UrtheCast Corp. (TSX:UR) (“UrtheCast” or the “Company”) announced
today a brokered private placement of up to CAD$35 million in
subscription receipts (the “Subscription Receipts”) at a purchase
price of CAD$0.35 per Subscription Receipt with Clarus Securities
Inc. and Canaccord Genuity Corp. (the “Dealers”) acting as joint
lead agents and joint bookrunners (the “Subordinated Capital
Financing”). The Subordinated Capital Financing is being raised to
satisfy certain conditions under the US$142 million senior secured
facility for the UrtheDailyTM Constellation (the “UrtheDaily Senior
Secured Facility”).
The UrtheDaily Subordinated Capital
Financing
The Subordinated Capital Financing is a brokered
private placement of up to CAD$35 million of Subscription Receipts
at a purchase price of CAD$0.35 per Subscription Receipt,
convertible into non-interest bearing, unsecured convertible notes
in the principal amount of CAD$0.35 (the “Notes”) and a number of
Common Share purchase warrants (the “Warrants”) equal to 50% of the
number of Common Shares the holder would receive if the Notes were
converted at the Original Conversion Price (as defined below).
The Notes will not bear any interest and will be
convertible into Common Shares at the option of the holder, at any
time prior to the six-year anniversary of the issuance of the Notes
at a conversion price equal to CAD$0.32, which represents 100% of
the volume weighted average price of the Common Shares for the five
trading days (the “5-day VWAP”) ending on April 2, 2018 (the
“Original Conversion Price”). The conversion price of the
Notes will be adjusted down if the Company issues Common Shares
(other than issuances in connection with its stock option plan or
in the ordinary course of business) below the then-existing
conversion price to such lower issuance price, provided that the
conversion price may not be adjusted below the Original Conversion
Price less the maximum permissible discount permitted by the TSX.
The Notes will also be subject to other customary anti-dilution
protections.
Each whole Warrant will be exercisable by the
holder to purchase one Common Share at an exercise price equal to
CAD$0.48, which represents 150% of the 5-day VWAP as at April 2,
2018 (the “Original Exercise Price”) for a period of five years
following issuance of the Warrants. The exercise price of the
Warrants will be adjusted down in the event that the Company issues
Common Shares (other than issuances in connection with its stock
option plan or in the ordinary course of business) below the
then-existing exercise price to such lower issuance price, provided
that the exercise price may not be adjusted below the Original
Conversion Price. The Warrants will also be subject to other
customary anti-dilution protections. The Warrants may be subject to
early exercise, at the election of the Company, if the 5-day VWAP
exceeds 250% of the Original Exercise Price for a period of at
least 20 consecutive trading days.
The Company has agreed to use commercially
reasonable efforts to file and obtain a receipt for a final
prospectus within 45 days of closing to qualify the Notes and
Warrants issuable on the conversion of the Subscription Receipts,
such that the Common Shares underlying the Notes and Warrants
become freely tradeable.
The proceeds of the Subordinated Capital
Financing will be released from escrow upon the execution of
finalized documentation for the UrtheDaily Senior Secured Facility
and the qualification of the Notes and the Warrants issuable on the
conversion of the Subscription Receipts under a prospectus.
Although the Company expects to use the proceeds of the
Subordinated Capital Financing to finance the UrtheDailyTM
Constellation and for general corporate purposes, there may be
restrictions imposed on the use of such proceeds, including that at
least 50% of the proceeds be used for the UrtheDailyTM
Constellation.
The Company has entered into an engagement
letter (the “Engagement Letter”) with Clarus Securities Inc. and
Canaccord Genuity Corp., as co-lead agents and
co-bookrunners. However, the Dealers’ obligations are subject
to completion and execution of definitive documentation for the
Subordinated Capital Financing satisfactory to Dealers and the
Company, each acting reasonably and in good faith, and receipt of
all required consents and approvals.
