NOT FOR DISTRIBUTION THROUGH UNITED
STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES
ClearStream Energy Services
Inc. (TSX:CSM) (TSX:CSM.DB.A) (the
“Company”) announced today that it has entered
into a refinancing agreement (the “Refinancing
Agreement”) with Canso Investment Counsel Ltd. (in its
capacity as portfolio manager for and on behalf of certain accounts
that it manages, “Canso”), pursuant to which
Canso, in its capacity as portfolio manager for and on behalf of
certain accounts that it manages, has agreed to exchange certain of
the Company’s existing debt for newly created Series 1 Preferred
Shares of the Company (the “Preferred Shares”) and
to subscribe for additional Preferred Shares of the Company
(collectively the “Refinancing Transaction”). The
Refinancing Transaction ensures that the Company is able to
continue to service its outstanding indebtedness and is designed to
improve the balance sheet and liquidity of the Company going
forward in order to allow it to better execute upon its business
plan and growth strategies.
Pursuant to the Refinancing Agreement, Canso has
agreed to exchange $75,000,000 principal amount of 8.00% senior
secured debentures due 2026 (the “Senior Secured
Debentures”) and approximately $33,564,900 principal
amount of 10.00% second lien secured convertible debentures due
2026 (the “Convertible Secured Debentures” and,
together with the Senior Secured Debentures, the “Secured
Debentures”) for Preferred Shares. Additionally, Canso has
agreed to acquire up to $20,000,000 in additional Preferred Shares
(the “Private Placement”), the proceeds of which
will primarily be used to fund the interest obligations of the
Company under the Secured Debentures due on January 2, 2018, June
30, 2018 and December 31, 2018. The Company does not intend to seek
a listing of the Preferred Shares on the TSX.
Closing of the Refinancing Transaction is
expected to occur on or following January 5, 2018 and will be
subject to the terms and conditions set out in the Refinancing
Agreement, including approval of certain amendments to the
indentures governing the Secured Debentures by the holders thereof
(as described below), as well as the approval of the Toronto Stock
Exchange (the “TSX”) and the approval of Bank of
Montreal, as agent, and the lenders under the Company’s senior
credit agreement. The Refinancing Agreement will be available on
the Company’s SEDAR profile at www.sedar.com. Since proceeds of the
Private Placement will be used to fund the interest payment due on
January 2, 2018 under the Secured Debentures, the Company does not
expect an Event of Default (as defined in the indentures governing
the Secured Debentures) to occur unless the Company is unable to
complete the Refinancing Agreement on or prior to January 17,
2018.
“ClearStream is pleased to announce this
refinancing transaction with Canso, a significant security holder
of the Company,” said Dean MacDonald, the Executive Chairman and
interim Chief Executive Officer of the Company. “This transaction
significantly improves the Company’s balance sheet and provides it
with the increased flexibility ClearStream needs in order to
continue to implement its business plan.”
The terms of the Preferred Shares provide for a
10% fixed cumulative preferential cash dividend payable when the
Company shall have sufficient monies to be able to do so, including
under the provisions of applicable law and contracts affecting the
Company. The board of directors of the Company (the
“Board”) does not intend to declare or pay any
cash dividends until such time as the Company’s balance sheet and
liquidity position supports the payment. Any accrued but unpaid
dividends are convertible in certain circumstances at the option of
the holder into additional Preferred Shares. Holders of the
Preferred Shares will have the right, at their option, to convert
their Preferred Shares into common shares of the Company
(“Common Shares”) at a price of $0.35 per Common
Share, subject to adjustment in certain circumstances. The
Preferred Shares are retractable by the Company in cash at 110% of
par value, plus accrued but unpaid dividends once all of the
outstanding Senior Secured Debentures have been repaid and are
subject to repayment in the event of certain change of control
transactions. There are approximately 110,000,000 Common Shares
issued and outstanding. Additionally, 10% of the Common Shares are
reserved for issuance under the Company’s Incentive Option Plan and
Performance Share Unit Plan, and in excess of 100,000,000 Common
Shares are reserved for issuance upon conversion of the Company’s
Convertible Secured Debentures.
