California Resources Corporation Announces Pricing of Upsized Private Offering of $600 Million of Senior Unsecured Notes
California Resources (CRC) announced the pricing of its $600 million upsized private offering of 8.250% senior unsecured notes due 2029.
The notes, guaranteed by CRC's subsidiaries, will close on June 5, 2024, pending customary conditions. Net proceeds of approximately $590 million will repay existing indebtedness of Aera Energy as part of the pending merger with Aera Companies. If the merger doesn't complete by May 7, 2025, the notes will be subject to special mandatory redemption.
The notes are not registered under the Securities Act and will be offered to qualified institutional buyers and non-U.S. persons.
- Successful pricing of $600 million upsized offering of senior unsecured notes.
- Net proceeds are estimated to be approximately $590 million after deducting initial purchasers' discount and expenses.
- Notes guaranteed by existing and future subsidiaries, enhancing credit security.
- Proceeds will be used for strategic repayment of Aera Energy's existing indebtedness in connection with a pending business combination, potentially strengthening financial position post-merger.
- The notes carry a high-interest rate of 8.250%, potentially increasing interest expense.
- Special mandatory redemption clause adds uncertainty if the Aera Merger is not consummated by May 7, 2025.
- Notes are not registered under the Securities Act, limiting their liquidity and resale options.
Insights
California Resources Corporation's announcement of a $600 million private offering results in multiple financial implications for investors.
The upsized offering, priced at an 8.250% interest due in 2029, indicates confidence in market demand for their debt. This rate is relatively high, suggesting the company needs to offer a substantial yield to attract investors, possibly reflecting the perceived risk or leveraging opportunity.
Net proceeds are expected to be around
The special mandatory redemption clause highlights a contingency plan. If the Aera Merger does not close by May 7, 2025, or if the merger is called off, the Notes will be redeemed at the issue price plus accrued interest. This clause mitigates risk for investors, ensuring that their investment is safeguarded to a degree, should the merger fail to materialize. Still, the redemption may impact the company’s financial strategy, causing disruptions if they need to return the capital.
Importantly, the offering targets institutional buyers via Rule 144A and non-U.S. transactions under Regulation S, ensuring compliance with securities regulations and limiting the buyer pool to qualified investors.
The issuance of 8.250% senior unsecured notes by California Resources Corporation, tied to the impending Aera Merger, offers intriguing market insights.
The company’s choice to issue senior unsecured notes, which are not backed by collateral, suggests a reliance on its overall creditworthiness and future cash flows. The 8.250% interest rate is relatively high and could reflect market perceptions of risk or a strategic move to attract investors willing to accept higher yields in exchange for perceived risks associated with the merger and the company's broader market position.
The Aera Merger, central to this financial maneuver, is notable. If successful, it may create synergistic efficiencies and enhance operational scale. However, the merger’s uncertainty, as evidenced by the special mandatory redemption clause, indicates potential volatility. Investors should watch for updates on this merger's progress, as it will significantly impact CRC's market position and financial health.
From a broader market perspective, this transaction reflects ongoing trends where energy companies leverage debt markets to finance strategic acquisitions. Successful completion could signal CRC’s ability to navigate complex market conditions and improve its foothold in the energy sector. Conversely, failure or delays in the merger could prompt market reassessment of CRC’s strategy and stability.
The Company estimates that the net proceeds from the offering will be approximately
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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CRC Contacts:
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
FAQ
What is the amount of CRC's upsized private offering?
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