Cadiz Inc. Announces Strategic Transaction With Apollo to Finance Cadiz Water Project Construction
May 02 2017 - 9:00AM
Today, Cadiz Inc. (NASDAQ:CDZI) (“Cadiz”, the “Company”) is
pleased to announce it has entered into a strategic transaction
with funds affiliated with Apollo Global Management, LLC (together
with its consolidated subsidiaries, “Apollo”) (NYSE:APO) to
initiate financial arrangements for the construction and
implementation of the Company’s Cadiz Valley Water Conservation,
Recovery & Storage Project (“Cadiz Water Project” or the
“Project”). In furtherance of the strategic transaction, funds
managed by affiliates of Apollo (the “Apollo Funds”) and Cadiz
executed a series of agreements that will replace and refinance
Cadiz’s senior secured mortgage debt and provide $15M of new senior
debt to fund immediate construction related expenditures. Apollo
Funds also executed a conditional commitment letter to fund up to
$240M in construction finance expenditures for the Cadiz Water
Project, subject to the satisfaction of conditions precedent.
The Cadiz Water Project is a public-private
partnership that in its initial phase will conserve and deliver a
new, reliable water supply for 400,000 Californians every year
without adverse environmental impacts. Phase 2 of the Project will
build upon the foundation established in Phase 1 to enable the
storage of up to 1M acre-feet of imported water and make possible
the interconnection of Colorado River Aqueduct (“CRA”) and Northern
California sources in a common groundwater storage program. Phase 1
is nearly shovel-ready and completing final regulatory permitting
related to transportation of conserved water from Cadiz’s private
property in the Mojave Desert to public water purveyors throughout
the region via a 43-mile pipeline to be constructed in an active
railroad right-of-way to the CRA. Construction of the Project is
expected to create and support nearly 6,000 jobs.
"We are excited by the unique opportunity to
support Cadiz at this critical juncture. As active
infrastructure investors, we believe innovative projects, like
Cadiz, can solve many of the important issues facing municipalities
today. The Project brings a reliable and vital new water
resource and water storage option to the Southern California
region," said Antoine Munfakh, a Partner at Apollo Global
Management. "As one of the world's leading private equity and
alternative credit managers with more than 25 years of experience,
we believe that in our capacity as a financing source to Cadiz, we
can add value to help the Company progress this important
Project."
Apollo is a leading global alternative
investment manager with approximately $197 billion of assets under
management (as of March 31, 2017). Founded in 1990, Apollo has a
demonstrated expertise in private capital investment opportunities
across industries, asset classes, geographies, and capital
structures with a focus on real estate and infrastructure
development which includes an investment in CH2M Hill.
“Apollo is a leading sponsor of private project
financing with a long track record of success,” Scott Slater, Cadiz
CEO & President. “We believe the Apollo Funds’ financing of the
Cadiz Water Project will enable us to more readily customize
contractual arrangements for the benefit of Project participants
and increase both the competitiveness and overall versatility of
the Project.”
As a first step in the strategic transaction,
the Apollo Funds entered into an agreement to provide $60M of
capital to refinance Cadiz’s $45M senior secured mortgage debt and
provide an initial $15M tranche of construction capital. The
new $60M facility will accrue 8% annual interest, with 6% PIK and
2% paid quarterly in cash. The new credit agreement terms are
definitive, yet subject to traditional conditions precedent, and
the transaction is scheduled to close within 45 days. The
conditional commitment for up to $240M is intended to provide the
additional resources necessary to complete the construction of
Phase I of the Cadiz Water Project. However, given that
Cadiz is not obligated to accept such financing from Apollo, and,
given the highly conditional nature of the commitment, investors in
Cadiz should not place undue reliance on the closing of the $240M
debt financing from Apollo.
“Regardless of the ultimate financing decision
that is made for the Project, Cadiz’ securing of the support and
involvement of Apollo enhances the relative strength of the team
and gives us more options that improve the Project’s ability to
move forward successfully.” said Dan Ferons, General Manager of
Santa Margarita Water District, the lead agency in this innovative
public-private
partnership.
All documents and agreements related to the strategic transaction
described in this press release have been filed today with the
United States Securities and Exchange Commission on Form 8K.
Investors in Cadiz are cautioned not to rely on the summary
description of the $240M conditional commitment in the press
release and are urged to refer to the full agreements and
descriptions.
About Apollo
Apollo (NYSE:APO) is a leading global
alternative investment manager with offices in New York, Los
Angeles, Houston, Chicago, St. Louis, Bethesda, Toronto, London,
Frankfurt, Madrid, Luxembourg, Singapore, Mumbai, Delhi, Shanghai
and Hong Kong. Apollo had assets under management of approximately
$197 billion as of March 31, 2017, in private equity, credit and
real estate funds invested across a core group of nine industries
where Apollo has considerable knowledge and resources. For more
information about Apollo, please visit www.agm.com.
About Cadiz
Founded in 1983, Cadiz Inc. is a publicly-held
renewable resources company that owns 70 square miles of property
with significant water resources in Southern California. The
Company maintains an organic agricultural development in the Cadiz
Valley of eastern San Bernardino County, California and is
partnering with public water agencies to implement the Cadiz Water
Project, which over two phases will create a new water supply for
approximately 100,000 Southern California families and make
available up to 1 million acre-feet of new groundwater storage
capacity for the region. Cadiz abides by a wide-ranging
“Green Compact” focused on environmental conservation and
sustainable practices to manage its land, water and agricultural
resources. For more information, please visit www.cadizinc.com
FORWARD LOOKING STATEMENT: This release contains
forward-looking statements that are subject to significant risks
and uncertainties, including statements related to the future
operating and financial performance of the Company and the
financing activities of the Company. Although the Company
believes that the expectations reflected in our forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Factors that could
cause actual results or events to differ materially from those
reflected in the Company’s forward-looking statements include the
Company’s ability to maximize value for Cadiz land and water
resources, the Company’s ability to obtain new financing as needed,
the receipt of additional permits for the water project and other
factors and considerations detailed in the Company’s Securities and
Exchange Commission filings.
Contact:
Courtney Degener
213.271.1603
cdegener@cadizinc.com
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