In accordance with the rules of the TSX, the
Company has applied to the TSX for permission to obtain shareholder
approval for the Refinancing Transaction through the delivery of a
written consent executed by holders of more than 50% of the issued
and outstanding Common Shares, excluding those shareholders who
also hold Convertible Secured Debentures, in lieu of holding a
shareholder meeting. None of the consenting shareholders will
participate in the Private Placement.
Pursuant to the Refinancing Transaction, an
aggregate of up to approximately $130,000,000 in Preferred Shares
will be issued at closing, with almost all of the Preferred Shares
being issued to accounts managed by Canso as portfolio manager.
Accordingly, based upon a conversion price of $0.35 per Common
Share, there could be significant dilution to the current holders
of Common Shares. Up to approximately 371,430,000 additional Common
Shares will be issuable upon conversion of the face amount of
Preferred Shares to be issued on closing of the Refinancing
Transaction, representing approximately 338% of the issued and
outstanding Common Shares as of December 18, 2017 (which amount
includes the 100,000,000 Common Shares currently issuable on
conversion of the Convertible Secured Debentures and for which
shareholder approval was already obtained in 2016 and assumes that
approximately all $35,000,000 in Convertible Secured Debentures is
ultimately voluntarily exchanged for Preferred Shares). Assuming
that the holders of the Preferred Shares exercise the right to
convert all accrued dividends into Preferred Shares at the end of
every year, and no right of redemption or retraction is exercised
under the Preferred Shares, up to approximately 963,400,000 Common
Shares would be issuable upon conversion of the face amount of
Preferred Shares after ten years, which represents approximately
877% of the issued and outstanding Common Shares as of December 18,
2017. Potentially almost all of these Common Shares could, subject
to applicable securities laws, be issued to accounts managed by
Canso. Currently, approximately 240,000,000 Common Shares are
potentially issuable pursuant to the Convertible Secured Debentures
assuming the payment of all interest on such debentures is
satisfied, pursuant to the terms of the existing indenture, by
issuing additional Convertible Secured Debentures. Accordingly, the
incremental dilutive effect of the Refinancing Transaction would be
the possible issuance of at least 131,430,000 Common Shares on
closing and potentially up to 723,400,000 Common Shares after ten
years based on the assumptions set out above. Accordingly, the
Company will seek written consent from holders for the issuance of
up to 963,400,000 Common Shares. If the Preferred Shares are
outstanding for longer than ten years and accrued dividends
continue to be paid in Preferred Shares past that time, the Company
will have to seek further shareholder approval for the issuance and
listing of the Common Shares underlying such additional Preferred
Shares.
The indentures governing the Convertible Secured
Debentures and the Senior Secured Debentures will be amended to
effect the exchange referred to above. Such amendments are subject
to approval of the TSX and the written consent of the holders of at
least 66 2/3% of each of the Convertible Secured Debentures and the
Senior Secured Debentures, respectively. Canso, holding greater
than 66 2/3% of each of the Convertible Secured Debentures and the
Senior Secured Debentures, has agreed to consent to such
amendments. Any Convertible Secured Debentures that remain
outstanding following the Refinancing Transaction are expected to
be delisted from the TSX and any continuing holders of Convertible
Secured Debentures will have the option to continue to hold their
debentures until maturity, exchange their debentures for Preferred
Shares or exchange their debentures for cash until March 31, 2018.
Canso, for and on behalf of accounts that it manages, will continue
to hold approximately $1,000,000 principal amount of Convertible
Secured Debentures, and has agreed to exchange such Convertible
Secured Debentures for Preferred Shares after no other Convertible
Secured Debentures remain outstanding. Continuing holders of
Convertible Secured Debentures are asked to contact the Company at
the number noted below.
