UrtheCast Corp. (TSX:UR) (“UrtheCast” or the “Company”) announced today a brokered private placement of up to CAD$35 million in subscription receipts (the “Subscription Receipts”) at a purchase price of CAD$0.35 per Subscription Receipt with Clarus Securities Inc. and Canaccord Genuity Corp. (the “Dealers”) acting as joint lead agents and joint bookrunners (the “Subordinated Capital Financing”). The Subordinated Capital Financing is being raised to satisfy certain conditions under the US$142 million senior secured facility for the UrtheDailyTM Constellation (the “UrtheDaily Senior Secured Facility”). 

The UrtheDaily Subordinated Capital Financing

The Subordinated Capital Financing is a brokered private placement of up to CAD$35 million of Subscription Receipts at a purchase price of CAD$0.35 per Subscription Receipt, convertible into non-interest bearing, unsecured convertible notes in the principal amount of CAD$0.35 (the “Notes”) and a number of Common Share purchase warrants (the “Warrants”) equal to 50% of the number of Common Shares the holder would receive if the Notes were converted at the Original Conversion Price (as defined below).

The Notes will not bear any interest and will be convertible into Common Shares at the option of the holder, at any time prior to the six-year anniversary of the issuance of the Notes at a conversion price equal to CAD$0.32, which represents 100% of the volume weighted average price of the Common Shares for the five trading days (the “5-day VWAP”) ending on April 2, 2018 (the “Original Conversion Price”).  The conversion price of the Notes will be adjusted down if the Company issues Common Shares (other than issuances in connection with its stock option plan or in the ordinary course of business) below the then-existing conversion price to such lower issuance price, provided that the conversion price may not be adjusted below the Original Conversion Price less the maximum permissible discount permitted by the TSX. The Notes will also be subject to other customary anti-dilution protections.

Each whole Warrant will be exercisable by the holder to purchase one Common Share at an exercise price equal to CAD$0.48, which represents 150% of the 5-day VWAP as at April 2, 2018 (the “Original Exercise Price”) for a period of five years following issuance of the Warrants. The exercise price of the Warrants will be adjusted down in the event that the Company issues Common Shares (other than issuances in connection with its stock option plan or in the ordinary course of business) below the then-existing exercise price to such lower issuance price, provided that the exercise price may not be adjusted below the Original Conversion Price. The Warrants will also be subject to other customary anti-dilution protections. The Warrants may be subject to early exercise, at the election of the Company, if the 5-day VWAP exceeds 250% of the Original Exercise Price for a period of at least 20 consecutive trading days.

The Company has agreed to use commercially reasonable efforts to file and obtain a receipt for a final prospectus within 45 days of closing to qualify the Notes and Warrants issuable on the conversion of the Subscription Receipts, such that the Common Shares underlying the Notes and Warrants become freely tradeable.

The proceeds of the Subordinated Capital Financing will be released from escrow upon the execution of finalized documentation for the UrtheDaily Senior Secured Facility and the qualification of the Notes and the Warrants issuable on the conversion of the Subscription Receipts under a prospectus. Although the Company expects to use the proceeds of the Subordinated Capital Financing to finance the UrtheDailyTM Constellation and for general corporate purposes, there may be restrictions imposed on the use of such proceeds, including that at least 50% of the proceeds be used for the UrtheDailyTM Constellation.

The Company has entered into an engagement letter (the “Engagement Letter”) with Clarus Securities Inc. and Canaccord Genuity Corp., as co-lead agents and co-bookrunners.  However, the Dealers’ obligations are subject to completion and execution of definitive documentation for the Subordinated Capital Financing satisfactory to Dealers and the Company, each acting reasonably and in good faith, and receipt of all required consents and approvals.

The Company is also in advanced negotiations with a Canadian private equity group to provide a conditional backstop commitment that will potentially provide additional financing of up to US$25 million of subordinated capital that may be required, which commitment will be subject to completing the initial US$25 million subordinated capital financing described above.

Each component of the UrtheDaily Financing is conditional on the others, and there is no assurance that any of the UrtheDaily Senior Secured Financing, Subordinated Capital Financing or conditional backstop commitment will be completed on the terms set out herein, or at all.