The Company is also in advanced negotiations
with a Canadian private equity group to provide a conditional
backstop commitment that will potentially provide additional
financing of up to US$25 million of subordinated capital that may
be required, which commitment will be subject to completing the
initial US$25 million subordinated capital financing described
above.
Each component of the UrtheDaily Financing is
conditional on the others, and there is no assurance that any of
the UrtheDaily Senior Secured Financing, Subordinated Capital
Financing or conditional backstop commitment will be completed on
the terms set out herein, or at all.
The Company may need to seek shareholder
approval for the Subordinated Capital Financing and the issuance of
the warrants in connection with the UrtheDaily Senior Secured
Facility (under the TSX Company Manual). If shareholder approval is
required, there can be no assurance that such shareholder approval
will be obtained or that an exemption (which may include the
serious financial difficulty exemption) from the shareholder
approval will be available under the TSX Company Manual. The
Company will use commercially reasonable efforts to list the
Warrants and the warrants issuable in connection with the
UrtheDaily Senior Secured Facility, subject to satisfaction of the
listing requirements under the TSX Company Manual.
The terms of the Subordinated Capital Financing
were negotiated on an arm’s length basis and the Company is unaware
of any intended participation by insiders.
The UrtheDaily Senior Secured
Facility
The terms below have been negotiated by the
Company and the Senior Lenders, but any transaction is subject to
finalization of definitive documentation, satisfactory to both
parties, which is ongoing. The loan will make available to the
Company US$142 million in two equal drawdowns subject to such
finalized documentation and upon satisfaction of the conditions
precedent described below.
The UrtheDaily Senior Secured Facility will
accrue interest at 12% per annum, 7% of which may be satisfied by
payment in kind and accrued to the loan principal until August 30,
2020. The UrtheDaily Senior Secured Facility will mature on the
fifth anniversary of the closing date, upon which the UrtheDaily
Senior Secured Facility will be repayable in full. After August 30,
2020, the Company must prepay the UrtheDaily Senior Secured
Facility with 100% of the free cash flow attributable to the
UrtheDailyTM Constellation; however, this may be reduced subject to
certain financial covenants. In addition, the Company may
refinance this facility at any time with no break fee.
As a condition precedent for the Senior Secured
Facility closing, the Company must raise subordinated capital (such
as in the Subordinated Capital Financing described below) of at
least US$25 million. In addition, the Company will be required to
effectuate the refinancing of an existing credit facility and may
therefore need to raise as much as an additional US$25 million of
subordinated capital acceptable to the Senior Lenders. The
availability of the first and second drawdowns will also be subject
to the Company maintaining certain maximum leverage and total
contracted value ratios, as ordinarily required of debt financing
facilities of this type.
The Company will pay a US$1.75 million
arrangement fee and a commitment fee equal to 7% per annum of the
undrawn loan commencing 12 months after the closing date. The
Company will also grant the Senior Lenders a number of common share
purchase warrants equal to 5% of the issued and outstanding common
shares of the Company (the “Common Shares”) after the closing of
the Senior Secured Facility.
The Senior Lenders will be entitled to a royalty
equal to 10% (adjusted to 5% if the UrtheDaily Senior Secured
Facility is repaid within 39 months of closing) of the gross
revenues generated by the UrtheDailyTM Constellation unless
previously terminated by the Company.
The Company expects to be in line to close the
facility over the next two weeks, although there can be no
assurance that the transaction will be closed on the terms
described above or on any other terms. On closing of the
transaction, a copy of the credit agreement will be filed and will
be available for viewing and download on SEDAR (www.sedar.com) and
readers are encouraged to review it in its entirety.
