Just Energy Group Inc. (“
Just Energy” or the
“
Company”) (TSXV:JE; OTC:JENGQ), a retail energy
provider specializing in electricity and natural gas commodities
and bringing energy efficient solutions and renewable energy
options to customers, today announced that it has entered into a
Support Agreement and a Backstop Commitment Letter (each as defined
below) with certain of its principal stakeholders, which provides
for a comprehensive restructuring and recapitalization transaction
that will be implemented pursuant to a plan of compromise and
arrangement (the “
Plan”) under the Companies’
Creditors Arrangement Act (the “
CCAA”). The
proposed Plan is the culmination of extensive negotiations among
the Company, its DIP Lenders (as defined below), its credit
facility lenders, certain of its secured commodity suppliers and
unsecured term loan lenders. If approved, the Plan will result in
Just Energy’s emergence from CCAA proceedings and cases commenced
under Chapter 15 of the United States Bankruptcy Code
(“
Chapter 15”) pending in the United States
Bankruptcy Court for the Southern District of Texas (the
“
U.S. Court”), preserve the going concern value of
the business, maintain customer relationships and retain employment
and critical vendor and regulator relationships. The Plan provides
that certain creditors will receive cash payments and/or equity in
exchange for their debt, and existing equityholders’ interests will
be cancelled for no consideration.
Just Energy and certain of its affiliates
(collectively, the “Just Energy Entities”) intend
to bring motions before the Ontario Superior Court of Justice
(Commercial List) (the “Court”) on May 26, 2022
for: (i) an Order (the “Meetings Order”) that,
among other things, approves of the holding of meetings (the
“Meetings”) of certain secured creditors (the
“Secured Creditor Class”) and unsecured creditors
(the “Unsecured Creditor Class”) to consider and
vote on a resolution approving the Plan, and (ii) an Order (the
“Authorization Order”) that, among other things,
approves of the execution by the applicable Just Energy Entities of
a plan support agreement (the “Support Agreement”)
and backstop commitment letter (the “Backstop Commitment
Letter”), each of which are described further below. The
Just Energy Entities also intend to seek recognition in the U.S. of
the Meetings Order and the Authorization Order in their Chapter 15
cases.
Additional information with respect to the
Support Agreement, the Backstop Commitment Letter, the Plan and the
Meetings, including instructions on how to vote at the Meetings,
will be set forth in an information statement of the Just Energy
Entities (the “Information Statement”), which is
expected to be sent within seven days of the granting of the
proposed Meetings Order or otherwise made available to creditors
entitled to vote at the Meetings as of the applicable record dates.
A copy of the Information Statement, Plan, Support Agreement and
Backstop Commitment Letter will also be made available on the SEDAR
website at www.sedar.com, on the U.S. Securities and Exchange
Commission’s website at www.sec.gov and on Just Energy’s website at
www.investors.justenergy.com.
As previously reported, FTI Consulting Canada
Inc. (the “Monitor”) is overseeing the Company’s
CCAA proceedings as court-appointed Monitor. Copies of the
Information Statement, the Plan, certain related material documents
and further information regarding the CCAA proceedings is available
at the Monitor’s website
at http://cfcanada.fticonsulting.com/justenergy and at the
Omni Agent Solutions case website at
https://cases.omniagentsolutions.com/?clientId=3600.
Information about the CCAA proceedings generally
can also be obtained by contacting the Monitor by phone at
416-649-8127 or 1-844-669-6340, or by email at
justenergy@fticonsulting.com.
RESTRUCTURING & RECAPITALIZATION
TRANSACTION
The Plan includes the following key
elements:
- A US$192.55
million new equity offering (the “Equity
Offering”) for the purchase of 80% of the new common
equity of New Just Energy Parent (as defined below), subject to
dilution resulting from equity issued under New Just Energy
Parent’s new management incentive plan (the “MIP”)
the terms of which are attached to the Support Agreement.
