Cequence Energy will implement a recapitalization transaction as part of a plan of compromise and arrangement under the Companies’ Creditors Arrangement Act. The plan will allow Cequence to reduce its debt and interest costs and improve liquidity to fund future operations.
In connection with the plan, Cequence entered into a restructuring support agreement with certain lenders under the company’s second lien senior secured $50 million term loan facility due Oct. 3, 2023, as plan sponsors. Pursuant to the support agreement, the plan sponsors have, among other things, agreed to convert $17.9 million and the unpaid interest on the term loan into unsecured debt, to accept shares of Cequence as payment for satisfaction of a certain portion of the principal amount of the term loan, to modify the interest rate on the remaining outstanding principal amount of the term loan and to take other actions to support the plan.
The implementation of the plan is conditional upon, among other things, the approval by the required majorities of secured and unsecured creditors of Cequence voting at the meeting of those creditors to be called for such purpose. The meeting will be held on Sept. 15 pursuant to an order of the Court of Queen’s Bench of Alberta. If the plan is approved by the secured and unsecured creditors, Cequence will seek an order of the court sanctioning the plan under the CCAA following the meeting.
Cequence has already obtained an order from the Court of Queen’s Bench of Alberta that approves the calling and holding of a virtual-only meeting of the secured and unsecured creditors, which will be held on Sept. 15 at 9 a.m. MDT. The record date for creditors entitled to vote at the meeting was set at 5 p.m. MDT on Sept. 14. Cequence also obtained an order from the court extending the stay period under the CCAA up to and including Sept. 30 and a confidentiality order in respect of a limited number of commercially sensitive terms in the support agreement.
The plan and the restructuring transaction include the following key elements:
- The operations of Cequence will continue as normal and without disruption following the implementation of the plan.
- The lenders under the term loan agreed to disclaim, as a deficiency claim, $17.9 million and the unpaid interest on the term loan, and amend the term loan agreement by, among other things, modifying the interest rate payable.
- An amendment or disclaimer of certain key long-term agreements to improve the future financial viability of the organization.
- Articles of amendment will be filed to create a new class of common shares, which the lenders under the term loan will accept as satisfaction of a portion of their debt.
- The lender of the Cequence’s debtor-in-possession facility that was made available in connection with the CCAA proceedings under a commitment letter will enter into an agreement to amend and restate the DIP facility commitment letter to provide Cequence with an operating credit facility following the plan implementation and the completion of the CCAA proceedings
- Unsecured creditors with accepted claims less than or equal to $1,500 (convenience class creditors) will be paid in full up to $1,500.
- All other unsecured creditors will receive the first $1,500 of their accepted claims, plus their pro rata share of an unsecured creditor fund of $500,000, less amounts paid to convenience class creditors.
_x000D_
_x000D_
_x000D_
_x000D_
_x000D_
_x000D_
_x000D_
All existing common shares, stock options and restricted share units of Cequence (equity claims) will be cancelled and extinguished for no consideration and without any return of capital. Holders of equity claims will not be entitled to attend or vote at the meeting on Sept. 15.
After implementation of the plan is complete, the plan sponsors will control all of the issued and outstanding common shares in Cequence.
Cequence Energy is engaged in the exploration for and development of oil and natural gas reserves. The company’s primary focus is the development of its Simonette asset in the Alberta Deep Basin with other non-core assets in Northeast British Columbia and the Peace River Arch of Alberta, CA.
