PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue New York, New York 10022
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP in connection with the representation of Calloway-Briggs Renewables Inc. It is protected from disclosure by the attorney-client privilege and the work product doctrine. Any unauthorized disclosure, distribution, or copying of this memorandum is strictly prohibited.
MEMORANDUM
Matter No.: 1015-00001
To: Jennifer Kwon, Partner, Capital Markets
From: Brendan Walsh, Lead Associate, Capital Markets
Date: June 12, 2022
Re: Calloway-Briggs Renewables Inc. — Proposed IPO — Use-of-Proceeds Mechanics and Term Loan B Prepayment Plan
Copies: Natasha Forbes (Working Associate); Leonard Cross (Specialist Partner, Tax); Priya Anand (SVP, Finance & Treasurer, CBR)
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I. Purpose and Executive Summary
The purpose of this memorandum is to set forth, in a detailed and step-by-step manner, the mechanics for deploying the net primary proceeds anticipated to be received by Calloway-Briggs Renewables Inc. ("CBR" or the "Company") from the proposed initial public offering of approximately $600,000,000 of shares of common stock on the New York Stock Exchange (anticipated ticker symbol: CBRI) (the "IPO" or the "Offering"). This memorandum is intended to serve as a reference guide for the deal team and the Company's treasury department in connection with the execution of the use-of-proceeds plan as currently described in the draft Registration Statement on Form S-1 (the "S-1") filed with the Securities and Exchange Commission (the "SEC").
This memorandum focuses primarily on the planned partial prepayment of $200,000,000 of the outstanding principal balance of the Corporate Term Loan B facility (the "Term Loan B") with Veltrano National Bank, in its capacity as Administrative Agent for the lenders party thereto, and secondarily addresses the mechanics and considerations applicable to the other planned uses of net primary proceeds. The prepayment of the Term Loan B is the single largest use-of-proceeds item and involves the most complex execution mechanics, including the requirement for lender consent, a formal payoff letter, compliance with notice periods and prepayment premium obligations under the governing credit agreement, and same-day wire transfer coordination on the IPO closing date.
As currently disclosed in the draft S-1, the Company intends to use the net primary proceeds from the Offering for the following three purposes:
1. Term Loan B Partial Prepayment. Approximately $200,000,000 to repay a portion of the outstanding principal balance of the Term Loan B under the Corporate Credit Agreement with Veltrano National Bank, as Administrative Agent.
2. Cimarron Solar Project Construction Funding. Approximately $100,000,000 to fund construction costs of the Cimarron Solar project, a 350 MW solar photovoltaic facility being developed by Cimarron Solar Development LLC, a wholly owned subsidiary of the Company, located in Doña Ana County, New Mexico.
3. General Corporate Purposes. Approximately $71,700,000 for general corporate purposes, including working capital, development-stage project investment, and potential acquisitions.
It should be noted that this memorandum addresses only primary offering proceeds — that is, the proceeds from shares of common stock sold by the Company in the Offering. The secondary offering proceeds, consisting of approximately $150,000,000 from the sale of 6,818,182 shares by Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista") at an assumed midpoint offering price of $22.00 per share, will flow directly to Pinnacle Vista as the selling stockholder and will not be available to the Company for any corporate purpose. Accordingly, the secondary proceeds are excluded from this analysis except to the extent they affect the total offering size, underwriting economics, and the post-IPO ownership calculations relevant to the change-of-control analysis under the Corporate Credit Agreement.
II. Net Proceeds Calculation
The following section sets forth the calculation of estimated net primary proceeds under the base offering scenario and the full overallotment exercise scenario, together with the key deductions that will reduce gross proceeds to net proceeds available for deployment by the Company.
A. Gross Primary Proceeds
The total Offering contemplates the sale of both primary shares (shares newly issued and sold by the Company) and secondary shares (existing shares sold by Pinnacle Vista). The gross proceeds attributable to each category are as follows:
Base Offering:
• Total base offering shares: Approximately 23,713,637 shares (primary and secondary combined).
• Primary shares sold by CBR: 16,895,455 shares at an assumed midpoint offering price of $22.00 per share, yielding gross primary proceeds of approximately $371,700,000.
• Secondary shares sold by Pinnacle Vista: 6,818,182 shares at $22.00 per share, yielding gross secondary proceeds of approximately $150,000,000. These proceeds are not available to the Company.
• Total gross base offering proceeds (primary + secondary): Approximately $521,700,000.
Overallotment Option (Greenshoe):
• The underwriters have been granted a 30-day option to purchase up to an additional 3,559,091 shares (representing 15% of the total base offering shares) at the initial public offering price, less the underwriting discount.
• All overallotment shares are primary shares to be sold by CBR; Pinnacle Vista is not participating in the overallotment option.
