Canacol Energy has signed a credit agreement for $265m senior secured term loan with a syndicate of banks.
The syndicate of banks are led by Credit Suisse as Sole Lead Arranger and Sole Bookrunner, and including Mandated Lead Arrangers Export Development Canada, Davivienda, Citibank and Managers Metrobank, Banco Internacional de Costa Rica (BICSA), Banco Latinoamericano de Comercio Exterior (Bladex), BHD International Bank and Bancaribe.
Funding occurred earlier today.
The new credit agreement will replace the Corporation's existing two facilities with BNP Paribas ("BNP Facility") and Apollo Investment Corporation Senior Notes ("Apollo Notes") and will offer the following benefits: 1) defers amortization payments until March, 2019, allowing the Corporation to dedicate capital to high netback production related projects instead of debt service; 2) reduces the total annual interest costs as compared to the combined BNP Facility and Apollo Notes by approximately 1.1% and, 3) harmonizes compliance and administrative deliverables under one facility.
Although the Corporation's currently contemplated 2017 capital budget lies within its 2017 cash flow and existing cash, the new credit agreement will also allow an additional US$ 40 million of Greenshoe funds available within 12 months post-funding, allowing Canacol increased financial flexibility as it pursues its stated gas production goal of 230 mmscf/d by late 2018. This option is at the discretion of the Corporation and on the same terms and conditions of the initial funding.
The term loan will mature on March 20, 2022, with interest payable quarterly and principal repayable in 13 equal quarterly instalments starting March 20, 2019, following more than two years of initial grace period. The term loan will carry interest at LIBOR plus 5.5% and will be secured by all of the material assets of the Corporation.
Proceeds from the term loan will be used for repayment of principal in the amount of US$ 255 million. This includes US$ 180 million of the BNP Facility and US$ 75 million of Apollo Notes, plus accrued interest and costs of the transaction.
This term loan will not be "re-determined" periodically, as is the case with an RBL structure, therefore eliminating the risk to the Corporation of being forced to return lenders' capital prior to the amortization schedule if energy markets or banking market conditions deteriorate.
Canacol's CFO, Jason Bednar, commented "For all the reasons stated above, this is a very important piece of business for Canacol as we work toward our goal of 230 mmscf/d of gas production by late 2018, most importantly, aligning the first term payment of the new facility with greatly increased gas production by 2019. It also ensures Canacol remains a very well capitalized company, with a strong balance sheet, a significant cash position and a very healthy debt to EBITDA ratio.
Canacol would like to thank Credit Suisse and all the new syndicate banks, notably including a large contingent of South American based banks, for their vote of confidence and support, as well as our advisors Plexus Capital for facilitating this smooth transition. We'd also like to express our gratitude to BNP Paribas and the outgoing syndicate, along with Apollo, for their past support."