Petrus Resources Ltd. ("
Petrus" or the
"
Company") (TSX: PRQ) is pleased to announce that,
further to its news release dated August 30, 2021 with respect to
its intention to complete a series of transactions (the
“
Transactions”) that will reduce the Company’s
total debt by approximately $49 million through the issuance of
$25.8 million of Petrus shares at $0.55 per share and extend the
maturity date of the Company’s senior secured credit facility (the
"
First Lien Loan"), the Toronto Stock Exchange
(the "
TSX") has consented to Petrus' application
for reliance on the "financial hardship" exemption for minority
shareholder approval of the Transactions, in accordance with the
TSX Company Manual.
As set out in Petrus' news release on August 30,
2021, the Transactions will result in the extension of the term of
the Company's first Lien Loan to May 31, 2021, the full settlement
of the Company’s subordinated secured term loan (the
"Second Lien Loan") in the current principal
amount of $39.3 million (the "Second Lien
Settlement") for $15.8 million of equity and a private
placement financing for proceeds of $10.0 million (the
"Equity Financing"), which will be applied to
outstanding indebtedness under the First Lien Loan, resulting in a
substantial reduction of the Company’s indebtedness from an
aggregate of approximately $112 million to approximately $63
million.
In connection with the Second Lien Settlement,
Petrus has entered into a shares for debt agreement with Stuart
Gray and Glen Gray, who recently took assignment of the Company's
Second Lien Loan, pursuant to which Petrus will issue an aggregate
of 28,727,273 common shares of Petrus (the "Common
Shares") at an issue price of $0.55 per share (for total
consideration of $15.8 million), in consideration for the full
payment and discharge of amounts outstanding under the Second Lien
Loan, currently totalling $39.3 million. Concurrently with entering
into the shares for debt agreement in respect to the Second Lien
Settlement, Petrus has entered into binding subscription agreements
with each of Don Gray and Glen Gray (Don Gray, Glen Gray and Stuart
Gray being the "Major Investors") to complete the
Equity Financing at an issue price of $0.55 per share for total
proceeds of $10.0 million. All of the proceeds of the Equity
Financing will be used to reduce amounts outstanding under the
First Lien Loan, which has approximately $73 million currently
outstanding. The issue price of the Common Shares issuable in the
Equity Financing and the Second Lien Settlement represent a 15%
premium to the 5-day VWAP of the Common Shares prior to announcing
the Transactions.
Financial Hardship Exemption
Don Gray is a director of the Company, who owns
or controls (directly or indirectly) 13,022,476 Common Shares
(representing 26.3% of the outstanding Common Shares). Glen Gray
owns or controls (directly or indirectly) 6,708,867 Common Shares
(representing 13.6% of the outstanding Common Shares). In addition
to Don Gray and Glen Gray being “insiders” of the Company, each of
the Major Investors are siblings of one another and of Ken Gray,
the President and a director of Petrus.
It is anticipated that the Second Lien
Settlement and the Equity Financing will result in the issuance of
Common Shares to the Major Investors in an amount greater than 10%
of the number of Common Shares outstanding, such that shareholder
approval of such issuance would be required pursuant to subsection
607(g) of the TSX Company Manual. In addition, the issuance of
Common Shares pursuant to the Second Lien Settlement and the Equity
Financing may be considered by the TSX to materially affect control
of the Company as each of the Major Investors will own or control
in excess of 20% of the Common Shares after giving effect to the
Second Lien Settlement and the Equity Financing, such that
shareholder approval of such issuances may also be required
pursuant to subsection 604(a)(i) of the TSX Company Manual.
Additionally, in accordance with Section 604(a)(ii) of the TSX
Company Manual, where a transaction involves consideration paid or
received by "insiders" of the issuer in excess of 10% of the
issuer's market capitalization in any 6-month period, the TSX
requires that the transaction be approved by the issuer's security
holders to the exclusion of those security holders who are
"insiders" of the Company.
A summary of the current and anticipated Common
Share ownerships of each of the Major Investors is set forth
below:
Name of Shareholder |
|
Securities Currently Owned, Controlledor
Directed (and % of issued and outstanding) |
|
Securities to be Owned, Controlledor
Directed (and % of issued and outstanding) (1) |
Don Gray |
|
13,022,476 (26.3%) |
|
28,658,840 (29.7%)(2) |
|
|
|
|
|
Glen Gray |
|
6,715,867 (13.7%) |
|
22,352,231 (23.2%)(3) |
|
|
|
|
|
Stuart Gray |
|
4,941,867 (9.9%) |
|
20,578,231 (21.3%)(4) |
Notes:(1) Based on 49,558,622 issued
and outstanding Common Shares.(2) Assumes Mr. Don Gray
subscribes for and acquires 15,636,364 Common Shares pursuant to
the Equity Financing.(3) Assumes Mr. Glen Gray
subscribes for and acquires 2,545,455 Common Shares pursuant to the
Equity Financing and is issued 13,090,909 Common Shares pursuant to
the Second Lien Settlement.(4) Assumes Mr. Stuart Gray
is issued 15,636,364 Common Shares pursuant to the Second Lien
Settlement.