- The repayment
in full of amounts owing under the Company’s first lien credit
facility, other than up to CAD$20 million, which may remain
outstanding under an amended and restated credit agreement
following implementation of the Plan. The amended and restated
credit agreement will provide for a CAD$250 million facility.
- Secured
commodity supply claims will be unaffected.
- The pre-filing
secured claims of BP Canada Energy Group ULC and BP Energy Company
in the aggregate principal amounts of approximately US$229.5
million and CAD$0.2 million, plus accrued and unpaid interest
thereon up to the implementation of the Plan (the “BP
Claim”), which claims have been assigned to an affiliate
of the Plan Sponsor (as defined below) will be exchanged for
preferred equity of New Just Energy Parent having a redemption
amount equal to the BP Claim, and entitling the holder to a 12.50%
accreting yield for the first four years, increasing 1% annually
thereafter and providing for such other terms as set forth in the
term sheet appended to the Support Agreement.
- The claims of
creditors (“Term Loan Claim Holders”) in respect
of approximately US$208.6 million principal amount outstanding
under the Company’s existing unsecured term loan agreement, plus
accrued and outstanding pre-filing fees, costs, interest and other
amounts owing thereunder, will be settled in exchange for 10% of
the new common equity of New Just Energy Parent (subject to
dilution from equity issued under the MIP).
- The opportunity
for eligible Term Loan Claim Holders to participate in the Equity
Offering and the backstop thereof.
- Applicable
general unsecured creditors with accepted claims less than or equal
to CAD$1,500 (“Convenience Creditors”), and other
applicable general unsecured creditors who make an election to be
treated as Convenience Creditors, will be paid in full up to
CAD$1,500.
- Other general
unsecured creditors will be entitled to payment in respect of their
accepted claims based on their pro rata share of a general
unsecured creditor cash pool in the amount of CAD$10 million, less
amounts required to fund payments to Convenience Creditors and
applicable fees and expenses, including with respect to the
administration of the claims process within the CCAA proceedings
and resolution of disputed claims.
- A modified
corporate structure in which Just Energy (U.S.) Corp. or such other
entity organized in the United States and determined in accordance
with the Plan (“New Just Energy Parent”) becomes
the new parent company of the Just Energy Entities.
- Just Energy
will cease to be a reporting issuer and New Just Energy Parent will
be a private company.
The trust indenture dated September 28, 2020
(the “Subordinated Note Indenture”) governing the
subordinated notes issued by the Company (the “Subordinated
Notes”) provides that the Subordinated Notes have been
subordinated and postponed and are subject in right of payment to
the full and final payment of all existing and future senior
indebtedness. Accordingly, the Plan restricts the Monitor from
making any distribution to beneficial holders (“Beneficial
Subordinated Note Claim Holders”) of Subordinated Notes
until all persons entitled to turnover of such distributions
pursuant to the terms of the Subordinated Note Indenture and the
Plan have been paid in full. As a result, Beneficial Subordinated
Note Claim Holders are not anticipated to receive any recovery
under the Plan and their claims will be cancelled and extinguished
without any entitlement to payment.
Further, as the Company’s creditors will not be
paid in full under the Plan, no value will accrue to the Company’s
existing equityholders as a result of implementation of the Plan,
and the outstanding shares, options and other equity of the Company
immediately prior to implementation of the Plan will be transferred
to the New Just Energy Parent or cancelled for no consideration and
without any vote of the existing shareholders.
Additionally, holders of accepted claims that
are less than CAD$10 will not receive any recovery under the Plan
and their claims will be cancelled and extinguished without any
entitlement to payment.
The implementation of the Plan is conditional
upon, among other things: (i) the approval by the required
majorities of the Secured Creditor Class and the Unsecured Creditor
Class at the Meetings, which Meetings are to be held by August 2,
2022; and (ii) if the Plan is approved at the Meetings, the Court
granting an Order that sanctions and approves of the Plan by August
12, 2022 and the recognition of such Order by the U.S. Court under
Chapter 15 by September 15, 2022. The Company expects to implement
the Plan as soon as reasonably practicable following entry of such
Order by the U.S. Court, subject to the satisfaction or waiver of
all condition precedent set forth in the Plan.
