Clearford Water Systems (TSX-V:CLI) is restructuring some of its debt and taking on a new loan as the company shows progress in executing on a new business model.
The Ottawa-based water solutions company announced Monday that its subsidiary, Clearford Koester Canada Inc., is entering into a 10-year loan agreement with Sustainable Water Recycling Inc. for proceeds of US$1.99 million. The loan, which carries a 9.75 per cent interest rate, is meant to bolster the company’s reserves of working capital.
Meanwhile, the company announced it is restructuring more than $8.6 million of debt currently held in convertible debentures. The new agreement sees lenders’ options to convert the holdings into Clearford shares removed, essentially rendering the debentures as standard secured debt. The four affected debentures will now have a maturity date of Dec. 1, 2023.
Related to the agreement, Clearford will assign its security rights in another subsidiary, UV Pure, to its principal lender. That comes with an option for the debtholder to acquire 25 per cent of the subsidiary at a price of $1 million; Clearford says this would provide funding for future growth opportunities.
President Kevin Loiselle said in a statement that the changes and new loans Clearford is taking on will help the company manage its debt amid the company’s transition to a full-service water solutions company. Cleaford first announced its plan to become a full-service utility through acquisitions back in 2017, and recent quarterly results show the new strategy might be bearing fruit.
Last month, Clearford reported revenues of roughly $5 million for the three month period ending Sept. 30, up from $1.6 million a year ago. The company also trimmed its net loss over its third quarter to $2.3 million, down from $2.7 million in Q3 2018.