As the Refinancing Transaction could result in:
(i) an aggregate number of Common Shares potentially greater than
25% of the Company’s issued and outstanding Common Shares being
issued (which requires shareholder approval pursuant to Section
607(g)(i) of the TSX Company Manual); (ii) greater than 10% of the
currently issued and outstanding Common Shares being issued to
insiders of the Company during a six month period (which requires
shareholder approval pursuant to Sections 607(g)(ii) of the TSX
Company Manual); (iii) the Preferred Share conversion price being
below the allowable discount thresholds (which requires shareholder
approval pursuant to Section 610 of the TSX Company Manual); (iv)
the Preferred Share conversion price being below the allowable
discount thresholds (which requires shareholder approval pursuant
to Section 607(e) of the TSX Company Manual); and (v) a pool of
Preferred Shares being reserved for issuance pursuant to the
payment of accrued dividends under the Preferred Shares being
priced before the applicable dividend payment date or the
obligation to pay the dividend has occurred, the Company would
ordinarily be required to obtain shareholder approval for the
Refinancing Transaction pursuant to Sections 607(g)(i) and (ii) of
the TSX Company Manual.
However, in excess of 50% of the disinterested
shareholders (excluding Canso and Mr. Dean Macdonald) have
evidenced their approval by written consent in accordance with the
requirements set forth in Section 604(d) of the TSX Company
Manual.
In accordance with the requirements set forth in
the TSX Company Manual and in connection with the approval being
sought thereunder for the listing of the Common Shares underlying
the Preferred Shares, the Company also confirms that the
transactions described herein have been negotiated at arm’s
length.
In aggregate, the accounts managed by Canso as
portfolio manager currently hold: (i) approximately 17,153,650
Common Shares, representing approximately 15.6% of the Company’s
109,941,241 outstanding Common Shares; (ii) all of the outstanding
Senior Secured Debentures; and (iii) approximately $34,564,900
aggregate principal amount of outstanding Convertible Secured
Debentures. As Canso is an insider of the Company, the Refinancing
Transaction constitutes a related party transaction under
Multilateral Instrument 61-101 - Protection of Minority Security
Holders in Special Investments (“MI 61-101”) of
certain of the Canadian Securities Administrators and the Company
would ordinarily be required to obtain shareholder approval for the
Refinancing Transaction on a disinterested basis both pursuant to
the requirements of MI 61-101 and the policies of the TSX.
The Company is relying on the formal valuation
exemption in Section 5.5(a) of MI 61-101 and the minority approval
exemption in Section 5.7(1) of MI 61-101 pursuant to Subsection
5.7(1)(e) of MI 61-101 based on the Board, acting in good faith,
having determined, and at least two-thirds of the Company’s
independent directors, acting in good faith, having determined
that: (i) the Company is in serious financial difficulty with
limited alternatives; (ii) the Refinancing Transaction is designed
to improve the Company’s financial position; (iii) the terms of the
Refinancing Transaction are reasonable in the Company’s
circumstances; (iv) the immediacy of the Company’s need for
financing through the Refinancing Transaction does not afford it
sufficient time to hold a special shareholders’ meeting; and (v)
the Refinancing Transaction is fair to, and in the best interests
of, the shareholders of the Company.
Mr. MacDonald currently holds approximately
$100,000 principal amount of the Convertible Secured Debentures. As
part of the Refinancing Transaction, such Convertible Secured
Debentures will be exchanged for Preferred Shares on the same basis
as the Convertible Secured Debentures held by accounts managed by
Canso, that is, at par, with no premium, penalty or bonus. Mr.
MacDonald was not involved with the negotiation of the Refinancing
Transaction and declared his interest to the Board in connection
with the Refinancing Transaction, abstained from voting, and
recused himself from the portion of the board meeting relating to
the Refinancing Transaction. The remaining directors, free from any
interest in the Refinancing Transaction and unrelated to the
parties involved in the Refinancing Transaction, reviewed the
Refinancing Transaction and concluded that it is in the best
interests of the Company.
The Company did not file a material change
report at least 21 days prior to the anticipated date of completion
of the Refinancing Transaction due to the Company’s determination
that it is in the best interests of the Company to avail itself of
the proceeds of and to complete the Refinancing Transaction in an
expeditious manner.
The Preferred Shares issued pursuant to the
Refinancing Transaction will be subject to a statutory hold period
of four months plus a day from the date of issuance in accordance
with applicable securities legislation. The Preferred Shares issued
pursuant to the Refinancing Transaction have not been and will not
be registered under the U.S. Securities Act of 1993, as amended, or
any state securities laws and may not be offered or sold unless an
exemption from registration is available.
