Agreements Extend Maturity of Existing Convertible Debt to March 2020 and Gains Right to Extend First Mortgage to June 2017
(Los Angeles, CA) (via GlobeNewswire) – Cadiz Inc. (NASDAQ: CDZI) (“Cadiz”, “the Company”) is pleased to announce today that it has entered into an agreement with its senior lenders, including MSD Credit Opportunity Master Fund, L.P., (“Senior Lenders”), which grants the Company the right to extend the maturity date of the $40 million first tranche of its mortgage debt (“First Mortgage”) from March 2016 to June 2017. Additionally, the Company has entered into agreements with a majority of its convertible note holders to exchange a minimum of $40 million in outstanding convertible notes presently due in March 2018 for substantially similar convertible notes due in March 2020 (“Convertible Notes” or “Notes”). These agreements allow the Company enhanced flexibility to progress implementation of the Cadiz Valley Water Conservation, Recovery and Storage Project (the “Water Project”) at its primary landholding in the eastern Mojave Desert.
Under the agreement with the Senior Lenders, if the Company elects to extend the First Mortgage, it must make a $9 million payment to the lenders prior to March 5, 2016, which will also reduce the Company’s outstanding mortgage balance. The Company may fund this $9 million payment with the proceeds of a possible future equity offering or, alternatively, the Company may replace or extinguish the mortgage debt prior to the March 2016 due date in connection with a potential expansion of the Cadiz Valley agricultural operations. Negotiations with third parties related to such an agricultural expansion are ongoing.
Further, in addition to the agreement with the Senior Lenders, the Company also entered into agreements with a majority of its Convertible Note holders, pursuant to which those holders will exchange their Convertible Notes for new convertible notes with substantially similar terms but with a maturity date in March 2020. In exchange for this maturity extension, the conversion rate on the new convertible notes will be reduced from $8.05 to $6.75 per share. Interest will continue to accrue at 7% with no payment due until maturity.
The implementation of the Cadiz Water Project, a public-private partnership that will make available a new water supply for 400,000 people in California, continues to be the Company’s primary objective. The Water Project has been reviewed and approved under California’s stringent environmental laws and upheld against six separate challenges in California Superior Court. In October 2015, the US Bureau of Land Management’s (“BLM”) California office issued guidance that may require the Water Project to seek a new permit to construct its water conveyance pipeline within an active railroad right-of-way – a route that will avoid environmental impacts and provide numerous benefits to the host railroad.
The use of an active railroad right-of-way continues to be the safest, most sustainable and preferred pipeline route for the Water Project and, with these agreements successfully completed, the Company will continue to seek the reconsideration, overturning or invalidation of this decision over the next few months. If these efforts do not result in the issuance of new guidance by the BLM, then the Company will aggressively pursue all administrative and legal remedies available to firmly establish the railroad’s right to grant access to the Company for a water conveyance pipeline that will also further numerous railroad purposes.
The Company paid its Senior Lenders an amendment fee of $2.25 million in additional debt for the right to extend the maturity date of the First Mortgage to June 2017, which is concurrent with the existing due date of the remaining $12 million second tranche of its mortgage debt. Should the Company opt to extend the First Mortgage maturity date, then it will incur an additional fee of $2.25 million payable in either additional term debt or shares of common stock at the Lenders’ option. Interest will continue to accrue on the First Mortgage at 8%.