agreement are subject to a number of conditions, including the receipt of all required regulatory approvals, the approval of the Court and, in the case of the CCAA Plan, receipt of requisite creditor approval. The Plan Sponsorship Agreement, CCAA Plan and Sale Agreement also contain other terms and conditions customary for transactions of this nature.
The Plan Sponsorship Agreement, the CCAA Plan and the Sale Agreement are supported by a majority of Connacher’s first lien lenders who are party to a Support Agreement entered into on March 19, 2018 and which was approved by the Court on March 28, 2018.
On August 22, 2018, Connacher intends to seek orders from the Court (i) approving the Plan Sponsorship Agreement, (ii) approving a supplemental claims process in order to facilitate closing of the transactions described herein; and (iii) accepting the CCAA Plan for filing purposes, authorizing Connacher to call meetings of its creditors to consider and vote on the CCAA Plan, and if approved at the creditors’ meetings, scheduling a Court hearing to seek a sanction order in respect of the CCAA Plan; and (iv) approving the Sale Agreement and vesting the purchased assets in the Plan Sponsor free and clear of claims in the event the transaction contemplated by the Sale Agreement occurs. If such Court approvals are obtained, Connacher will provide further information at that time.
The above description is a summary only and is subject to the terms of the definitive Plan Sponsorship Agreement and CCAA Plan and the Sale Agreement. The material terms of the Plan Sponsorship Agreement and CCAA Plan and the Sale Agreement, including the consideration thereunder, are contained in the Plan Sponsorship Agreement and CCAA Plan and the Sale Agreement, copies of which are available on the Monitor’s website at www.ey.com/ca/connacheroilandgas and will be filed under the Company’s profile on www.sedar.com.
Connacher is a Calgary-based in situ oil sands developer, producer, and marketer of bitumen. The Company holds a 100 per cent interest in approximately 465 million barrels of proved and probable bitumen reserves and operates two steam-assisted gravity drainage facilities located on the Company’s Great Divide oil sands leases near Fort McMurray, Alberta.