The New Notes will be issued under a new trust indenture that will contain substantially the same terms as the Notes other than the New Notes will be secured on a third-lien basis subordinate to the Company’s senior indebtedness and allow for semi-annual interest payments to be paid either in cash, in additional New Notes (a “PIK Interest Payment”), or a combination thereof, at the Company’s election.
The Note Exchange Arrangement is designed to strengthen the Company’s overall financial position and maximize value for all stakeholders including noteholders and shareholders. In addition to providing the noteholders with security over the Company’s assets, it is also anticipated to provide noteholders with greater certainty that the Company will continue to make regular semi-annual interest payments on the Notes and will be able to repay the New Notes when due. The Note Exchange Arrangement will not result in any dilution to the Company’s shareholders as there will be no shares issued in connection with the Note Exchange Arrangement and shareholders will continue to own the same number of shares, nor will the security proposed to be granted under the New Notes negatively affect shareholders.
In addition, the ability of the Company to make PIK Interest Payments on the New Notes (which it intends to do for the January 23 and July 23, 2021 interest payments) and the maturity date of the New Notes is expected to enhance the Company’s current liquidity. In particular, holders of New Notes will receive $43.75 per $1,000 principal amount of New Notes in a PIK Interest Payment, representing all accrued and unpaid interest outstanding from July 23, 2020 up to, but excluding, January 23, 2021, being the first interest payment of the New Notes, which, for greater certainty, such amount will include all accrued and unpaid interest on the Notes.
Pursuant to an interim order of the Court received today, Perpetual is authorized to hold a special meeting of noteholders and a special meeting of shareholders via live audio cast on Friday, January 22, 2021 at 9:00 a.m. and 9:30 a.m. (Calgary time), respectively, to consider and vote upon the approval of the Note Exchange Arrangement. Details regarding these meetings, voting information and the Note Exchange Arrangement will be set forth in an information circular to be provided to noteholders and shareholders and will be available under the Company’s profile on SEDAR at www.sedar.com. If the Note Exchange Arrangement is approved at each meeting by the requisite special resolution approval, the Company will attend a hearing before the Court, currently scheduled for January 22, 2021, to ask the Court to grant a final order in respect of the Note Exchange Arrangement. The Note Exchange Arrangement is also subject to customary conditions, including the entering into of an inter creditor agreement with the Company’s first and second lien lenders. The Company’s first and second lien lenders have each provided the Company with their consent to the Note Exchange Arrangement.
The Note Exchange Arrangement is the result of a process undertaken by Perpetual, with the assistance of its legal and financial advisors overseen by an independent special committee (the “Special Committee”) of the Board of Directors. Peters & Co. Limited (“Peters & Co.”), an independent financial advisor to the Special Committee and the Board of Directors, has provided its opinion to the Special Committee and the Board of Directors that, as at December 15, 2020 and subject to the assumptions, limitations, qualifications and other matters contained therein, the Note Exchange Arrangement, is fair from a financial point of view, to the Noteholders. The Board of Directors has reviewed the terms and conditions of the Note Exchange Arrangement and has unanimously concluded that they are fair and reasonable to, and are in the best interests of, the Company and the Noteholders. The Board of Directors recommends that the noteholders and shareholders each vote in favour of the Note Exchange Arrangement.
The New Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities law of any other state of the United States and are being issued in reliance on the exemption from registration set forth in Section 3(a)(10) of the U.S. Securities Act on the basis of the approval of the Note Exchange Arrangement by the Court.
This press release shall not constitute an offer or a solicitation in any jurisdiction where such offer or solicitation would be unlawful.
Perpetual is an oil and natural gas exploration, production and marketing company headquartered in Calgary, Alberta. Perpetual owns a diversified asset portfolio, including liquids-rich natural gas assets in the deep basin of west central Alberta, heavy oil and shallow natural gas in eastern Alberta, with longer term opportunities through undeveloped oil sands leases in northern Alberta. Additional information on Perpetual can be accessed at www.sedar.com or from the Corporation’s website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.