CALGARY, Alberta, May 23, 2019 (GLOBE NEWSWIRE) — Cequence Energy Ltd. (“Cequence” or the “Company”) (TSX: CQE) is pleased to announce a proposed debt restructuring transaction, private placement and credit facility renewal update.
Under the terms of a first amending agreement to the Company’s $60.0 million Term Loan entered into between the Company and the Term Loan debtholders, the Company has agreed to pre-pay $10.0 million of the Company’s $60.0 million Term Loan plus accrued and unpaid interest on such amount. In addition, the Term Loan will be amended to:
- extend the maturity date from October 3, 2022 to October 3, 2023,
- fix the interest rate at 5% by removing the interest rate escalation to 10% when funds flow from operations is equal to or greater than $40.0 million, and
- cancel all the issued and outstanding 1.8 million warrants all of which warrants are held by Term Loan debtholders.
Proforma net debt(1) following the debt repayment of $10.0 million at March 31, 2019 would have been $61.8 million and the net debt(1) to trailing twelve month EBITDA(1) ratio would decline from 3.6 times at March 31, 2019 to proforma 3.1 times at March 31, 2019. The transaction is expected to lower annual finance costs and improve the Company’s cash flow by $0.5 million or $2.1 million over the new term.
In consideration of the Term Loan amendments, the Company agreed to pay the Term Loan debtholders fees in the amount of $1.2 million, which includes a restructuring fee and the prepayment of due diligence costs payable in accordance with the Term Loan agreement, eliminating a future obligation of the Company under the agreement.
Prior to the Board of Directors approval of the proposed transactions, the Term Loan debtholders repurchased all interests in the Term Loan and warrants which were held by the two Company directors. As of May 13, 2019, no directors or officers held any interest in the Term Loan.
A number of the Term Loan debtholders have entered into subscription agreements pursuant to which they have agreed to purchase approximately 17.2 million common shares of the Company at a price of $0.65 per share for aggregate gross proceeds of $11.2 million. The shares will be issued on a Canadian development expense “flow-through” basis. Upon completion of the private placement the Company expects to have approximately 41.8 million common shares outstanding.
Following these transactions, Mr. G.A. Cumming is expected to own approximately 25% percent or (10.3 million common shares) of Cequence. Closing of the private placement is subject to the receipt of shareholder approval as required under the Rules of the TSX as a result of the number of shares proposed to be issued and the percentage of shares held by Mr. Cumming following the private placement. The Company’s shareholders will be asked to vote on the private placement at the Company’s upcoming annual and special meeting of shareholders on June 27, 2019 in Calgary. The Company’s information circular in respect of this meeting, which will include details of the proposed private placement, will be mailed to shareholders in early June.
Don Archibald, Chairman of the Board of Directors said, “the partial debt repayment, amendment of the debt agreement, and subsequent equity private placement represents another and important step in the recapitalization of Cequence. The $50.0 million Term Loan is a very competitive instrument with an attractive interest rate and the extended term provides long term stability and certainty to the balance sheet. These transactions not only improve the financial strength of the company but also represent the cooperative approach of the debt holders in working with the company to provide for its future success.”
The Company’s credit facility, which has a credit limit of $7.0 million and is undrawn except for $1.6 million in letters of credit outstanding, expires on May 31, 2019. Management and the Company’s lender are working on renewal of the credit facility and have extended the expiry date to June 14, 2019.