For further information please contact:
Gary Summach Chief Financial
Officer587-318-0997gsummach@clearstreamenergy.ca
About ClearStream Energy Services
Inc.
With a legacy of excellence and experience
stretching back more than 50 years, ClearStream provides solutions
to the Energy and Industrial markets including: Oil & Gas,
Petrochemical, Mining, Power, Agriculture, Forestry, Infrastructure
and Water Treatment. With offices strategically located across
Canada and over 3,000 employees, we construct, transport and
provide maintenance services that keep our clients moving forward.
For more information about ClearStream, please visit
www.ClearStreamEnergy.ca.
Forward-looking information
This press release contains forward-looking
information based on current expectations, including but not
limited to the Company's expectations in connection with the
Refinancing Transaction, benefits of the Refinancing Transaction,
conditions precedent to the completion of the Refinancing
Transaction, the delisting of the Convertible Secured Debentures
following the Refinancing Transaction and the expected performance
of the Company. Forward-looking information is often, but not
always, identified by the use of the words “contemplate” and
“anticipate” and statements that an event or result “may”, “will”,
“should”, “could” or “might” occur and any similar expressions or
negative variations thereof. In providing forward-looking
information in this press release, management of the Company has
made numerous assumptions regarding the Refinancing Transaction
which it believes to be reasonable, including assumptions relating
to: (i) the Company’s existing and future business prospects and
opportunities; (ii) the receipt of all required security holder
approvals in respect of the Refinancing Transaction; (iii) the
satisfaction or waiver of all other conditions to the completion of
the Refinancing Transaction; (iv) the expected actions of third
parties; and (v) the outcome of the Refinancing Transaction and
related transactions and agreements including the expected use of
proceeds. However, forward-looking information entails various
risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking information.
Specific risks that could cause actual results to differ materially
from those anticipated or disclosed herein include, but are not
limited to: (i) failure to satisfy the conditions to complete the
Refinancing Transaction including failure to receive required stock
exchange, security holder and third party approvals and/or
consents; (ii) the occurrence of any event, change or other
circumstance that could give rise to the termination of the
Refinancing Agreement; (iii) the delay of consummation of the
Refinancing Transaction or the failure of the Refinancing
Transaction to be completed for any other reason; (iv) the amount
of costs, fees and other expenses incurred in connection with the
Refinancing Transaction; and (v) the risk that the anticipated
effects of the Refinancing Transaction, if completed, may not
result in the outcomes expected by management. In addition, general
risks relating to capital markets, economic conditions, regulatory
changes, changes in interest rates as well as the management and
operations of the Company’s business may also cause actual results
to differ materially from those anticipated or disclosed herein.
These and other risks and uncertainties relating generally to the
Company’s business are more fully discussed in the Company’s
disclosure materials, including its annual information form and
MD&A, filed with the securities regulatory authorities in
Canada and available at www.sedar.com. Forward-looking statements
are not guarantees of future performance, and management’s
assumptions upon which such forward-looking information are based
may prove to be incorrect. Accordingly, there can be no assurance
that actual events or results will be consistent with the
forward-looking statements disclosed herein. In light of the
significant uncertainties inherent in forward-looking information,
any such forward-looking information should not be regarded as
representations by the Company that its objectives or plans
relating to the Refinancing Transaction or otherwise will be
achieved. Readers are cautioned not to place undue reliance on any
forward-looking information contained herein and that such
forward-looking information are provided solely for the purpose of
providing information about management's current expectations and
plans relating to the future. Readers are cautioned that such
information may not be appropriate for other purposes. In addition,
forward-looking information relates to the date on which they are
made. The Company disclaims any intention or obligation to update
or revise any forward-looking information contained herein, whether
as a result of new information, future events or otherwise, except
to the extent required by law.
ClearStream Energy Servi... (TSX:CSM)
Historical Stock Chart
From Mar 2024 to Apr 2024
ClearStream Energy Servi... (TSX:CSM)
Historical Stock Chart
From Apr 2023 to Apr 2024