SUPPORT AGREEMENT
In connection with the Plan, the Just Energy
Entities have entered into the Support Agreement with: (a) the
lenders under the Company’s debtor-in-possession financing facility
(the “DIP Lenders”) and one of their affiliates
(collectively, the “Plan Sponsor”) that are also
significant Term Loan Claim Holders, (b) the Company’s credit
facility lenders, (c) the Company’s largest commodity supplier and
(d) the holder of the BP Claim. Pursuant to the Support Agreement,
among other things, the Just Energy Entities have agreed to use
commercially reasonable efforts to complete the transactions as set
forth in the Plan, and the Plan Sponsor and other counterparties
have agreed to vote in favour of, and take actions to support, the
Plan, in each case on the terms and conditions set forth in the
Support Agreement.
While the Support Agreement provides that Just
Energy shall not solicit the submission of any transaction that is
an alternative to or otherwise inconsistent with the restructuring
and recapitalization transactions contemplated by the Plan (an
“Alternative Restructuring Proposal”, as such term
is defined in the Support Agreement), Just Energy is permitted to
consider, respond to and negotiate unsolicited Alternative
Restructuring Proposals. The terms of the Support Agreement do not
contain a contractual right for any party to match or top any
Alternative Restructuring Proposal or Superior Proposal (as defined
below).
The Support Agreement may be terminated in
certain circumstances, including by any of the Just Energy Entities
in the event that the board of directors or similar governing body
of such entity (the “Board”) determines, upon the
advice of outside legal counsel and financial advisors, that
proceeding with the restructuring contemplated by the Plan would be
inconsistent with the exercise of its fiduciary duties or
applicable law, or to pursue an Alternative Restructuring Proposal
the terms of which are determined by the Board to be more favorable
to the Just Energy Entities and their stakeholders (a
“Superior Proposal”, as such term is defined in
the Support Agreement) in accordance with the terms of the Support
Agreement.
The Plan Sponsor may also terminate the Support
Agreement if the Board determines to proceed with and accept a
definitive Alternative Restructuring Proposal or a definitive
Superior Proposal. In either of the foregoing termination
scenarios, the Just Energy Entities would be required to pay a
termination fee to the Backstop Parties (as defined below) in the
amount of US$15 million under the terms of the Backstop Commitment
Letter, subject to the granting of the Authorization Order, which
fee would be payable concurrent with the consummation of an
Alternative Restructuring Proposal after any such termination.
BACKSTOP COMMITMENT LETTER
Pursuant to the Backstop Commitment Letter, the
Equity Offering will be backstopped by the Plan Sponsor and other
eligible Term Loan Claim Holders who elect to participate in the
backstop (collectively, the “Backstop Parties”) by
providing an executed joinder to the Backstop Commitment Letter and
participation form to Just Energy by June 23, 2022. Such forms,
together with additional details regarding participation in the
backstop, will be provided to applicable Term Loan Claim Holders
after the granting of the proposed Meetings Order.
The Backstop Commitment Letter provides for the
issuance of 10% of the new common equity of New Just Energy Parent
(subject to dilution resulting from equity issued under the MIP) to
the Backstop Parties as a fee for their agreement to backstop the
Equity Offering.
FURTHER INFORMATION
The Company has been advised by OC II VS XIV LP
(“OC II”), a Delaware limited partnership, and
certain other funds under common management with OC II
(collectively, the “Funds”), who own approximately
29% of the issued and outstanding common shares of the Company,
that OC II has filed an amended early warning report pursuant to
Canadian securities laws to provide updated disclosure relating to
the Funds’ participation in the Plan, which is available at
www.sedar.com under the Company’s issuer profile.
