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Recapitalization Transaction
The Company has entered into a support agreement (the “Support Agreement”) with holders of approximately 85% of its Senior Notes. This includes a group of holders of approximately 45% of the Senior Notes (the “Noteholder Group”) and certain investment funds (the “Sponsor Funds”) that are the Company’s principal shareholders and holders of approximately 40% of the Senior Notes.
The proposed Recapitalization Transaction will be implemented by way of a corporate plan of arrangement (the “CBCA Plan”) under the Canada Business Corporations Act (the “CBCA”).
Key elements of the Recapitalization Transaction include:
- Jupiter’s existing equity shareholders will own an aggregate of 10 million common shares of Jupiter (the “New Equity”);
- Existing shareholders will also receive warrants as detailed in the term sheet available through the investor portal on the Company website (the “Term Sheet”);
- Pursuant to the CBCA Plan, each holder of Senior Notes (“Senior Noteholders”) shall exchange its Senior Notes for consideration consisting of its pro rata share of (a) 78,235,294 common shares of New Equity (the “Principal Recovery Shares”); plus (b) subject to the completion of the New Equity Subscription described below, US$46,750,000 in cash;
- As part of the CBCA Plan, and as more fully described in the Term Sheet, Jupiter may issue an additional 11,764,706 common shares of New Equity to Eligible Noteholders (as defined in the Term Sheet) for an aggregate cash subscription price of US$50,000,000 (the “New Equity Subscription”);
- The New Equity Subscription has been fully backstopped by the members of the Noteholder Group pursuant to a definitive Backstop Commitment Letter. In the event that the Backstop Commitment Letter is terminated pursuant to its terms and the New Equity Subscription is not otherwise fully subscribed, then no additional common shares of New Equity shall be issued pursuant to the New Equity Subscription and the Senior Notes shall be exchanged pursuant to the CBCA Plan for only the Principal Recovery Shares, being 78,235,294 common shares of New Equity, in full and final satisfaction of the Senior Notes;
- The New Equity issued pursuant to the CBCA Plan will not be listed on any stock exchange and will be subject to transfer restrictions under applicable U.S. and Canadian securities laws;
- The Board of Directors will be comprised of five members, including two directors designated by the Sponsor Funds, two directors designated by the Noteholder Group and Jupiter’s CEO, Simon Bregazzi;
- All other creditors, including the Company’s lenders under the RBL Facility (described below), will be unaffected by the CBCA Plan;
- Additional terms of the proposed Recapitalization Transaction are detailed in the Term Sheet posted to the investor portal on Jupiter’s website.
Jupiter sought and obtained a preliminary interim order (the “Preliminary Interim Order”) from the Court of Queen’s Bench of Alberta under the CBCA, which contains a stay that, among other things, prohibits persons (other than lenders under the Company’s revolving credit facility, with whom the Company has negotiated the revised RBL Facility as described below) from terminating, making any demand, accelerating, amending or declaring in default or taking enforcement steps under any contract or other agreement to which any member of the Company is a party by reason of the Company’s commencement of proceedings under the CBCA, among other things.
The Preliminary Interim Order has authorized Jupiter to apply to the Court on or before November 9, 2018 to seek a further order in the CBCA proceedings (the “Interim Order Application”) permitting the Company to, among other things, call, hold and conduct the required special meeting (the “Special Meeting”) of the Senior Noteholders to consider and vote on the CBCA Plan.
The Company is continuing to finalize the terms of the definitive CBCA Plan, which will be fully disclosed as part of the Interim Order Application and in the management information circular that will be prepared in connection with the Special Meeting of the Senior Noteholders. The Company will issue a further news release when the exact record date and meeting date for such Special Meeting have been determined.
Credit Facility
The Company entered into an agreement to revise its senior secured reserve-based revolving credit facility (the “RBL Facility”) to allow for continued access to the facility and waive events of default that may arise as a result of the proceedings under the CBCA and the continued non-payment of the interest on the Senior Notes that was due on October 1, 2018, subject to customary conditions. The agreement includes an amendment setting the maximum borrowing base and commitments under the RBL Facility at $375 million until the next scheduled redetermination on April 30, 2019.
Additional Matters
Associated with these discussions, the Company entered into non-disclosure agreements (the “NDAs”) with the Noteholder Group and, subject to the applicable NDAs, the Company shared certain confidential information with the Noteholder Group (collectively, the “Cleansing Materials”). Pursuant to the terms of the NDAs, the Company is now obligated to disclose the Cleansing Materials to the investor portal on the Company website, and this information can now be found there.
Jupiter’s legal advisors in connection with the Recapitalization Transaction are Blake, Cassels & Graydon LLP and its financial advisor is Evercore Group L.L.C. In addition, Peters & Co. Limited has been retained by the Company Board as its independent financial advisor to provide a fairness opinion in connection with the Recapitalization Transaction. Peters & Co. Limited has provided the Company Board with its opinion that, subject to the scope of review, assumptions and limitations set forth in its opinion, the Recapitalization Transaction is fair from a financial point of view to the Company.
The Noteholder Group’s legal advisors in connection with the Recapitalization Transaction are Osler, Hoskin & Harcourt LLP and Quinn, Emanuel, Urquhart & Sullivan LLP and its financial advisor is PJT Partners LP. The Sponsor Funds’ legal advisors in connection with the Recapitalization Transaction are Goodmans LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP.
About Jupiter
Jupiter is an independent Calgary-based energy company with an operations office in Grande Cache, Alberta. The Company is focused on the acquisition, development and production of unconventional liquids-rich natural gas properties in the Western Canadian Sedimentary Basin.
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