/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
CALGARY, AB, March 29, 2021 /CNW/ - Ensign Energy Services
Inc. ("Ensign" or the "Corporation") (TSX: ESI)
announces that effective March 18,
2021, it has amended the terms of the unsecured,
subordinated convertible debentures of the Corporation in the
principal amount of $37,000,000 (the
"Convertible Debentures") which remain outstanding. The
Corporation announced the issuance of the Convertible Debentures on
March 29, 2018 and April 12, 2018.
Prior to the Amendments described below, the Convertible
Debentures matured on January 31,
2022 (the "Maturity Date") and bore interest from the
date of closing at 7.0% per annum, payable semi–annually in
arrears, on April 1 and October 1 of each year. The Convertible
Debentures are convertible at the option of the holder into common
shares of the Corporation ("Common Shares") at any time
prior to the close of business on the Maturity Date upon at least
61 days prior notice, at a conversion price, prior to the
Amendments, of $7.00 per Common
Share, subject to customary anti–dilution adjustments (the
"Conversion Price"). Holders converting their Convertible
Debentures will receive accrued and unpaid interest thereon (if
any), up to, but excluding, the date of conversion.
On December 31, 2020, the
Corporation amended and extended its existing $900 million credit facility by amending or
replacing certain financial covenant ratios and extending the
maturity date of the credit facility to November 25, 2022. As a condition to the credit
facility amendment, if, on or before September 30, 2021, the Maturity Date of the
Corporation's existing Convertible Debentures is not extended to a
date no earlier than February 26,
2023, then the maturity date of the credit facility shall
automatically be amended to November 29,
2021.
Therefore, in order to satisfy the lenders' requirement above
and maintain the November 25, 2022
maturity date of the amended credit facility, the Corporation has
amended the terms of the Convertible Debentures to: (i) extend the
Maturity Date from January 31, 2022
to May 1, 2023; (ii) increase the
interest rate from 7.00% to 7.75% per annum; and (iii) reduce the
Conversion Price from $7.00 to
$1.75 (collectively, the
"Amendments"). The effect of the Amendments is that the
Convertible Debentures are convertible into up to 21,142,857
Common Shares, which is equal to 12.96% of the Corporation's
163,118,758 Common Shares currently outstanding.
Early Warning Requirements
Fairfax Financial Holdings Limited ("Fairfax"), which
currently owns or controls (directly or indirectly) 15,486,600
(9.86%) of the outstanding Common Shares on a non-diluted basis,
currently holds Convertible Debentures in the principal amount of
$11.05 million. Prior to the
Amendments, assuming conversion of the full amount of the
Convertible Debentures held by Fairfax through its subsidiaries,
Fairfax would have owned or controlled (directly or indirectly)
17,065,171 Common Shares representing 10.36% of the outstanding
Common Shares.
Assuming conversion of the full amount of the Convertible
Debentures held by Fairfax through its subsidiaries and after
giving effect to the Amendments, Fairfax would own or control
(directly or indirectly) 21,800,886 Common Shares, representing
12.87% of the issued and outstanding Common Shares (based on
conversion at the amended conversion price of $1.75 and issued and outstanding Common Shares
totaling 169,433,043, being 163,118,758 currently issued and
outstanding Common Shares plus 6,314,286 Common Shares issuable to
Fairfax (or its subsidiaries) upon conversion of the Convertible
Debentures held (directly or indirectly) by Fairfax). The
Convertible Debentures and Common Shares were acquired by Fairfax
for investment purposes. Fairfax has no current intention to enter
into any of the transactions listed in item 5 of Form F1 of
National Instrument 62-103 but in the future, it may discuss such
transactions with management and/or the board of directors of the
Corporation and it may further purchase, hold, convert, vote,
trade, dispose or otherwise deal in the securities of the
Corporation, in such manner as it deems advisable to benefit from
changes in market prices of the Corporation's securities, publicly
disclosed changes in the operations of the Corporation, its
business strategy or prospects or from a material transaction of
the Corporation, and it will also consider the availability of
funds, evaluation of alternative investments and other factors.
