Calfrac makes changes to recapitalization plan in an effort to woo shareholders

CALGARY — Shares in Calfrac Well Services Ltd. rose on Friday after the company sweetened its recapitalization offer with cash for shareholders while it tries to fend off a rival American firm's takeover bid.

The Calgary-based oilfield services firm, which specializes in hydraulic fracturing or "fracking" of oil and gas wells, announced a revised plan under which each shareholder could elect to be paid 15 cents per share in cash, from a maximum pool of $10 million.

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The shares rose by a cent to 15.5 cents in trading on the Toronto Stock Exchange. That matches the stock's highest closing price since Texas-based Wilks Brothers LLC launched a formal 18-cents-per-share takeover offer on Sept. 10.

"The new proposal is superior for equity holders than the prior Calfrac proposal, though the overall debt picture doesn’t fundamentally change under the new proposal and the risk of covenant default continues to exist," said analyst Waqar Syed of ATB Capital Markets in a report.

The available cash, which would be borrowed, would cover about 46 per cent of the total common shares outstanding, he added.

The revised recapitalization plan includes the provision of two warrants per share with an exercise price of five cents for three years, potentially boosting the number of shares by 5.5 per cent, Syed pointed out.

"A consensual transaction supported by our stakeholders has been a key focus for Calfrac," said Calfrac president and chief operating officer Lindsay Link in a news release.

"We believe that the amended terms deliver increased benefits to our shareholders and that the transaction provides the best available alternative for our stakeholders."

Wilks Brothers, which owns a nearly 20 per cent equity stake in Calfrac and opposes the recapitalization plan, urged shareholders Friday to reject the new Calfrac management proposal.

"The amended management transaction does not change anything," said the U.S. company which owns U.S. oilfield services company ProFrac Services.

Calfrac's court-supervised reorganization under the Canada Business Corporations Act must be supported by two-thirds of Calfrac's debtholders and shareholders in separate votes to proceed. It said votes set for next Tuesday have been postponed until Oct. 16.

Calfrac said its senior unsecured noteholders, who hold US$431.8 million in debt plus interest, continue to support the amended plan which would allow it to carry on as an independent company.

It warned that if the reorganization is not completed, it will go back to the original plan through a Companies' Creditors Arrangement Act process that would likely result in a reduced recovery for shareholders.

Wilks responded that it would continue to honour its takeover offer even if the company does enter a CCAA process.

The recapitalization plan would see Calfrac unsecured notes exchanged for shares, thus reducing the stake held by the company's current shareholders.

This report by The Canadian Press was first published Sept. 25, 2020.

Companies in this story: (TSX:CFW)

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