NORTHSTAR ANNOUNCES $14.0 MILLION ROYALTY TRANSACTION WITH CVW CLEANTECH
/NOT FOR DISTRIBUTION TO
Highlights
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$14.0 million in a secured convertible debenture, convertible into royalties on two futureNorthstar facilities -
Rapidly accelerates
Northstar's future growth plan -
Adds future financing optionality for
Northstar assets - Adds a reputable long-term financing partner
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Virtual investor webinar
Thursday, August 8, 2024 at6:00am PT – see link here
Experience the full interactive Multichannel News Release here: https://www.multivu.com/players/English/9270551-northstar-announces-royalty-transaction-cvw-cleantech-fund-expansion-program/
The Transaction will be separated into two funding tranches from
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$1.5 million has been advanced (the "Initial Debenture") byCVW CleanTech for a five-year 10% unsecured debenture issued byNorthstar that is convertible into a royalty agreement applicable to the nextNorthstar operating facility after theCalgary facility ("Empower Calgary"). - An additional
$12.5 million , subject to certain conditions precedent, includingCVW CleanTech completing an equity financing (the "CVW CleanTech Financing") prior toSeptember 30, 2024 , andBusiness Development Bank entering into a Subordination Agreement withNorthstar and CVW and regulatory approvals, at which time the Initial Debenture will be replaced by the Royalty Debenture in the amount of$14.0 million (less the accrued and unpaid interest on the Initial Debenture). Upon the achievement of certain production milestones, the Royalty Debenture will convert the full principal of the Royalty Debenture into two, equal royalty interests in the next two ofNorthstar's planned asphalt shingle reprocessing facilities ("Empower 3" and "Empower 4") after Empower Calgary. The royalty interests and their respective royalty rates would be subject to adjustment for capitalized or accrued and unpaid interest, if any.
Mr.
Mr.
Strategic Rationale to
- Immediate funding of
Northstar development program for Empower 3 and Empower 4 - Increased flexibility managing working capital for Empower Calgary and
Northstar development costs - Deal structured without equity dilution or warrants issued
- Long-term, five-year investment by
CVW CleanTech , convertible into royalties on operating facilities - Adds future financing optionality for
Northstar assets:- For Empower 5 onwards, royalty financing can be added to the funding structure if desired by both parties but not obligated under the terms of the transaction
- Deployable alongside debt partners through intercreditor arrangements
- Has the potential to reduce equity requirement for asset level development
- Adds a new strategic investment partner for
Northstar
Key Transaction Terms
- Structure: secured royalty debenture convertible into gross revenue royalties
- Principal amount: Approximately
$14 million - Maturity: five years
- Coupon rate: 10.0% annual coupon rate, which may be capitalized at
Northstar's option during the first three years of the term of the debenture - Conversion to royalty: 50% of the principal balance will automatically convert into a revenue royalty on Empower 3 and the remaining balance will automatically convert into a revenue royalty on Empower 4 upon each facility reaching commercial production and financial thresholds. The principal balance (including accrued and unpaid interest) will convert into a revenue royalty at a conversion at a ratio of 1.7143% royalty interest for each
$1 million converted, resulting in a 12.0% revenue royalty on each of Empower 3 and Empower 4, assuming no capitalization of semi-annual coupons - If either or both of Empower 3 and Empower 4 do not meet production thresholds during the conversion period of the Royalty Debenture, then the balance may, at
CVW CleanTech's option, be converted into a royalty on Empower 2 and intercreditor arrangements have been made with the Company's senior lender to facilitate such a conversion - Minimum fixed charge coverage ratio: payment of any royalties will be subject to a minimum fixed charge coverage ratio on any underlying facility with a royalty, which will cause royalty payments to be deferred and paid later when the ratio can be maintained
- Security: second lien security positions on the existing assets of
Northstar ,Empower Environmental Solutions Calgary Ltd. ,Empower Environmental Solutions Ltd. and the future assets of Empower 3 and Empower 4 - ROFR:
CVW CleanTech receives a ROFR for royalty funding on 5 facilities entering royalty transactions after Empower 4.CVW CleanTech receives a ROFO for any additional plants entering royalty transaction after the first 5 facilities. - Royalty Repurchase Right: If Northstar enters into a change of control transaction with a purchaser involved in the collection of waste shingles and/or use of asphalt oil in their manufactured products,
Northstar will have the right to purchase 100% of the royalty on each facility for a purchase price equal to the greater of : (i) the amount that represents a 30% internal rate of return in favour of the royalty owner until the 5th anniversary of the commencement of the royalty agreement, thereafter decreasing daily in a linear fashion to a 20% internal rate of return in favour of the royalty owner by the 10th anniversary; and (ii) a multiple of 2.0 times the dollar value of the Royalty Debenture that was converted into the royalty agreement interest. A similar repurchase right formula applies to any outstanding balance under the Royalty Debenture at the time of a change of control transaction.
Use of Proceeds
For working capital requirements and other general corporate purposes, expected to include business development to support future site selection and facility build-out.
Advisors
Approvals
Closing of the Transaction is subject to regulatory approval, including that of the
Closing
Closing of the Transaction is expected to occur around the middle of
Investor Webinar
To discuss the Transaction, the Company will host a virtual investor webcast and corporate update to the investment community on
Title: Northstar Clean Technologies Corporate Update: CVW Transaction
Date:
Time:
Registration: https://us06web.zoom.us/webinar/register/6017204711239/WN_ig0K7vcHQyGEXvYLiunaUA
Approximately two hours after the Q&A session has ended, an archived version of the webcast will be available via the webcast URL above.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the "1933 Act") and may not be offered or sold to, or for the account or benefit of, persons in
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President & CEO, Director
Cautionary Statement on Forward-Looking Information
This press release may contain forward–looking information within the meaning of applicable securities legislation, which forward–looking information reflects the Company's current expectations regarding future events. Forward-looking statements are often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions.
Forward-looking statements in this press release include statements concerning:
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended and such changes could be material. The Company does not intend, and do not assume any obligation, to update the forward-looking statements except as otherwise required by applicable law.
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