The Company may need to seek shareholder approval for the Subordinated Capital Financing and the issuance of the warrants in connection with the UrtheDaily Senior Secured Facility (under the TSX Company Manual). If shareholder approval is required, there can be no assurance that such shareholder approval will be obtained or that an exemption (which may include the serious financial difficulty exemption) from the shareholder approval will be available under the TSX Company Manual. The Company will use commercially reasonable efforts to list the Warrants and the warrants issuable in connection with the UrtheDaily Senior Secured Facility, subject to satisfaction of the listing requirements under the TSX Company Manual.

The terms of the Subordinated Capital Financing were negotiated on an arm’s length basis and the Company is unaware of any intended participation by insiders.

The UrtheDaily Senior Secured Facility

The terms below have been negotiated by the Company and the Senior Lenders, but any transaction is subject to finalization of definitive documentation, satisfactory to both parties, which is ongoing. The loan will make available to the Company US$142 million in two equal drawdowns subject to such finalized documentation and upon satisfaction of the conditions precedent described below.

The UrtheDaily Senior Secured Facility will accrue interest at 12% per annum, 7% of which may be satisfied by payment in kind and accrued to the loan principal until August 30, 2020. The UrtheDaily Senior Secured Facility will mature on the fifth anniversary of the closing date, upon which the UrtheDaily Senior Secured Facility will be repayable in full. After August 30, 2020, the Company must prepay the UrtheDaily Senior Secured Facility with 100% of the free cash flow attributable to the UrtheDailyTM Constellation; however, this may be reduced subject to certain financial covenants.  In addition, the Company may refinance this facility at any time with no break fee.

As a condition precedent for the Senior Secured Facility closing, the Company must raise subordinated capital (such as in the Subordinated Capital Financing described below) of at least US$25 million. In addition, the Company will be required to effectuate the refinancing of an existing credit facility and may therefore need to raise as much as an additional US$25 million of subordinated capital acceptable to the Senior Lenders. The availability of the first and second drawdowns will also be subject to the Company maintaining certain maximum leverage and total contracted value ratios, as ordinarily required of debt financing facilities of this type.

The Company will pay a US$1.75 million arrangement fee and a commitment fee equal to 7% per annum of the undrawn loan commencing 12 months after the closing date. The Company will also grant the Senior Lenders a number of common share purchase warrants equal to 5% of the i
ssued and outstanding common shares of the Company (the “Common Shares”) after the closing of the Senior Secured Facility.

The Senior Lenders will be entitled to a royalty equal to 10% (adjusted to 5% if the UrtheDaily Senior Secured Facility is repaid within 39 months of closing) of the gross revenues generated by the UrtheDailyTM Constellation unless previously terminated by the Company.

The Company expects to be in line to close the facility over the next two weeks, although there can be no assurance that the transaction will be closed on the terms described above or on any other terms.  On closing of the transaction, a copy of the credit agreement will be filed and will be available for viewing and download on SEDAR (www.sedar.com) and readers are encouraged to review it in its entirety.

About UrtheCast

UrtheCast Corp. is a Vancouver-based technology company that serves the rapidly evolving geospatial and geoanalytics markets with a wide range of information-rich products and services. The Company operates Earth Observation (EO) sensors in space, through its subsidiary Deimos Imaging, including two satellites, Deimos-1 and Deimos-2, to produce imagery data for partners and customers in multiple markets. UrtheCast processes and distributes imagery data and value-added products on behalf of the PanGeo Alliance, a network of seven satellite operators with a combined 13 medium- and high-resolution EO sensors. Additionally, UrtheCast is developing the world’s first fully-integrated constellation of sixteen multispectral optical and SAR satellites, called OptiSAR™, and a satellite constellation designed to capture high-quality, medium- resolution optical imagery of the Earth’s entire landmass (excluding Antarctica) every day, called UrtheDaily™. Common shares of UrtheCast trade on the Toronto Stock Exchange as ticker “UR”.

For more information, visit UrtheCast’s website at www.urthecast.com.