01:02:33 EDT Thu 13 Jun 2024
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NG Energy International Corp
Symbol GASX
Shares Issued 137,450,742
Close 2024-02-08 C$ 0.97
Market Cap C$ 133,327,220
Recent Sedar Documents

NG Energy arranges $100M (U.S.) credit agreement

2024-02-08 15:12 ET - News Release

Mr. Jorge Fonseca reports

NG ENERGY ANNOUNCES FINANCING AGREEMENT WITH MACQUARIE GROUP OF UP TO US$100 MILLION INCLUDING US$50 MILLION IN COMMITTED FUNDING

NG Energy International Corp. has entered into a definitive credit and guarantee agreement with Macquarie Group for a financing of up to $100-million (U.S.), of which $50-million (U.S.) is committed financing. The company and its wholly owned subsidiaries, Bochica Investment Holdings Ltd., Pentanova BVI Ltd. and MKMS Enerji Anonim Sirketi SA, will guarantee the financing as guarantors. The financing is secured by a first-priority lien over all the assets of the company, a trust formed in Colombia and the guarantors, and matures on Dec. 29, 2028. The net proceeds of the financing and related LC facility for up to $13.6-million (U.S.) under discussion will be used to: (i) simplify the company's capital structure; (ii) optimize the company's balance sheet; (iii) reduce the overall leverage of the company; (iv) guarantee work commitments under the company's contracts with mid-stream partners and with the Agencia Nacional de Hidrocarburos (ANH) in Colombia; and (v) for general corporate purposes as the company continues to develop its asset base.

Key highlights of the financing:

  • Macquarie has made available $50-million (U.S.) of committed financing and an additional $50-million (U.S.) in uncommitted financing under an accordion feature.
  • On the date of closing of the financing, $40-million (U.S.) of the committed portion of the financing will be advanced to the company, with the remaining $10-million (U.S.) of the committed portion of the financing to be advanced to the company in a second advance on a date to be determined pursuant to the terms of the credit agreement.
  • The company intends to use the net proceeds of the loans as follows:
    • $26-million (U.S.) to pay fees enabling the conversion of approximately $52-million (U.S.) (approximately $70-million) debt owed to existing secured debentureholders (as defined as follows) and, by doing so, reduce the company's debt obligations and optimize the capital structure of the company;
    • $14-million (U.S.) to pay existing shareholder loans, finance the debt reserve account, pay fees for the transaction and for general corporate purposes;
    • $10-million (U.S.) for future capex (capital expenditure) requirements.
  • The loans will accrue interest at a rate equal to term SOFR (secured overnight financing rate) (as such term is defined in the credit agreement) plus a maximum of 8.50 per cent per annum with a step-down margin grid based on performance.
  • In connection with the financing, the company shall issue to Macquarie 20,742,857 common share purchase warrants on the closing date. For additional information pertaining to the issuance of the bonus warrants to Macquarie, please see the section on bonus warrant issuance and transaction fees herein.

Jorge Fonseca, chief financial officer of NG Energy, commented: "The commitment from Macquarie after a thorough review of the technical, financial and legal components of our business is a significant milestone for our company as we enter this next phase of growth and cash flow generation. We are very pleased to have secured the financing to support our industry-leading growth trajectory, and, above all, the financing provides the company with substantial financial flexibility today, and into the future as we have deleveraged the balance sheet, optimized our capital structure and now have obtained the necessary capex to support the accelerated growth of our assets. I would like to thank Macquarie and all the members of our team for their support throughout the duration of this process."

Corporate update

The company has appointed Brian Paes-Braga as chief executive officer of the company effective on the closing date. Serafino Iacono, who has served as the company's chief executive officer since 2019, will transition to the role of co-chairman of the board of directors, joining existing chairman Brian Paes-Braga.

The company has also welcomed Patricia Herrera Paba to the board. Ms. Herrera is the founder and chief executive officer of Estudios y Consultorias SAS, a firm specializing in financial consulting and regulatory advisory in the natural gas and energy sector across Colombia and Latin America. Ms. Herrera also serves as the chief financial officer of Caribbean Resources and has past work experience at Promigas SA ESP and the Ministry of Mines and Energy in Colombia.

Mr. Paes-Braga, incoming chief executive officer and co-chairman of NG Energy, commented: "It is my honour and pleasure to join and lead NG Energy as CEO at this critical and exciting time for the company and energy in Colombia. Firstly, I would like to express my deepest thanks and appreciation to Serafino Iacono for his unwavering commitment to this company. We would not be in the position we are today without his tenacity, belief in our assets and personal financial commitments over the past five years. I look forward to Serafino's continued contribution and working by his side as co-chairman as we enter this high-growth phase of our company's journey and deliver for all our valued investors, employees, partners, and the communities in which we explore and operate."

Mr. Paes-Braga continued: "I would also like to give a warm welcome to Patricia, who adds a depth of industry and in-country expertise to our board of directors. Patricia is a natural fit, having extensive experience as a consultant in financial and regulatory advisory in the natural gas and energy sector in Latin America, specifically Colombia, where she has deep relationships with the top industry players both in the public and private sectors.

"Lastly, I would like to welcome Macquarie to NGE as a key stakeholder in our business. Aligning our company with a global financial institution like Macquarie at this inflection point for our company is a testament to the quality of our people, assets and the opportunity we see in the energy sector in Colombia and represents a first and symbolic step for NG and Macquarie's relationship. We are grateful for their efforts in this transaction over the past few months. We share similar vision, values and a strong conviction around the energy opportunity in Colombia, where Macquarie has been a significant contributor."