About UrtheCast
UrtheCast Corp. is a Vancouver-based technology
company that serves the rapidly evolving geospatial and
geoanalytics markets with a wide range of information-rich products
and services. The Company operates Earth Observation (EO) sensors
in space, through its subsidiary Deimos Imaging, including two
satellites, Deimos-1 and Deimos-2, to produce imagery data for
partners and customers in multiple markets. UrtheCast processes and
distributes imagery data and value-added products on behalf of the
PanGeo Alliance, a network of seven satellite operators with a
combined 13 medium- and high-resolution EO sensors. Additionally,
UrtheCast is developing the world’s first fully-integrated
constellation of sixteen multispectral optical and SAR satellites,
called OptiSAR™, and a satellite constellation designed to capture
high-quality, medium- resolution optical imagery of the Earth’s
entire landmass (excluding Antarctica) every day, called
UrtheDaily™. Common shares of UrtheCast trade on the Toronto Stock
Exchange as ticker “UR”.
For more information, visit UrtheCast’s website
at www.urthecast.com.
Forward Looking Information
This release contains certain information which,
as presented, constitutes “forward-looking information” or
“forward-oriented financial information” within the meaning of
applicable Canadian securities laws. Forward-looking
information involves statements that relate to future events and
often addresses expected future business and financial performance,
containing words such as “anticipate”, “plan”, “explore” and
“expect”, statements that an action or event “may”, “should” or
“will” be taken or occur, or other similar expressions and
includes, but is not limited to, statements relating to:
UrtheCast’s expected completion of the UrtheDaily Financing on the
terms set out in the Engagement Letter or at all; UrtheCast’s
inability to successfully negotiate the backstop commitment or meet
the conditions thereof; UrtheCast’s ability to satisfy the escrow
release conditions in connection with the issuance of the
Subscription Receipts; and UrtheCast’s expectations with respect to
its ability to raise proceeds from a subordinated capital or equity
offering sufficient to satisfy the related drawdown condition of
the UrtheDaily Senior Secured Facility in a timely manner. Such
statements reflect UrtheCast’s current views with respect to future
events. Such statements are necessarily based upon a number
of estimates and assumptions that, while considered reasonable by
UrtheCast as at the date of this release, are inherently subject to
significant uncertainties and contingencies. Many factors
could cause UrtheCast’s actual results, performance or achievements
to be materially different from any future results, performance or
achievements that may be expressed or implied by such
forward-looking statements, including, among others: UrtheCast’s
inability to enter into definitive documentation relating to the
Engagement Letter; UrtheCast’s inability to close the UrtheDaily
Financing on the terms set forth in the Engagement Letter, the
definitive documentation related thereto or at all; UrtheCast’s
inability to successfully negotiate the backstop commitment or meet
the conditions thereof; UrtheCast’s inability to
raise proceeds from a subordinated capital or equity offering
sufficient to satisfy the related drawdown condition of the
UrtheDaily Senior Secured Facility in a timely manner or at all;
the Company’s inability to generate sufficient cash flow from
operations or obtain adequate financing to fund its capital
expenditures and meet working capital needs or satisfy its
obligations; the Company’s inability to maintain relationships with
creditors, suppliers, customers, employees, shareholders and other
third parties in light of its liquidity situation; the Company’s
inability to effectively implement its cost reduction initiatives
or refocus its business if necessary; the uncertainty inherent in
the Company’s exploration of strategic and performance improvement
options; the Company being unable to, adequately and on acceptable
terms, finance the development, building, launch and commissioning
of the UrtheDaily™ Constellation; as well as those factors and
assumptions discussed in UrtheCast’s annual information form dated
March 27, 2017, which is available under UrtheCast’s SEDAR profile
at www.sedar.com. UrtheCast cautions readers that such
factors and uncertainties are not exhaustive and that should
certain risks or uncertainties materialize, or should underlying
estimates or assumptions prove incorrect, actual results,
performance or achievements may vary significantly from those
expected. There can be no assurance that the actual
strategies, results, performance, events or activities anticipated
by the Company will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on,
the Company.
UrtheCast undertakes no obligation to update
forward-looking statements except as required by Canadian
securities laws. Readers are cautioned against attributing undue
certainty to forward-looking statements.
For further information, please contact: Sai ChuChief Financial
OfficerUrtheCast Corp.+1 (604) 669-1788