Initiates Prepackaged Chapter 11 Process with
Support from Senior Secured Lender;
Obtains Commitment for Significant Balance
Sheet Improvements and New Financing
Capstone Green Energy Corporation (NASDAQ: CGRN) (the Company or
Capstone) has entered into a transaction support agreement (TSA)
with Goldman Sachs Specialty Lending Group, L.P., in its capacity
as collateral agent (the “Collateral Agent”) under that certain
Amended and Restated Note Purchase Agreement, dated as of October
1, 2020 (as amended, the Note Purchase Agreement), and Broad Street
Credit Holdings LLC, an affiliate of the Collateral Agent, in its
capacity as purchaser (Consenting Lender) under the Note Purchase
Agreement, and in connection therewith has initiated a prepackaged
restructuring. This is a significant step towards expediting the
Company’s corporate restructuring efforts, with the primary
objectives of significantly reducing Capstone's debt burden,
injecting additional liquidity into its operations, and ultimately
paving the way for the sustained and prosperous future of its
business.
"The transactions contemplated by the TSA have been carefully
designed to preserve and enhance value for all our stakeholders,”
said Robert C. Flexon, Interim President and Chief Executive
Officer. "The new financings provide much-needed liquidity to
ensure near-term stable operations and, importantly, upon
emergence, our pre-petition debt and accrued interest of more than
$56.0 million will decrease to $25.0 million resulting in
significantly improved financial health and longer-term financial
stability."
To implement Capstone's prepackaged restructuring, Capstone and
certain of its subsidiaries (the Debtors) filed voluntary Chapter
11 petitions for relief in the U.S. Bankruptcy Court for the
District of Delaware (the Bankruptcy Court). The TSA and the joint
prepackaged Chapter 11 plan of reorganization (the Plan)
contemplate the Debtors effectuating certain transactions pursuant
to which the Company will become a private company (Reorganized
PrivateCo) that will continue to own assets consisting of (i)
right, title, and interest in and to the certain trademarks of
Capstone and (ii) all assets relating to distributor support
services (the Retained Assets). Capstone Turbine International,
Inc., a subsidiary of the Company, will be renamed Capstone Green
Energy Corporation (Reorganized PublicCo), which expects to be the
successor to Capstone for purposes of Securities and Exchange
Commission reporting and will be the successor to Capstone with
respect to certain of its business, assets, and liabilities through
its ownership interest in a new operating subsidiary.
Under the Plan, all holders of Allowed General Unsecured Claims
will receive payment in full in cash in the ordinary course or such
other treatment so as to render such claim unimpaired under the
Bankruptcy Code. Existing stockholders of the Company will receive
their pro rata share of 100% of the equity in Reorganized PublicCo,
subject to dilution from any stock that may be issued as equity
incentive compensation to employees. All existing warrants and
restricted stock units will be canceled and will not receive any
distribution. Other than the Retained Assets described above, the
existing operating assets and liabilities of the Company will be
transferred to a "New Subsidiary" (with certain limited
exceptions), the common shares of which will be 100% held by
Reorganized PublicCo, and 100% of its non-dilutable preferred
shares will be held by Reorganized PrivateCo. On a fully diluted
basis, Reorganized PublicCo will own 62.5% of New Subsidiary, and
Reorganized PrivateCo will own 37.5%.
The Company is filing a series of customary motions with the
Bankruptcy Court to maintain business-as-usual operations and
uphold its commitments to its valued stakeholders. These
"first-day" motions, which Capstone expects to be approved promptly
following a hearing to be set by the Bankruptcy Court, include
requests to continue to pay wages and provide benefits to the
Company's employees as usual, as well as honor customer programs
and policies. The Company is expected to operate in the ordinary
course of business through the Chapter 11 process.
Capstone has secured a commitment from its Consenting Lender for
$12.0 million in new money debtor-in-possession financing, which is
in addition to the $3.0 million of new money financing provided on
September 22, 2023. Subject to Bankruptcy Court approval, this "new
money" financing will provide liquidity to support continued
operations during the Chapter 11 process. This $12.0 million, plus
an additional $8.0 million of pre-petition debt, will be converted
into exit financing at emergence along with a new $5.0 million
revolver facility, also from the Consenting Lender. This added
liquidity will be used for operating purposes, primarily to bring
the Company's outstanding vendor payable balances more in line with
the associated commercial terms.