In addition to the above, the TSX has advised
that they may consider each of the Major Investors to be acting
jointly in respect of the Transaction, and as such, all Common
Shares owned by such persons would be aggregated in determining
insider participation in the Transactions as well as any "minority
approvals" required by the TSX, absent the financial hardship
exemption.
As previously noted in Petrus' August 30, 2021
news release, the Company applied to the TSX for relief from the
foregoing shareholder approval requirements on the basis that a
committee of independent directors of Petrus (the
"Independent Committee") has determined that
Petrus is in serious financial difficulty and that the Equity
Financing together with the Second Lien Settlement, is designed to
improve Petrus’ financial situation and the terms of the Equity
Financing and the Second Lien Settlement are reasonable for the
Company in the circumstances. The Independent Committee also
considered the need for a timely completion of the Equity Financing
and the Second Lien Settlement, as required by its lenders under
the First Lien Loan, and the ability of the Company to complete
such transactions in the timelines required by its lenders.
In connection with reliance on the above
described "financial hardship" exemption from the TSX's shareholder
approval requirements, the TSX will place Petrus under a delisting
review, which is normal practice when a listed issuer seeks to rely
on this exemption. No assurance can be provided as to the outcome
of such review and, therefore, on the Company's continued
qualification for listing on the TSX.
Closing of the Second Lien Settlement and Equity
Financing remain subject to all conditions to closing, including
the receipt of all third party and regulatory approvals, including
the TSX’s conditional approval and its final acceptance of the
Second Lien Settlement and Equity Financing.
For further information on the Transaction,
including a summary of the background of the Transactions, Petrus'
financial position and the considerations of the Independent
Committee, please see Petrus' August 30, 2021 news release.
ABOUT PETRUS
Petrus is a public Canadian oil and gas company
focused on property exploitation, strategic acquisitions and
risk-managed exploration in Alberta.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Ken Gray President and Chief Executive Officer
T: 403-930-0889 E: kgray@petrusresources.com
CAUTIONARY STATEMENTS:
Forward-Looking Statements
This news release contains forward‐looking
statements regarding the Second Lien Settlement and Equity
Financing, closing of the Second Lien Settlement and Equity
Financing and the timing of the same and the Company’s continued
qualification for listing on the TSX. These forward‐looking
statements are provided as of the date of this news release, or the
effective date of the documents referred to in this news release,
as applicable, and reflect predictions, expectations or beliefs
regarding future events based on the Company's beliefs at the time
the statements were made, as well as various assumptions made by
and information currently available to them. In making the
forward-looking statements included in this news release, the
Company has applied several material assumptions, including, but
not limited to, the assumption that regulatory approval of the
Second Lien Settlement and Equity Financing will be obtained in a
timely manner; that all conditions precedent to the completion of
the Second Lien Settlement and Equity Financing will be satisfied
in a timely manner; and that general economic and business
conditions will not change in a materially adverse manner, well
production rates and commodity prices,. Although management
considers these assumptions to be reasonable based on information
available to it, they may prove to be incorrect. By their very
nature, forward‐looking statements involve inherent risks and
uncertainties, both general and specific, and risks exist that
estimates, forecasts, projections and other forward‐looking
statements will not be achieved or that assumptions on which they
are based do not reflect future experience. We caution readers not
to place undue reliance on these forward‐looking statements as a
number of important factors could cause the actual outcomes to
differ materially from the expectations expressed in them. These
risk factors may be generally stated as the risk that the
assumptions expressed above do not occur, but specifically include,
without limitation, risks relating to: general market conditions;
the Company’s ability to secure financing on favourable terms; the
failure to receive all applicable third party and regulatory
approvals for the Transaction, and the additional risks described
in the Company's latest Annual Information Form, and other
disclosure documents filed by the Company on SEDAR. The foregoing
list of factors that may affect future results is not exhaustive.
When relying on our forward‐looking statements, investors and
others should carefully consider the foregoing factors and other
uncertainties and potential events. The Company does not undertake
to update any forward‐looking statement, whether written or oral,
that may be made from time to time by the Company or on behalf of
the Company, except as required by law.
This press release shall not constitute
an offer to sell or the solicitation of an offer to buy securities
of the Company in the United States nor shall there be any sale of
securities of the Company in any jurisdiction in which such offer,
solicitation or sale would be unlawful. The securities described
herein have not been, and will not be, registered under the United
States Securities Act of 1933, as amended, or the securities laws
of any state of the United States. Accordingly, any of the
securities described herein may not be offered or sold in the
United States or to U.S. persons unless an exemption from
registration is available.
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