Fairfax is a corporation continued under the Canada Business
Corporations Act and is a holding company which, through its
subsidiaries, is engaged in property and casualty insurance and
reinsurance and the associated investment management. An
early warning report will be filed by Fairfax in accordance with
applicable securities laws and will be available on SEDAR at
www.sedar.com or may be obtained directly from Fairfax upon request
at 416-367-4941 (Attention: John
Varnell) or at Fairfax Financial Holdings Limited, 95
Wellington Street West, Suite 800, Toronto, Ontario M5J 2N7.
Mr. N. Murray Edwards, Chairman
of the Corporation, currently owns or controls (directly or
indirectly) 31,582,085 (19.36%) of the outstanding Common Shares on
a non-diluted basis, and currently holds Convertible Debentures in
the principal amount of $20 million.
Prior to the Amendments, assuming conversion of the full amount of
the Convertible Debentures held by Mr. Edwards, Mr. Edwards would
have owned or controlled 34,439,228 Common Shares, representing
20.75% of the outstanding Common Shares. Assuming conversion of the
full amount of the Convertible Debentures currently held by Mr.
Edwards and after giving effect to the Amendments, Mr. Edwards
would own or control (directly or indirectly) 43,010,656 Common
Shares, representing 24.64% of the issued and outstanding Common
Shares (based on conversion at the amended conversion price of
$1.75 and issued and outstanding
Common Shares totaling 174,547,329, being 163,118,758 currently
issued and outstanding Common Shares plus 11,428,571 Common Shares
issuable to Mr. Edwards upon conversion of all of the Convertible
Debentures held by him). The Convertible Debentures were acquired
by Mr. Edwards for investment purposes. Mr. Edwards has no current
intention to enter into any of the transactions listed in item 5 of
Form F1 of National Instrument 62-103 but in the future may
consider such transactions. An early warning report will be filed
by Mr. Edwards in accordance with applicable securities laws and
will be available on SEDAR at www.sedar.com or may be obtained
directly from the Corporation upon request at 403-262-1361
(Attention: Michael Gray) or c/o the
Corporation at 400 – 5th Avenue S.W., Suite 1000, Calgary, Alberta T2P 0L6 Canada.
At the Corporation's annual general and special shareholder
meeting to be held on May 7, 2021
(the "Meeting"), the disinterested shareholders of the
Corporation will be asked to consider and, if deemed advisable,
to approve an ordinary resolution (the "MAC
Resolution") authorizing and approving the issuance of
Common Shares that may be required to be issued to Mr. Edwards upon
conversion of all or some of the Corporation's Convertible
Debentures that may be held by Mr. Edwards at the time of such
conversion and where such conversion would "materially affect
control" (as that term is defined in the Toronto Stock Exchange
Company Manual) of the Corporation through the creation of a new
"Control Person" (as such term is defined in the Securities
Act (Alberta)).
In the event the MAC Resolution is not passed at the Meeting,
the Convertible Debentures held by Mr. Edwards will be amended to:
(i) include a cap on conversion of the Convertible Debenture into
Common Shares, so that as long as Mr. Edwards or his affiliates
own all or some of the Convertible Debenture, he will not be able
to convert that portion of the Convertible Debenture into Common
Shares that would result in him holding greater than 19.99% of
the Corporation's issued and outstanding Common Shares at the
relevant time; (ii) include a provision that, so long as the
Convertible Debenture is owned by Mr. Edwards, allows for the
principal amount of the Convertible Debenture remaining after the
conversion described in (i) (limited to the cap at 19.99%) to be,
at the Corporation's discretion, (A) repaid by the Corporation at
their stated principal amount, plus an amount equal to the trading
value of the Common Shares at the time of repayment, less the
$1.75 amended Conversion Price,
multiplied by the number of Common Shares that the Debenture would
be convertible into (such amount being the "Make Whole
Amount"), or (B) repaid through the issuance of a junior
non-convertible secured instrument, with a 7.75% per annum
interest rate, in an amount equal to the stated principal amount of
the Convertible Debenture plus the Make Whole Amount, which would
mature the same date as the Corporation's senior notes, in April
2024. The foregoing amendments will aim to treat Mr. Edwards in
the same manner as other Convertible Debenture holders, without
the creation of a "Control Person". The Make Whole Amount payable
to Mr. Edwards, so long as he continues to own all or some of the
Convertible Debentures currently owned by him, may, if required
by the Toronto Stock Exchange ("TSX") in accordance with
s.604(a)(ii) of the TSX Company Manual, be limited to an
amount that together with the Common Shares payable to
insiders on conversion of the Convertible Debenture, does not
exceed 10% of the market capitalization of the Corporation.
