CALGARY, Alberta, July 27, 2022 (GLOBE NEWSWIRE) — Tidewater Midstream and Infrastructure Ltd. (“Tidewater” or the “Company”) (TSX: TWM) announces a financing plan to fully fund the repayment of its $125 million senior unsecured notes due December 19, 2022 (the “Senior Unsecured Notes”) and $20 million second lien term loan (the “Second Lien Term Loan”). The Company intends to use new capital sources as follows:
- $70 million draw on the Company’s senior credit facility that, through an expanded syndicate of lenders, the Company intends to increase in size to $550 million (the “Expanded Senior Credit Facility”);
- $40.5 million offering of units (“Units”) issued to the public on a bought deal basis (the “Public Offering”) at a price of $1.20 per Unit (the “Issue Price”), each Unit will be comprised of one common share of the Company (each a “Common Share”) and one-half of one common share purchase warrant (each full warrant, a “Warrant”). Each Warrant will entitle the holder to acquire one Common Share from the Company at a price of $1.44 per Common Share for a period of 24 months following the closing of the Public Offering; and
- $34.5 million offering of Units to affiliates of Birch Hill (as defined below), the Company’s largest shareholder, funds managed and advised by Kicking Horse Capital Inc. (respectively, the “Kicking Horse Funds” and “Kicking Horse”), and officers of the Company on a non-brokered private placement basis (the “Private Placement”), to be issued at the Issue Price and comprised of one Common Share and one-half of one Warrant.
The new capital sources outlined above will fully refinance the maturing Senior Unsecured Notes and Second Lien Term Loan. The expenses of the refinancing will be funded via the Expanded Senior Credit Facility. Following the completion of the refinancing, Tidewater is expected to have remaining liquidity of approximately $70 million under its Expanded Senior Credit Facility. The combination of the equity raise, the increased liquidity from the Expanded Senior Credit Facility, and the strong performance of the Company, places Tidewater in a strong financial position going forward.
“These transactions simplify Tidewater’s balance sheet and enhance liquidity to provide a durable financial base for our business. Our strong business performance is driving financial results that have us at the lower end of our leverage targets and in a strong position to progress our growth initiatives,” comments Tidewater’s Chairman and CEO, Joel Macleod.
SECOND QUARTER 2022 RESULTS
Consistent operating results combined with favorable refining margins have led to strong second quarter of 2022 financial results for the Company. During the second quarter, the Company’s Pipestone Gas Plant processed volumes in excess of 100 MMcf/d, above forecast volumes and the Company’s Prince George Refinery realized strong refining margins. Additionally, Tidewater Renewables Ltd. (“Tidewater Renewables”), a subsidiary in which Tidewater owns a 69% interest, has exceeded initial forecasts due to increased renewable diesel prices and carbon credit values. Strong aggregate business performance for Tidewater has driven initial second quarter 2022 consolidated net income estimates of $18-$20 million and Consolidated Adjusted EBITDA of $67-$69 million, with Tidewater Renewables generating $4-5 million of net income and $15-$16 million of Adjusted EBITDA supporting the Company’s full year outlook released with Tidewater’s first quarter results. Full second quarter 2022 financial results are expected to be released on August 11, 2022.
EXPANDED SENIOR CREDIT FACILITY
Through an expanded syndicate of lenders including two of Canada’s largest financial institutions, the Company intends to increase the size of its senior credit facility by approximately 30% to $550 million with the facility maturing in mid-year 2024. With the announced refinancing transaction, the Company’s current senior lenders have eliminated the previously announced deadline to refinance the Senior Unsecured Notes and Second Lien Term Loan.
SECOND LIEN FACILITY
Tidewater has received a binding commitment from affiliates of its largest shareholder, Birch Hill Private Equity Partners Fund V (“Birch Hill”), for a second lien debt facility of up to $15 million available to the Company until November 30, 2022 (the “Second Lien Facility”). The Second Lien Facility could be used to reduce the borrowings under the Expanded Senior Credit Facility if the Company does not reduce such facility through other means prior to November 30, 2022. The Company does not expect to draw upon the Second Lien Facility. If drawn, the Second Lien Facility will bear interest at the rate of 9.85% per annum and will mature on October 18, 2024. A commitment fee of $1.75 million is payable to Birch Hill upon availability of the Second Lien Facility. Borrowings under the Second Lien Facility will be subject to an original issue discount of 3.25% and a one-time fee of $750,000. The Company will have the ability to repay the Second Lien Facility at any time prior the maturity date without any additional premium or penalty.
The closing of the Second Lien Facility is subject to the closing of the Offering (as defined below) and certain other customary closing conditions including approval from the Toronto Stock Exchange (“TSX”).
Birch Hill is a related party within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”).
The Company has entered into agreements to raise $75 million of new equity via an issuance of Units. $40.5 million of the Units will be issued via the Public Offering and $34.5 million of the Units will be issued via the Private Placement to Birch Hill, the Kicking Horse Funds and certain Tidewater directors and officers (the Private Placement, together with the Public Offering, the “Offering”). Net proceeds from the Offering, together with amounts drawn under Tidewater’s Expanded Senior Credit Facility will be used to repay Tidewater’s Senior Unsecured Notes and Second Lien Term Loan.
