Journey has secured a $38 million term-debt facility from its major shareholder, Alberta Investment Management Corporation (“AIMCo“), to fund the settlement of its $75 million credit facility with its syndicate of first-lien lenders. In addition to the initial $38 million payment to the banking syndicate, Journey will also be contingently liable to pay the syndicate a maximum of $5.75 million over a three-year period with any payments made tied to various levels of mixed, sweet, blended oil prices at the Edmonton, Alberta hub (“MSW“) as reported by Natural Resources Canada. The maximum payment for 2021 is capped at $750 thousand; for 2022 the cap is $2.25 million and for 2023 there is no maximum except for the overall, aggregate maximum of $5.75 million. In all three years, there are graduated payments between zero and the capped maximum based on average MSW prices for the respective year. The intent is to have no payments if MSW prices are below $50/bbl, while maximum payments will occur if the following thresholds are achieved:
- 2021: $750 thousand if MSW is greater than $52.50/bbl
- 2022: $2.25 million if MSW is greater than $56.67/bbl
- 2023: $5.75 million (minus any prior year payments) if MSW is greater than $80/bbl
AIMCo’s $38 million secured term debt facility has been provided in three tranches. The first tranche is for a principal amount of $15 million, bears interest at 11.5% per annum, and matures on December 31, 2020. The second tranche is for a principal amount of $10 million, matures on October 31, 2021 and bears interest at the rate of 9.0% per annum. The third tranche is for a principal amount of $13 million, matures October 31, 2024, and bears interest at 9.0% for the first year; 9.85% for the second year; and 12.95% for years three and four. In connection with the term debt advances, Journey will issue 5.0 million share-purchase warrants to AIMCo. Each warrant will entitle AIMCo to purchase one common share of Journey at an exercise price reflecting a 25% premium to the ten-day weighted average trading price of the common shares of the Company leading up to today. These warrants will have a term of four years. In addition, Journey has provided AIMCo with a commitment fee of $5.35 million. This fee is payable on October 30, 2024 and bears interest at zero if MSW prices are at or below $65/bbl; 5.0% per annum if MSW prices are between $65/bbl and $80/bbl; and 10.0% per annum if MSW prices exceed $80/bbl.
By virtue of this transaction, Journey has been successful in reducing leverage and significantly increasing shareholder net asset value. In addition, Journey, working with AIMCo, is now in a position to remain viable and continue to create shareholder value until commodity prices recover from these generational lows. President and Chief Executive Officer Alex Verge says, “This agreement represents the culmination of six months’ work from all parties. With this agreement, Journey will emerge from a state of forbearance with all of our borrowings being held by our largest shareholder. This provides Journey with the financial flexibility to control our own destiny, and allows Journey the ability to maximize value for all of our stakeholders over time, as commodity prices recover from the devastation resulting from the precipitous drop in oil demand caused by the COVID-19 pandemic. On behalf of all of Journey’s stakeholders, we extend our appreciation to all of our banking syndicate members, and in particular to AIMCo for continuing to work together with Journey during these difficult times.”
Journey Energy Inc.
700, 517 – 10th Avenue SW
Calgary, AB T2R 0A8
No securities regulatory authority has either approved or disapproved of the contents of this press release.29dk2902l