"The significant agreement and investment of our senior secured
lender demonstrates its support of the Company and our long-term
strategy," said Mr. Flexon. "Today's Chapter 11 filings represent
an important step toward strengthening our financial position, and
we intend to move through this process quickly and without
disruption for our employees, customers, distribution partners and
vendors. Notably, the restructuring will provide that the Company's
public stockholders receive their pro rata share of equity in the
new public company. We believe that implementing these transactions
will enable us to continue manufacturing and producing customized
microgrid solutions and on-site energy technology systems that
provide the significant energy cost and carbon savings that
Capstone customers are seeking."
The restructuring is expected to be expeditious, with emergence
occurring within 45 days after the filing of the petitions, subject
to the Bankruptcy Court’s scheduling and availability.
Nasdaq Delisting Letter
As previously disclosed, the Company received written notice
(Notification Letter) from the listing qualifications department of
The Nasdaq Stock Market (Nasdaq) on March 28, 2023, stating that
the Company’s market value of listed securities (MVLS) for the last
30 consecutive business was below the required minimum of $35
million for continued listing on Nasdaq under Nasdaq Listing Rule
5550(b)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(C),
the Company had 180 calendar days (or until September 25, 2023) to
regain compliance (Compliance Period). The Notification Letter
stated that Nasdaq will close the matter and provide written
confirmation that the Company has achieved compliance with rule
5550(b)(2) if at any time before September 25, 2023, the Company’s
MVLS closes at $35 million or more for a minimum of ten (10)
consecutive business days.
On September 26, 2023, the Company received written notice
(Delisting Letter) from Nasdaq that the Company has not regained
compliance with Nasdaq Listing Rule 5550(b)(2) for the MVLS within
the Compliance Period in accordance with Nasdaq Listing Rule
5810(c)(3)(C). Accordingly, unless the Company requests an appeal
of this determination, the Company’s securities will be delisted
from The Nasdaq Capital Market, trading of the Company’s common
stock will be suspended at the opening of business on October 5,
2023, and a Form 25-NSE will be filed with the Securities and
Exchange Commission to remove the Company’s securities from listing
and registration on Nasdaq. Because the bankruptcy filing is
expected to result in a delisting, the Company does not intend to
appeal Nasdaq’s determination and, therefore, it is expected that
its common stock will be delisted. The Common Stock may be quoted
and traded on an over-the-counter market following delisting.
Additional Information
Bankruptcy Court filings and information about the Chapter 11
cases can be found at a website maintained by the Debtors' noticing
and claims agent, Kroll Restructuring Administration LLC ("Kroll"),
at https://cases.ra.kroll.com/capstone or by contacting Kroll at
1-844-642-1256 (Toll-Free), +1-646-651-1164 (International) or by
e-mail at capstoneinfo@ra.kroll.com. Additional details regarding
the Chapter 11 cases are included in, and the description above is
qualified in its entirety by, the Company's Current Report on Form
8-K filed with the SEC on September 28, 2023.
Katten Muchin Rosenman LLP is serving as legal counsel, and
Riveron LLP is serving as financial advisor to the Company.
Cleary Gottlieb Steen & Hamilton LLP is serving as legal
counsel to the Consenting Lender.
Conference Call
Information
Capstone will host a conference call and webcast on Thursday,
September 28, 2023, beginning at 12:00 p.m. ET/9:00 a.m. PT.
Capstone management will present its Go-Forward Plan and provide an
update on business activities. At the conclusion of the
presentation, Capstone management will conduct a question and
answer session to allow financial analysts the chance to ask
questions. In addition, Capstone will be offering an opportunity
for the broader audience to submit their questions online while the
broadcast is live.
To access the webcast and view the accompanying slide
presentation, participants can visit the Investor Relations page or
click here.
The replay of the conference call will be available on the
Investor Relations page of the Company’s website
www.capstonegreenenergy.com.
.About Capstone Green Energy
Capstone Green Energy (NASDAQ: CGRN) is a leading provider of
customized microgrid solutions, and on-site energy technology
systems focused on helping customers around the globe meet their
environmental, energy savings, and resiliency goals. Capstone Green
Energy focuses on four key business lines. Through its Energy as a
Service (EaaS) business, it offers rental solutions utilizing its
microturbine energy systems and battery storage systems,
comprehensive Factory Protection Plan (FPP) service contracts that
guarantee life-cycle costs, as well as aftermarket parts. Energy
Generation Technologies (EGT) are driven by the Company's
industry-leading, highly efficient, low-emission, resilient
microturbine energy systems offering scalable solutions in addition
to a broad range of customer-tailored solutions, including hybrid
energy systems and larger frame industrial turbines. The Energy
Storage Solutions (ESS) business line designs and installs
microgrid storage systems, creating customized solutions using a
combination of battery technologies and monitoring software.
