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Maynbridge Capital Closes $20.4MM Restructuring Loan with Canadian Equipment Rentals

April 27, 2017, 07:14 AM
Filed Under: Rental

Canadian Equipment Rentals Corp. announced that it has largely completed its restructuring efforts and entered into a Loan and Security Agreement with Maynbridge Capital Inc. The company partnered with Maynbridge Capital for the next year through their asset backed lending solution which is well suited for an asset based rental business such as CERC. In conjunction with this financing, the directors of CERC will be appointing Mr. Dean Shillington, CEO of Maynbridge Capital, to the Company's Board of Directors. Mr. Shillington's business and finance expertise will greatly benefit the company as it executes on its new sharply focused business plan.

The principal amount of the Maynbridge loan is $20.4 million and it has a term of one (1) year (plus a day), with an option to extend for an additional year. The loan bears interest at 12.75% per annum and will be serviced by six months of interest only payments followed by six months of blended interest and principal payments. The proceeds from the loan will be used to repay in full CERC's existing syndicated credit facility. The loan has no financial covenant requirements as it is to be secured through the value of the company's rental assets and a $2.5 million guarantee from Mr. Dean Swanberg.

The corporate restructuring and refinancing is the culmination of over ten months of efforts to eliminate significant costs and inefficiencies in the business and transform the company from one with multiple business lines, in different industries, operating under a high corporate overhead cost structure, to a lean and focused company operating one business line under a low-cost corporate structure. The company is now solely focused on the rental of quality assets to top-tier customers in the Western Canadian Sedimentary Basin. The company continues to experience strong demand for its rental assets and is now well positioned to take advantage of the anticipated improvements in rental rates in conjunction with the overall strengthening of the oil and gas services market.

Through the restructuring process the company has significantly reduced its total debt through the divestures of non-core subsidiaries, the sale of under-utilized assets and through the retirement of $2.5 million of debt owing to a company controlled by Mr. Dean Swanberg in exchange for 10 million common shares (representing a price of $0.25 per share). This conversion will result in Mr. Swanberg being the largest individual shareholder of the Company, and the balance of the debt owing to Mr. Swanberg's company being reduced to $2.5 million. The directors of CERC will be appointing Mr. Swanberg to the Company's Board of Directors where his experience and reputation as a veteran oilfield executive in Western Canada will be of great value to the Company.

As a final step in the restructuring process, the company will be seeking shareholder approval at the June 27, 2017 Annual and Special Meeting to change the name of the Company from Canadian Equipment Rentals Corp. to Zedcor Energy Inc., thus aligning the parent company branding with its only operating entity, Zedcor Energy Services Corp.

Under the Loan and Security Agreement, the Company will, subject to TSX Venture Exchange approvals, issue to Maynbridge 3,651,501 share purchase warrants entitling the holder to acquire that number of common shares in the Company representing approximately 6.5% of the fully diluted equity of the Company, at an exercise price of $0.25 per share. The warrants will expire 90 days after the maturity date of the loan.

The closing of the Maynbridge financing is scheduled for on, or before, April 28th, 2017 and is subject to approval by the TSX Venture Exchange and to the satisfaction or waiver of certain conditions precedent typical for equipment loan transactions.

Ernst & Young Orenda Corporate Finance Inc. acted as the Company's exclusive financial advisor with respect to the refinancing.

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