Zedcor Energy signed a $13.5 million credit facility with ATB Financial.
The facility is comprised of a $3 million operating loan facility, which replaced the previous $1 million operating loan facility; a $2.5 million term loan facility, which will be used to pay out the guarantee from the loan and security agreement with Maynbridge Capital and a new $8 million equipment finance facility.
The operating loan is a revolving facility which bears interest at a rate of prime plus 3.3% and is secured by the company’s accounts receivable. The term facility will mature in two years, bears interest at a rate of prime plus 3.3% and is secured by a shareholder guarantee. Monthly interest payments are required over the term of the loan with a bullet payment at maturity. The shareholder guarantee bears interest at a rate of 5.0% per annum and is paid monthly through the issuance of shares.
The $8 million equipment finance loan will be used to finance 75% of the purchase of new rental assets for which there is strong demand. This facility can be drawn in tranches, is amortized over 36 months, bears interest at a rate of 6.1% and is repayable in equal monthly installments of principal and interest over the term.
The $13.5 million credit facility has industry standard positive and negative lending covenants and has financial covenants which require the company’s current ratio does not fall below 1.50:1.00, the debt service coverage ratio does not fall below 1.25:1.00 and the share value of the shares pledged under the shareholder guarantee not be less than 1.25 times the value of the outstanding term facility.
Zedcor also renewed its loan and security agreement with Maynbridge Capital in the amount of $17.5 million for an additional six months, with an option to renew for an additional six months at the satisfaction of the lender. The renewed agreement bears interest at 12.75% and will be serviced by six months of interest only payments, followed by six months of principal and interest payments in the event that the loan is renewed. The facility no longer has any shareholder guarantees pledged as security, and all covenants and collateral remain unchanged. The company now has the option to repay $7 million of the facility at any time without penalty.
“This new refinancing is the next step in our strategy to strengthen our balance sheet and reduce our cost of capital, while also financing new growth opportunities which we expect to deliver positive cash flow,” said Ian McKinnon, Zedcor president and CEO.
Zedcor Energy is a Canadian public corporation engaged in the rental of surface equipment and accommodations to the Western Canadian oil and gas industry.
