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Cielo Waste Solutions Corp., a Calgary, Alberta-based waste-to-fuel environmental technology company, says it has reached a purchase and sale agreement for its property in Fort Saskatchewan, Alberta, which would eliminate the company’s $11 million mortgage loan.
Cielo Waste has entered into a loan commitment letter with First Choice Financial Inc. (FCF) for a mortgage loan for a principal amount of up to CA$5 million. The company will initially receive a principal amount of $2 million in late July. The mortgage loan is subject to the approval of the TSX Venture Exchange.
The mortgage loan will bear simple interest of 7.5 percent percent per annum, and FCF will withhold $150,000 as an interest reserve to satisfy the first 12 months of interest payments. In addition, FCF will be entitled to receive a financing fee of 3.5 percent per advance, including $70,000 for the initial advance of $2 million. No securities will be issued in connection with the mortgage loan, and no other fees or commissions will be payable.
The mortgage loan will be secured against the Cielo Waste’s property in Aldersyde, Alberta, including a site-specific general security agreement against the assets on the property. The proceeds of the loan will be used for general working capital.
“These last several months we have been focused on achieving a number of initiatives for Cielo, including the commissioning of the R&D facility and our continuing efforts to secure a permit to commence railway tie testing,” says Cielo CEO Ryan Jackson. “With this loan from FCF and the sale of the land, we believe we will have the resources we need at this time to continue to move forward with our commercialization plan.”
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The company continues to work toward securing permit approval from Alberta Environment and Protected Areas (EPA) to begin railway tie testing. The company’s amended application is under review with the EPA, and if approval is granted, testing will commence.
“We appreciate the actions of management over the last year to strengthen Cielo’s overall position and move the company further along the path to commercialization,” FCF CEO Vikas Sharma says. “We believe in Cielo’s long-term plans and that this credit facility, and our purchase of the real estate help position Cielo to reach its upcoming milestones, including railway tie testing. We are pleased with the recent EPA re-submission and are hopeful for a positive response and quick turnaround. We have been long time supporters of Cielo and look forward to strengthening our relationship even further going forward.”
Cielo will have the right to repay the mortgage loan at any time without penalty. In addition, once the structure and financing terms for the company’s first commercial facility have been determined, Cielo may make a proposal to FCF to exchange the principal portion of the loan for participation in its first commercial facility, which FCF will be entitled to accept or reject. Management believes that this would minimize the dilutive impact on Cielo while unlocking potential value for third parties, such as FCF, that may be interested in participating directly in the first commercial facility financing.
Cielo also says it has terminated a binding letter of intent with regard to financing with Crestmont Investments LLC. However, the parties are continuing discussions surrounding financing plans for Cielo’s first commercial facility.
“After an exhaustive due diligence period with Cielo, Crestmont has come to appreciate that Cielo’s project pipeline is very compelling,” Crestmont Principal David Beach says. “It is with a deep understanding of Cielo’s future project finance needs as well as Crestmont’s desire to be involved in a more substantial way that we turn our attention to the larger project financing that Cielo requires.”
Land sale to FCF
Cielo says it has entered into a purchase and sale agreement with FCF as purchaser of the company’s property in Fort Saskatchewan, Alberta.
The purchase price for the Fort Saskatchewan property is CA$13 million, subject to the terms of the note.
FCF previously provided a mortgage loan of CA$11 million to the Cielo, which was secured in part by the Fort Saskatchewan property. On completion of the sale, the existing mortgage will be repaid in full.
The remaining CA$2 million will be paid by way of a promissory note from FCF, whereby it will be required to use commercially reasonable best efforts to enter into a purchase and sale agreement for the sale of the Fort Saskatchewan property by the end of September 2024. Should FCF be unable to do so, the purchase price will be reduced by CA$2 million.
However, Cielo says it believes the sale will be completed the closing on or before July 31, 2023.
Cielo says it has amended the lease agreement with a tenant at the Fort Saskatchewan property to provide for an additional 19 acres to be leased by the tenant.