Tidewater has entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by CIBC Capital Markets, National Bank Financial, RBC Capital Markets and ATB Capital Markets Inc. pursuant to the Public Offering by which the Company will issue $40.5 million aggregate amount of Units at a price of $1.20 per Unit to the public on a “bought deal” basis. Each Unit will consist of one Common Share and one-half of one Warrant. Each Warrant will entitle the holder to acquire one Common Share from the Company at a price of $1.44 per Common Share for a period of 24 months following the closing of the Offering.
Additionally, the Company will issue a total of $34.5 million of Units pursuant to the Private Placement. Units will be issued to Birch Hill in the amount of $17 million, Kicking Horse Funds in the amount of $16 million and certain officers of Tidewater in the amount of $1.5 million. Units issued in the Private Placement will be sold at the Issue Price. Birch Hill and Kicking Horse Funds will be paid a commitment fee of 5% each on their subscriptions ($850,000 and $800,000 respectively), equal to the underwriting fee in the Public Offering.
The Company has granted the Underwriters of the Public Offering an option (the “Over-Allotment Option”), exercisable at the Issue Price for a period of 30 days following the closing of the Public Offering, to purchase up to an additional 15% of the Public Offering to cover over-allotments, if any. This Over-Allotment Option may be exercised by the Underwriters for additional Units, Common Shares, Warrants or any combination of such securities (the “Securities”). Should the Over-Allotment Option be exercised, the subscribers under the Private Placement will have the option to purchase on a pro-rata basis additional Securities that are purchased by the Underwriters pursuant to the Over-Allotment Option.
The Units offered under the Public Offering will be offered in each of the provinces of Canada by way of a short form prospectus, and by way of private placement in the United States to “qualified institutional buyers” pursuant to Rule 144A or in such a manner as to not require registration under the U.S. Securities Act of 1933, as amended.
The Offering is expected to close on or about August 16, 2022, and closing of each of the Public Offering and Private Placement will be subject to, among other things, customary conditions, the concurrent closing of the other such Offering and the entering into the Expanded Senior Credit Facility. The Offering is subject to the approval of the TSX.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in the United States or in any other jurisdiction in which such offer, solicitation or sale would be unlawful. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements thereunder.
RETIREMENT OF SENIOR UNSECURED NOTES AND SECOND LIEN TERM LOAN
The Company has committed to retire the $125 million Senior Unsecured Notes due December 19, 2022. Following the closing of the Offering, the Company will provide 10 days’ notice of redemption to holders to satisfy the obligations of the notes. Tidewater also intends to fully repay the Second Lien Term Loan upon the closing of the Offering.
BOARD OF DIRECTORS UPDATE
In connection with the transaction and an investment by the Kicking Horse Funds of $16 million in the Private Placement, Thomas P. Dea will join the Board of Directors of the Company. Mr. Dea is the President and CEO of Kicking Horse, a Toronto-based investment manager. He was previously a Partner with West Face Capital Inc. and a Managing Director of Onex Corporation. Pursuant to and in connection with the Private Placement, the Company and Kicking Horse will enter into a board nomination agreement whereby the Company will agree to nominate Mr. Dea, or another Kicking Horse nominee so long as the Kicking Horse Funds hold at least 2% of the issued and outstanding basic common shares of the Company.
TRANSACTION DECISION AND APPROVALS
The Board of Directors has determined that the comprehensive financing package and associated transactions as described herein are in the Company’s best interests as it will allow the Company to fully finance the retirement of the $125 million Senior Unsecured Notes due December 19, 2022 and $20 million Second Lien Term Loan due October 31, 2022 and provide the Company with additional liquidity under its Expanded Senior Credit Facility.
This determination was based on a number of factors, including but not limited to, the unanimous recommendation of a special committee of independent directors formed to consider the Company’s financing after consultation with the Company’s financial and legal advisors.
The involvement of management and Birch Hill in the Offering and Second Lien Facility are “related party transactions” within the meaning of MI 61-101 and the Company is relying on the exemptions in sections 5.5(a) and 5.7(a) [Fair Market Value Not More Than 25% of Market Capitalization] of MI 61-101 in connection with such transactions, as the aggregate fair market value of such transactions does not exceed 25% of the Company’s current market capitalization.
Tidewater is traded on the TSX under the symbol “TWM”. Tidewater’s business objective is to build a diversified midstream and infrastructure company in the North American natural gas, natural gas liquids, crude oil, refined product, and renewable energy value chain. Its strategy is to profitably grow and create shareholder value through the acquisition and development of conventional and renewable energy infrastructure. To achieve its business objective, Tidewater is focused on providing customers with a full service, vertically integrated value chain through the acquisition and development of energy infrastructure, including downstream facilities, natural gas processing facilities, natural gas liquids infrastructure, pipelines, railcars, export terminals, storage, and various renewable initiatives. To complement its infrastructure asset base, the Company also markets crude, refined product, natural gas, NGLs and renewable products and services to customers across North America.
Tidewater is a majority shareholder in Tidewater Renewables, a multi-faceted, energy transition company focusing on the production of low carbon fuels. Tidewater Renewables’ common shares are publicly traded on the TSX under the symbol “LCFS”.