California Resources Corporation Announces Private Offering of $500 Million of Senior Unsecured Notes
California Resources (NYSE: CRC) announced a private offering of $500 million in senior unsecured notes due 2029. The notes will be guaranteed by existing subsidiaries and certain future ones. Proceeds will be used, along with cash on hand and borrowings, to repay Aera Energy's debt in connection with the pending merger with Aera Companies. If the merger is not consummated by May 7, 2025, or is terminated, the notes will be subject to mandatory redemption. The notes will be offered to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S. They won’t be registered under the Securities Act.
- CRC plans to raise $500 million through senior unsecured notes, indicating an effort to bolster financial resources.
- The notes are guaranteed by CRC’s existing subsidiaries, reflecting additional security for investors.
- Proceeds will be utilized to repay Aera Energy's debt, potentially improving CRC’s balance sheet post-merger.
- Special mandatory redemption provides a safeguard for investors if the Aera Merger fails.
- The notes are senior unsecured, implying higher risk for investors compared to secured notes.
- Mandatory redemption is contingent on the uncertain Aera Merger, introducing potential volatility.
- The notes are not registered under the Securities Act, limiting their marketability in the U.S.
- Dependence on market conditions may affect the success of the offering.
The issuance of $500 million in senior unsecured notes is a significant move by California Resources Corporation (CRC). Senior unsecured notes are a form of debt that ranks below secured debt but above equity in the event of bankruptcy. The interest rate and maturity date play important roles in understanding the cost and risk associated with this debt. The notes due in 2029 indicate a long-term financing strategy.
The proceeds from this offering are earmarked for repaying the existing indebtedness of Aera Energy, LLC, in connection with the Aera Merger. This means the company aims to restructure its debt profile and possibly lower its interest expenses by refinancing older, more expensive debt. Using a mix of
However, the special mandatory redemption clause highlights potential uncertainties surrounding the merger. If the merger fails, CRC would have to redeem the notes at 100% of their initial issue price, which could affect its liquidity.
For retail investors, the company’s debt management strategies and the success of the Aera Merger are key factors to monitor. Given the conditions, this move seems to be a calculated risk to manage existing debt while aiming for a significant merger.
From a market perspective, CRC’s strategy to offer senior unsecured notes is a step towards consolidating its position in the industry by merging with Aera Energy. The issuance of senior unsecured notes to fund the merger and manage debt highlights the company's focus on strategic growth and market expansion.
The senior unsecured notes being offered to qualified institutional buyers and non-U.S. persons under specific regulatory exemptions suggest a targeted approach to tap into specific investor segments. This can be perceived as a method to ensure substantial interest and successful subscription to the notes, leveraging institutional investors' appetite for such debt instruments.
However, the market's perception of this move will hinge on the successful execution of the Aera Merger. The stipulation for mandatory redemption in case of merger failure adds a layer of risk that can impact investor confidence. Retail investors should consider the market dynamics and potential impact on stock prices, contingent on merger outcomes and debt repayment efficacy.
The legal implications of CRC’s senior unsecured notes offering are multifaceted. These notes are being offered under exemptions from the registration requirements of the Securities Act of 1933, relying on Rule 144A and Regulation S. This means the notes are geared towards institutional investors and non-U.S. persons, limiting retail investor direct access.
The special mandatory redemption clause is a critical legal safeguard for investors, ensuring that their principal investment is protected if the Aera Merger does not materialize. This clause reflects the company’s legal commitment to protecting investor interests in uncertain merger scenarios.
Additionally, the guarantees by the company’s existing and certain future subsidiaries provide an additional layer of security for noteholders, ensuring that the company’s broader asset base underpins the debt issuance. Retail investors should be aware of these protections and the legal framework ensuring the repayment of these notes.
If (x) the consummation of the Aera Merger does not occur on or before May 7, 2025 (the “Outside Date”) or (y) prior thereto, the Company notifies the trustee in writing that the merger agreement related to the Aera Merger (the “Merger Agreement”) has been terminated or the Company will not pursue the consummation of the Aera Merger or has determined in its sole discretion that the Aera Merger cannot or is not reasonably likely to be consummated by the Outside Date, the Notes will be subject to a special mandatory redemption at a redemption price equal to
The Notes have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in
This press release does not and shall not constitute an offer to sell or the solicitation of an offer to buy any Notes, nor shall there be any offer, solicitation or sale of Notes in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Forward-Looking Statement Disclosure
All statements, except for statements of historical fact, made in this release regarding activities, events or developments the Company expects, believes or anticipates will or may occur in the future, such as statements regarding the proposed offering, the intended use of proceeds and the business combination with the Aera Companies, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements speak only as of the date of this release. Although the Company believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Except as required by law, the Company expressly disclaims any obligation to and does not intend to publicly update or revise any forward-looking statements.
The Company cautions you that these forward-looking statements are subject to all of the risks and uncertainties incident to the Company’s business, most of which are difficult to predict and many of which are beyond the Company’s control. These risks include, but are not limited to, the risks described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and its subsequently filed Quarterly Report on Form 10-Q.
About California Resources Corporation
California Resources Corporation is an independent energy and carbon management company committed to energy transition. CRC produces some of the lowest carbon intensity production in the US and is focused on maximizing the value of its land, mineral and technical resources for decarbonization by developing carbon capture and storage and other emissions reducing projects.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the transactions contemplated by the Merger Agreement, including the proposed issuance of the Company’s common stock pursuant to the Merger Agreement. In connection with the transaction, the Company filed a proxy statement on Schedule 14A with the
Participants in Solicitation
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the Aera Merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2024 Annual Meeting of Stockholders, which was filed with the SEC on March 21, 2024. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement regarding the transaction.
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Joanna Park (Investor Relations)
(818) 661-3731
Joanna.Park@crc.com
Richard Venn (Media)
(818) 661-6014
Richard.Venn@crc.com
Source: California Resources Corporation
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