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CII Provides $60MM Second Lien Term Loan to Cequence Energy

July 30, 2018, 08:00 AM
Filed Under: Energy

Cequence Energy Ltd. announced a series of transactions that will refinance the company's balance sheet, and thereby provide greater flexibility and liquidity to execute the ongoing business plan of the Company.

Firstly, Cequence has entered into a refinancing agreement with CPPIB Credit Investments Inc. (CII) providing for a $60 million second lien senior secured term loan facility due October 3, 2022. This facility will bear interest at 5% and will be used to retire the existing $60 million in senior notes held by CII.

Concurrently with the Term Loan, Cequence announces that that it plans to complete an exempt market rights offering pursuant to which holders of the Company's common shares will be issued rights to purchase flow-through common shares of Cequence at a price of $0.035 per share for gross proceeds of not less than $5 million (pursuant to the backstop described further herein) and up to $8.6 million (the "Rights Offering"). Cequence expects that the Rights Offering is expected to close on or about September 13, 2018.

Additionally, Cequence has received commitments from its lenders to extend its senior secured revolving credit facilities (the "Credit Facility") until September 28, 2018. The existing Credit Facility has a borrowing base of $9 million, and with the exception of letters of credit outstanding of approximately $1.5 million, there are currently no amounts drawn under the Credit Facility. Upon closing of the Rights Offering and Term Loan, the Company has received a commitment from its lender to further extend the maturity date of the Credit Facility to May 31, 2019 with a borrowing base of $7 million.

Together, the Term Loan, renewed Credit Facility and proceeds from the planned Rights Offering will allow Cequence to more actively develop its high impact Dunvegan light oil play which has continued to generate economic well results that are in excess of management's expectations. The Dunvegan operating results, recent increase in oil pricing, and Cequence's netback initiatives have all had a positive impact on funds flow from operations. As a result, the reduction in the Credit Facility borrowing base is not an impediment to Cequence's planned capital expenditures and cash flow growth initiatives.

"Cequence has maintained a focused effort on minimizing risk and maximizing value for its shareholders and other stakeholders" said Todd Brown, Chief Executive Officer, and "the Term Loan is a highly attractive outcome for the Company as, compared to its existing senior notes, it provides an additional four-year term and significantly reduces the annual interest cost to the Company by approximately $2.8 million per year, giving us the ability to further invest in the Company's assets."

"The Board of Directors of Cequence is very excited about the future of the Company with the flexibility that the Term Loan and Rights Offering will afford it" said Don Archibald, Executive Chairman, "Howard Crone and I are demonstrating our personal commitment by agreeing to fully backstop the $5 million minimum amount of the planned Rights Offering. Cequence is very appreciative of the opportunity to continue to work with CII in a collaborative fashion, in support of the best interests of CII and the Company's various stakeholders." 

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