Mr. Iacono, co-chairman of NG Energy, commented: "I am enormously proud of this team and what we have accomplished together over the past five years and believe we are executing on our mission to support energy transition and economic growth in Colombia as we continue to delineate two of the best natural gas assets in the country. To the team, I would like to extend my upmost gratitude for your relentless contribution to this company. I am extremely confident as we enter the next phase of growth under the leadership of Brian who has done a remarkable job during his time as chairman, and I look forward to our collaboration as I join him in this capacity. I am very excited for the future of this company and would like to thank all our stakeholders for their continued support."

Catalina Hayata, managing director and head of Latin America private credit in Macquarie's commodities and global markets business, commented: "We are pleased to support the NGE team on its next phase of rapid growth as they build a platform well positioned to support economic growth in Colombia. We look forward to continuing to contribute to the development of the market in the region and to providing innovative capital solutions to our key clients."

Operational update

Production from the company's Maria Conchita block has increased to 19.4 million cubic feet per day with both the Aruchara-1 and the Aruchara-3 wells contributing to production from zones H1 and H2 with 100 per cent of natural gas volumes sold.

Bonus warrant issuance and transaction fees

In connection with the financing, on the closing date, the company will issue to Macquarie 20,742,857 bonus warrants. Each bonus warrant will entitle Macquarie to purchase one common share of the company at an exercise price equal to $1 until Dec. 29, 2028. Completion of the issuance of the bonus warrants to Macquarie remains subject to approval of the TSX Venture Exchange. The bonus warrants and the common shares underlying the bonus warrants will be subject to a statutory four-month hold period from the date of issuance in accordance with applicable securities laws.

In connection with the financing, on the closing date, the company shall pay Macquarie an upfront fee equal to 1.5 per cent of the loans, a structuring and arranger fee equal to 2.0 per cent of the loans, and an administrative agent fee equal to $100,000 (U.S.). The administrative agent fee will be payable annually on each anniversary of the closing date. The total amount of fees payable to Macquarie by the company on the closing date is anticipated to be $1.85-million (U.S.). Pursuant to the terms of the credit agreement, the company shall pay Macquarie a commitment fee on the unused portion of the committed portion of the financing (with regard to any reduction in the committed portion of the financing effected by an initial draw under the credit agreement if occurring within 10 days of the date thereof) at a rate equal to 3.50 per cent per annum starting on the date of the initial advance under the credit agreement.

Moreover, in the event any of the loans advanced to the company by Macquarie are prepaid at any time on or after the two-year anniversary of the date of the credit agreement but before the three-year anniversary of such date (with some exceptions) or become due prior to the three-year anniversary of the closing date as a result of an event of default (as defined in the credit agreement), the company shall pay Macquarie a prepayment fee equal to 4.50 per cent of the aggregate principal amount of the loans being prepaid.

Shares for debt settlement

The company has provided the terms of a proposed shares for debt settlement, pursuant to which the company has agreed to issue an aggregate of two million common shares of the company at a deemed price of $1 per common share in satisfaction of $1,502,000 (U.S.) owing to Plus+ SAS ESP pursuant to the terms of a termination agreement entered into between the company, MKMS Enerji Sucursal Colombia, the Colombian branch of MKMS Enerji Anonim Sirket SA and Plus+ on Dec. 31, 2023.

The completion of the settlement remains subject to certain regulatory approvals, including the approval of the exchange. The common shares will be subject to a four-month hold period from the date of issuance in accordance with applicable securities laws.

Conversion and redemption of outstanding convertible debentures

In connection with the financing and pursuant to the terms of the debenture indenture dated Nov. 30, 2022, as supplemented by the first supplemental debenture indenture dated July 31, 2023, entered into between the company and TSX Trust Company, as trustee, the company provided the holders of the company's outstanding debentures (as such term is defined in the debenture indenture) issued Nov. 30, 2022, and July 31, 2023, with a notice that the company was contemplating a takeout financing (as such term is defined in the debenture indenture). Pursuant to the terms of the notice, each debentureholder was provided with the option to elect to convert or redeem their debentures in accordance with the terms of the debenture indenture.

Debentureholders representing 100 per cent of the outstanding debentures issued on Nov. 30, 2022, and 100 per cent of the outstanding debentures issued on July 31, 2023, have elected to convert or redeem their debentures. The conversion or redemption of the November, 2022, debentures and the July, 2023, debentures, as applicable, is expected to occur immediately following the closing date.

The company anticipates that approximately $7.1-million (U.S.) of the net proceeds of the loans will be used to pay back existing shareholder loans (approximately $1.5-million (U.S.)) and pay fees enabling the conversion of debt owed to existing secured debentureholders (approximately $5.6-million (U.S.)) that are current directors and officers of the company.

The credit agreement also contains certain other provisions with respect to events of default and representations and warranties that are customary for a transaction of this nature. For additional information pertaining to the credit agreement, please see the company's SEDAR+ profile.

The completion of the financing remains subject to certain regulatory approvals, including the approval of the exchange.

About NG Energy International Corp.

NG Energy is a natural gas exploration and production company with operations in Colombia. The company is on a mission to discover, delineate and develop meaningful natural gas fields in developing counties to support energy transition and economic growth. In Colombia, the company is executing on this mission with a rapidly growing production base that is being delivered to the premium-priced Colombian market. NG Energy's team has extensive technical expertise and a proven record of building companies and creating value in South America.

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