Nothing shall prevent Mr. Edwards from selling all or some of
his Convertible Debentures at any time to an arms' length party,
who would be entitled to convert all or some of such purchased
Convertible Debentures into Common Shares, in accordance with the
terms of the Convertible Debentures, so long as that arms' length
party's shareholdings in the Corporation would not then exceed 20%
of the Corporation's issued and outstanding Common Shares.
U.S. Securities Laws
The Debentures and the Common Shares issuable on conversion
thereof have not been, and will not be, registered under the United
States Securities Act of 1933, as amended (the "1933 Act"),
or any state securities laws and may not be offered or sold in
the United States to, or for the
account or benefit of, U.S. persons (as defined in Regulation S
under the 1933 Act), except pursuant to an exemption from the
registration requirements of those laws. This news release shall
not constitute an offer to sell or the solicitation of an offer to
buy securities in the United
States, or for the account or benefit of U.S persons.
Resignation of Chief Financial Officer
Ensign also today announces that Mr. Michael Gray has tendered his resignation as
Chief Financial Officer of Ensign, to pursue other opportunities.
Mr. Gray plans to remain with the Corporation until May 7, 2021, in order to provide for an orderly
transition period.
"We thank Mike very much for his contributions to Ensign and
wish him the very best in his new venture," said Robert H. Geddes, Ensign's President and Chief
Operating Officer.
Ensign has initiated a search for a new Chief Financial Officer
and expects to fill the position in the near term.
Cautionary Statements on Forward-looking Information
Certain statements in this news release constitute
forward-looking statements or information (collectively referred to
herein as "forward-looking statements") within the meaning of
applicable securities legislation. Forward-looking statements
generally can be identified by the words "believe", "anticipate",
"expect", "plan", "estimate", "target", "continue", "could",
"intend", "may", "potential", "predict", "should", "will",
"objective", "project", "forecast", "goal", "guidance", "outlook",
"effort", "seeks", "schedule" or expressions of a similar nature
suggesting future outcome or statements regarding an outlook. In
particular, this news release contains forward-looking statements
pertaining to the issuance of Common Shares upon conversion of the
Convertible Debentures, the MAC Resolution to be put forward to
shareholders at the Meeting, and further amendments to the
Convertible Debentures in the event the MAC Resolution is not
approved at the Meeting.
These forward-looking statements are subject to, and may be
affected by, numerous risks and uncertainties, some of which are
beyond Ensign's control. Risks that could cause or contribute to
these differences include the factors described in Ensign's public
reports and filings, which are available under Ensign's profile at
www.sedar.com. The forward-looking information contained herein is
provided as at the date hereof and Ensign does not undertake
update, correct or revise any forward-looking statements as a
result of any new information, future events or otherwise, except
as may be required by applicable law.
About Ensign
Ensign is a global leader in oilfield services, headquartered
out of Calgary, Alberta, operating
in Canada, the United States and internationally. We are
one of the world's top land-based drilling and well servicing
contractors serving crude oil, natural gas, and geothermal
operators. Our premium services include contract drilling,
directional drilling, underbalanced and managed pressure drilling,
rental equipment, well servicing and production services. Please
visit our website at ensignenergy.com.
Ensign's Common Shares are publicly traded though the facilities
of the Toronto Stock Exchange under the trading symbol ESI. For
further information, contact:
Ensign Energy Services Inc.
400 – 5th Avenue S.W., Suite 1000
Calgary, Alberta T2P 0L6
Canada
Mr. Michael Gray, Chief Financial
Officer
Telephone: 403.262.1361
SOURCE Ensign Energy Services Inc.