Cadiz Inc. Announces Comprehensive Refinancing Package
New Financial Structure Positions Balance Sheet for Water Project Construction Financing and Provides $17.5 Million in Working Capital to Fund Operations
LOS ANGELES--(BUSINESS WIRE)-- Cadiz Inc. (NAS: CDZI) ("Cadiz", "the Company") is pleased to announce that it has entered into an agreement with its senior lenders ("the Lenders") to refinance the Company's existing $66 million corporate term debt that is currently due June 29, 2013. The agreement establishes two separate debt instruments, a $30 million senior secured mortgage loan due in three years and a new $53.5 million convertible bond due in five years. No principal or interest payments are required under either instrument during the term until maturity. The new debt instruments will replace all existing term debt on the Company's balance sheet and provide $17.5 million in new working capital to fund the Company's current operations, including pre-construction activities related to the Cadiz Valley Water Conservation, Recovery and Storage Project (the "Water Project").
The major components of the refinancing include:
- A $30 million senior term loan secured by the underlying assets of the Company, including our landholdings and infrastructure ("Senior Secured Debt"). This instrument, which will be held entirely by our existing Lenders, will accrue interest at 8% and require no principal or interest payments before maturity in March 2016. Prepayment would be mandatory following any asset sale or voluntary at the Company's option, subject to a premium. The Senior Secured Debt will have a senior position to any other Company debt instrument.
- A $53.5 million convertible bond held by our existing Lenders and new investors ("Convertible Bond(s)"). The Bond will be convertible at any time into the Company's common stock at a price of $8.05 per share. Interest will accrue at 7%, with no principal or interest payments required before maturity in March 2018. This instrument will have a junior position to the Senior Secured Debt.
- Approximately $17.5 million in new working capital provided as part of the Convertible Bond issuance to fund Company operations.
The Company is currently engaged in important pre-construction planning activities for the Water Project, including resolution of outstanding administrative CEQA litigation, the finalization of water supply purchase agreements with all Project participants, and final facility engineering and design, which will include a technical agreement with the Metropolitan Water District related to the exchange of Cadiz water. The Water Project's environmental review was successfully completed in 2012 with the Project receiving a certified Final Environmental Impact Report ("Final EIR") concluding that operations would not cause any significant adverse environmental impacts. The Project also obtained key approvals of its 50-year groundwater extraction plan and the first purchase agreement for project water supplies.
"As a result of the significant advancement of the Project in 2012, the Company is working diligently to execute the important pre-construction phase and be in a position to commence construction next year," said Scott Slater, Cadiz CEO & President. "This refinancing and working capital raise are critical for our next phase and we are pleased with the new structure."
Water Project facilities include a wellfield and an underground water conveyance pipeline along the active Arizona & California Railroad (ARZC) right-of-way that would deliver conserved water to the Colorado River Aqueduct, one of Southern California's primary water distribution facilities. Capital costs for construction of the Water Project facilities are estimated at approximately $225 million. Project participants will have the opportunity to independently finance their pro-rata portion of the Project facilities. Alternatively, these facilities can be privately financed by the Company with lower-cost infrastructure construction financing debt. The agreement announced today affords us with additional flexibility to place such debt ahead of the Convertible Bonds subject to certain terms and conditions.
In addition to ongoing pre-construction activities, we are currently engaged in incorporating the recently acquired 96-mile idle natural gas pipeline extending from Cadiz to the Barstow area into our business plans and exploring optimal configurations for further Project development and environmental analysis of the Water Project's imported storage phase, or Phase 2. The integration of the 96-mile pipeline holds great promise for connecting Northern California and Colorado River supplies by a common storage facility. We also remain dedicated to our existing desert operations, including our agricultural development in the Cadiz Valley, and advancing our legacy commitments to the area, including a tourist steam train operation on the ARZC and a museum cultural center in Cadiz.
B. Riley & Company served as advisor on the transaction and placement agent for the Convertible Bond. The closing of the transaction is expected this week subject to the satisfaction of customary closing conditions.
About Cadiz Inc.
Founded in 1983, Cadiz Inc. is a publicly-held renewable resources company that owns 70 square miles of property with significant water resources and clean energy potential in eastern San Bernardino County, California. The Company is engaged in a combination of organic farming and water supply and storage projects, including the Cadiz Valley water Conservation, Recovery & Storage Project which will deliver a new, reliable water supply throughout Southern California. Cadiz abides by a wide-ranging "Green Compact" focused on environmental conservation and sustainable management practices at its properties. For more information about Cadiz, visit www.cadizinc.com.
About B. Riley & Co.
B. Riley & Co. is a leading independent investment bank which provides a full array of corporate finance, research, sales, trading and otcqx dad services to corporate, institutional and high net worth individual clients. Investment banking services include merger and acquisitions advisory to public and private middle market companies, initial and secondary public offerings and institutional private placements. Its Corporate Governance Advisory Services Group is engaged by both companies and investors to help maximize value for shareholders. The firm is recognized for its distinguished Equity Research. Founded in 1997, B. Riley is headquartered in Los Angeles and maintains offices in Newport Beach, San Francisco, New York, Boston and Atlanta. It is a member of FINRA and SIPC. For more information, please visit www.brileyco.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.
KEYWORDS: United States North America California
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