Blackbird Energy and Pipestone Oil entered into an agreement that will combine the two companies. In conjunction with the transaction, Pipestone Oil received a binding commitment letter and term sheet for a $198.5 million two-year first lien credit facility, comprised of $10 million revolving credit facility, a $20 million letter of credit facility and a $168.5 million term loan.
National Bank Financial acted as lead arranger and sole bookrunner on the credit facility and is acting as strategic advisor to Pipestone Oil in respect to the merger.
The entire credit facility will be used to fund a portion of the 2019 capital expenditure program and repay existing indebtedness. The term loan will be available in tranches between the anticipated transaction closing date and the first quarter of 2020 to fund capital expenditures and to repay existing indebtedness. The interest rate on the revolving and letter of credit facilities is Prime + 300 bps, and payable in cash on a monthly basis. The term loan carries a swapped floating-to-fixed interest rate of 9.75%, which is funded through a payment-in-kind interest reserve tranche of $9 million. The credit facility is not subject to any scheduled borrowing base redeterminations or financial covenants. The closing of the credit facility financing, including the execution of a definitive credit agreement, is expected to occur concurrently with merger close in early January 2019.
Blackbird and Pipestone Oil have also entered into agreements with certain of their existing shareholders who have committed to common equity financings totaling $111 million.
The transaction and financings will result in the strategic combination of two adjacent and contiguous Pipestone Montney land bases under a single well-capitalized, high growth company that will operate under the name Pipestone Energy.
Cormark Securities and BMO Capital Markets will act as financial advisors to Blackbird on the Transaction. Bennett Jones will act as Blackbird’s legal advisor. Peters & Co. will act as the exclusive financial advisor to Pipestone Oil, while Osler, Hoskin & Harcourt will act as its legal advisor.