The above descriptions are summaries only and
are subject to the terms of the Plan, the Support Agreement and the
Backstop Commitment Letter, copies of which are available on the
Monitor’s website and will be made available on the SEDAR website
at www.sedar.com, on the U.S. Securities and Exchange Commission’s
website at www.sec.gov and on Just Energy’s website at
https://investors.justenergy.com/.
Just Energy’s legal advisors in connection with
the proposed Plan are Osler, Hoskin & Harcourt LLP and Kirkland
& Ellis LLP. The Company’s financial advisor is BMO Capital
Markets.
About Just Energy Group
Inc.
Just Energy is a retail energy provider
specializing in electricity and natural gas commodities and
bringing energy efficient solutions, carbon offsets and renewable
energy options to customers. Currently operating in the United
States and Canada, Just Energy serves residential and commercial
customers. Just Energy is the parent company of Amigo Energy,
Filter Group, Hudson Energy, Interactive Energy Group, Tara Energy,
and Terrapass. Visit https://investors.justenergy.com/ to
learn more.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking
statements, including, without limitation, expectations regarding
the implementation of the Plan and the anticipated results thereof;
timing for applications to the Court for required approvals; timing
for mailing or other delivery of the Information Statement; timing
of the Meetings; and required approvals for the Plan. These
statements are based on current expectations that involve several
risks and uncertainties which could cause actual results to differ
from those anticipated. These risks include, but are not limited
to, risks with respect to: satisfaction of the conditions to
implementation of the Plan and the transactions contemplated by the
Support Agreement and the Backstop Commitment Letter, including
approval of the Plan by the required majorities at the Meetings and
by the Court and the U.S. Court and receipt of all required
regulatory approvals; the risk that more capital may be required in
order for the Just Energy Entities to be able to implement the
Plan; the ability of the Company to continue as a going concern;
the outcome of proceedings under the CCAA and similar legislation
in the United States; the outcome of any potential litigation with
respect to the February 2021 extreme weather event in Texas (the
“Weather Event”), the final amount received by the
Company with respect to the financing mechanisms to recover certain
costs incurred during the Weather Event, the outcome of any invoice
dispute with the Electric Reliability Council of Texas; the impact
of the evolving COVID-19 pandemic on the Company’s business,
operations and sales; uncertainties relating to the ultimate
spread, severity and duration of COVID-19 and related adverse
effects on the economies and financial markets of countries in
which the Company operates; the ability of the Company to
successfully implement its business continuity plans with respect
to the COVID-19 pandemic; the Company’s ability to access
sufficient capital to provide liquidity to manage its cash flow
requirements; general economic, business and market conditions; the
ability of management to execute its business plan; levels of
customer natural gas and electricity consumption; extreme weather
conditions; rates of customer additions and renewals; customer
credit risk; rates of customer attrition; fluctuations in natural
gas and electricity prices; interest and exchange rates; actions
taken by governmental authorities including energy marketing
regulation; increases in taxes and changes in government
regulations and incentive programs; changes in regulatory regimes;
results of litigation and decisions by regulatory authorities;
competition; and dependence on certain suppliers. Additional
information on these and other factors that could affect Just
Energy’s operations or financial results are included in Just
Energy’s annual information form and other reports on file with
Canadian securities regulatory authorities which can be accessed
through the SEDAR website at www.sedar.com and on the U.S.
Securities and Exchange Commission’s website at www.sec.gov or
through Just Energy’s website at investors.justenergy.com.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE
CONTACT:
InvestorsMichael CummingsAlpha
IRPhone: (617) 982-0475 JE@alpha-ir.com
Michael CarterJust Energy, Chief Financial
OfficerPhone: 905-670-4440pr@justenergy.com
Court-appointed MonitorFTI
Consulting Canada Inc.Phone: 416-649-8127 or
1-844-669-6340justenergy@fticonsulting.com
MediaBoyd ErmanLongview
CommunicationsPhone: 416-523-5885berman@longviewcomms.ca
Source: Just Energy Group
Inc
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