Through Hydrogen & Sustainable Products (H2S), Capstone Green
Energy offers customers a variety of hydrogen products, including
the Company's microturbine energy systems.
To date, Capstone has shipped over 10,000 units to 83 countries
and estimates that in FY23, it saved customers over $169 million in
annual energy costs and approximately 362,000 tons of carbon. Total
savings over the last five years are estimated to be approximately
$1.08 billion in energy savings and approximately 1.9 million tons
of carbon savings.
For customers with limited capital or short-term needs, Capstone
offers rental systems; for more information, contact:
rentals@CGRNenergy.com.
For more information about the Company, please visit
www.CapstoneGreenEnergy.com. Follow Capstone Green Energy on
Twitter, LinkedIn, Instagram, Facebook, and YouTube.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements as defined in
the Private Securities Litigation Reform Act of 1995, including
statements regarding the restructuring and the other statements
regarding the Company's expectations, beliefs, plans, intentions,
and strategies. The Company has tried to identify these
forward-looking statements by using words such as "expect,"
"anticipate," "believe," "could," "should," "estimate," "intend,"
"may," "will," "plan," "goal" and similar terms and phrases, but
such words, terms and phrases are not the exclusive means of
identifying such statements. Actual results, performance and
achievements could differ materially from those expressed in, or
implied by, these forward-looking statements due to a variety of
risks, uncertainties and other factors, including, but not limited
to, the following: risks attendant to the Chapter 11 bankruptcy
process, including the Company’s ability to obtain court approval
from the Bankruptcy Court with respect to motions or other requests
made to the Bankruptcy Court throughout the course of the Chapter
11 process; the effects of Chapter 11, including increased legal
and other professional costs necessary to execute the Chapter 11
process and on the Company’s liquidity and results of operations
(including the availability of operating capital during the
pendency of Chapter 11); the length of time that the Company will
operate under Chapter 11 protection and the continued availability
of operating capital during the pendency of Chapter 11; the
Company’s ability to continue funding operations through the
Chapter 11 bankruptcy process, and the possibility that it may be
unable to obtain any additional funding as needed; the Company’s
ability to meet its financial obligations during the Chapter 11
process and to maintain contracts that are critical to its
operations; the Company’s ability to comply with the restrictions
imposed by the terms and conditions of the DIP Facility and other
financing arrangements; objections to the DIP Facility, or other
pleadings filed that could protract Chapter 11; the effects of
Chapter 11 on the interests of various constituents and financial
stakeholders; the effect of the Chapter 11 filings on the Company’s
relationships with vendors, regulatory authorities, employees and
other third parties; possible proceedings that may be brought by
third parties in connection with the Chapter 11 process and risks
associated with third-party motions in Chapter 11; employee
attrition and the Company’s ability to retain senior management and
other key personnel due to the distractions and uncertainties; the
impact and timing of any cost-savings measures and related local
law requirements in various jurisdictions; the impact of litigation
and regulatory proceedings; risks related to the restatement
previously announced by the Company (including discovery of
additional information relevant to the financial statements subject
to restatement; changes in the effects of the restatement on the
Company’s financial statements or financial results and delay in
the filing of the amended 10-K and amended 10-Q’s due to the
Company’s efforts to complete the restatement; the time, costs and
expenses associated with the restatement; potential inquiries from
the SEC and/or Nasdaq; the potential material adverse effect on the
price of the Company’s common stock and possible stockholder
lawsuits); and expectations regarding financial performance,
strategic and operational plans, and other related matters. For a
detailed discussion of factors that could affect the Company's
future operating results, please see the Company's filings with the
Securities and Exchange Commission, including the disclosures under
"Risk Factors" in those filings. Except as expressly required by
the federal securities laws, the Company undertakes no obligation
to update or revise any forward-looking statements, whether as a
result of new information, changed circumstances or future events
or for any other reason.
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version on businesswire.com: https://www.businesswire.com/news/home/20230928240047/en/
Capstone Green Energy Investor and investment media inquiries:
818-407-3628 ir@CGRNenergy.com
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