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RED DEER, AB, June 6 /CNW/ - High Arctic Energy Services Inc. ("High Arctic" or the "Corporation") announced today that it has negotiated extensions to its existing credit facilities to March 31, 2009.
The Corporation has a revolving credit facility composed of a $20-million revolving loan ("Facility A") and a $100-million equipment based revolving loan ("Facility B"). In addition, the Corporation has a $20 million bridge loan facility (the "Bridge Loan"). The Corporation currently owes approximately $6.8 million on Facility A, $99.3 million on Facility B and $20 million on the Bridge Loan (the aggregate amounts owing on Facility A, Facility B and the Bridge Loan are herein referred to as the "Consolidated Debt"). Accordingly, the Corporation's Consolidated Debt is approximately $126.1 million. The revolving term period under the credit facility was scheduled to end on June 30, 2008 and the Bridge Loan was to mature on that date.
The extension signed today provides the Corporation with time to execute its business plan and reduce its debt leverage through the repayment of debt with the proceeds of asset sales. The main terms of the extension can be summarized as follows:
1. The revolving term period has been extended to March 31, 2009 after
which the outstanding principal will become repayable over a 36-month
period. The maturity date of the Bridge Loan has also been extended to
March 31, 2009.
2. High Arctic has committed to reduce the Consolidated Debt by at least
$50 million through the sale of assets to be completed by January 31,
2009. The sales must be completed at defined intervals so that 25% is
completed by July 31, 2008, 50% is completed by September 30, 2008 and
75% is completed by November 30, 2008.
3. The financial covenant ratios have been adjusted to reflect, among
other things, the earnings projections. In general terms, the ratios for
2008 were based on a Consolidated EBITDA, as updated under the revolving
credit facility agreement (which generally means the adjusted earnings
before interest, depreciation, amortization and taxes excluding any
amounts in respect of the Optimal Joint Venture), of approximately
$27.4 million for 2008. The various financial covenants will continue to
be calculated monthly.
4. The Corporation has until September 30, 2008 to correct the
anticipated shortfalls in the value of the assets that make up the
borrowing base for each of Facility A and Facility B. As at March 31,
2008, Facility B was overdrawn by about $7.3 million and Facility A, at
current levels, is expected to be overdrawn by as much as $3 million at
May 31, 2008. High Arctic expects that the shortfalls will be rectified
through the reduction of debt from the proceeds of asset sales. The
Corporation will not be able to withdraw any further amounts under the
revolving credit facility until its consolidated leverage ratio ("CLR")
is reduced to below 2.75 to 1.0. The CLR is generally defined as the
Consolidated Total Debt, as defined in the revolving credit facility,
divided by the 12 month trailing Consolidated EBITDA.
The Corporation will pay its lenders an amendment fee of approximately $0.9 million. In addition, in consideration for amendments to the Bridge Loan, the Corporation has agreed:
(i) to issue to the lender 1,000,000 warrants to purchase common
shares of the Corporation for a period of two (2) years from the date
of grant (the "New Expiry Date") at an exercise price (the "New
Exercise Price") equal to the five day volume weighted average
trading price of the Corporation's common shares calculated on the
date of issuance (which issuance date is expected to be at least ten
(10) business days following the date of this press release); and
(ii) to amend the expiry date and the exercise price of the
500,000 warrants to purchase common shares of the Corporation that
were previously issued to the lender on October 29, 2007. The expiry
date for these warrants will be extended to the New Expiry Date (as
opposed to April 29, 2009) and the exercise price for these warrants
will be reduced to the New Exercise Price (as opposed to $1.60 per
common share).
The Corporation currently owes $1.1 million in fees related to amendments made in October, 2007 to the revolving credit facility and $2.7 million in fees related Bridge Loan amendments made at that time. The $1.1 million must be repaid from proceeds of the first asset sales. The $2.7 million together with the current fee of $0.9 million referred to above will generally be deferred until March 31, 2009 provided that if the revolving credit facility is extended at that time the fees would be 40% payable on March 31, 2009 and the balance payable in nine equal monthly payments to December 31, 2009.
This latest extension is a key step in the plan to put High Arctic back on sound financial footing. The Corporation has identified underutilized and underperforming assets that it believes it can sell to meet the asset sales targets with limited impact on earnings going forward.
The amended credit facilities contain various other changes to the terms of the loan agreements including new financial covenants. The Corporation will file a copy of the material contracts giving effect to the amended and restated credit facilities on SEDAR at www.sedar.com.
About High Arctic
The Corporation, through its subsidiaries, is a global provider of specialized oilfield equipment and services, including drilling, completion and workover operations. High Arctic's new underbalanced drilling technology and equipment is recognized for its ability to improve oil and gas production capabilities and is expected to develop greater acceptance in international markets. Based in Red Deer, High Arctic has domestic operations in Alberta, British Columbia and the Northwest Territories. International operations are currently active in the Middle East, Northern Africa and Asia. For more information visit www.higharcticenergyservices.com.
Forward-Looking Statements
This news release may contain forward-looking statements relating to expected future events and financial and operating results of the Corporation that involve risks and uncertainties. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed in the Corporation's Management Discussion and Analysis for the year ended December 31, 2007 and in High Arctic's Annual Information Form for the year ended December 31, 2007 and High Arctic's Information Circular dated April 17, 2008, all found on SEDAR (www.sedar.com). Due to the potential impact of these factors, the Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
The TSX has not reviewed and does not accept responsibility for the
adequacy or accuracy of this news release.
%SEDAR: 00025582E