• Gross proceeds from full exercise of the overallotment option: 3,559,091 shares × $22.00 = approximately $78,300,000.
Summary of Gross Primary Proceeds:
B. Deductions from Gross Primary Proceeds
The gross primary proceeds will be reduced by (i) the underwriting discount payable to the underwriters and (ii) the estimated offering expenses borne by the Company. Each is discussed below.
Underwriting discount:
The underwriting discount, as set forth in the draft underwriting agreement (Document 62), is 5.50% of the gross offering price. The underwriting discount is applied to both primary and secondary shares; however, for purposes of this memorandum, only the discount attributable to primary shares affects the Company's net proceeds.
• Underwriting discount on primary shares (base offering): $371,700,000 × 5.50% = $20,443,500.
• Underwriting discount on overallotment shares (full exercise): $78,300,000 × 5.50% = $4,306,500.
• Total underwriting discount on primary shares (full overallotment exercise): $20,443,500 + $4,306,500 = $24,750,000.
The underwriting discount is netted from the settlement proceeds at closing — that is, the underwriters will remit to the Company the aggregate public offering price for the primary shares, less the underwriting discount. The Company does not separately wire the underwriting discount to the underwriters.
Estimated Offering Expenses:
In addition to the underwriting discount, the Company will bear certain offering expenses. Based on current estimates, these expenses are expected to total approximately $4,500,000 to $5,000,000, with a midpoint estimate of approximately $4,750,000, subject to finalization at the time of pricing. The principal components of offering expenses include:
• SEC registration fee (calculated based on maximum aggregate offering price)
• FINRA filing fee
• NYSE initial listing fee (including supplemental listing fees based on shares outstanding)
• Printing and EDGAR filing costs (Ridgeway Financial Printing Corp.)
• Legal fees and expenses of Company counsel (Calderwood & Harkness LLP)
• Auditor fees and expenses (Ashford & Pemberton LLP)
• Transfer agent and registrar fees (Continental Shareowner Services, Inc.)
• Blue sky fees and expenses (if applicable)
• Underwriter expense reimbursement (capped at $350,000, primarily for FINRA-related expenses, included in the above total)
• Miscellaneous expenses (road show, D&O insurance tail premium, etc.)
The final amount of offering expenses will be determined at or around the time of pricing and will be reflected in the final prospectus.
C. Estimated Net Primary Proceeds
Based on the foregoing, the estimated net primary proceeds available to the Company are as follows:
Base Offering (No Overallotment Exercise):
• Gross primary proceeds: $371,700,000
• Less: Underwriting discount: ($20,443,500)
• Less: Estimated offering expenses: (~$4,750,000)
• Estimated net primary proceeds: approximately $346,506,500
Full Overallotment Exercise:
• Gross primary proceeds: $450,000,000
• Less: Underwriting discount: ($24,750,000)
• Less: Estimated offering expenses: (~$4,750,000)
• Estimated net primary proceeds: approximately $420,500,000
Important Note Regarding Use-of-Proceeds Allocations: The three use-of-proceeds categories as described in the draft S-1 total approximately $371,700,000 ($200,000,000 + $100,000,000 + $71,700,000), which corresponds to the gross primary base proceeds figure. However, the actual net proceeds available to the Company will be lower than the gross figure by the amount of the underwriting discount and offering expenses (approximately $25,200,000 in the aggregate for the base offering). As a practical matter, this reduction will be absorbed by the general corporate purposes allocation — that is, the Company will have approximately $71,700,000 less $25,200,000, or approximately $46,500,000, available for general corporate purposes in the base offering scenario. If the overallotment option is exercised in whole or in part, the additional net proceeds (up to approximately $74,000,000 in the case of full exercise) will supplement the amounts available for general corporate purposes or, at the Company's discretion, for any of the three described use-of-proceeds categories. The S-1 disclosure should be reviewed to confirm that it adequately describes this dynamic.
III. Term Loan B — Background and Key Terms
This section provides a summary of the material terms of the Term Loan B relevant to the planned prepayment, including the facility structure, outstanding balance, prepayment provisions, change-of-control triggers, and covenant compliance considerations.
A. Facility Overview
The Term Loan B was established pursuant to a credit agreement (the "Corporate Credit Agreement") among CBR (as successor borrower through CBR Holdings LLC and Calloway-Briggs Operating Company LLC), the lenders party thereto from time to time, and Veltrano National Bank, as Administrative Agent. The key terms of the facility are summarized below:
• Borrower: Calloway-Briggs Renewables Inc. (as successor borrower through CBR Holdings LLC and Calloway-Briggs Operating Company LLC).
• Administrative Agent: Veltrano National Bank, 1401 McKinney Street, Houston, Texas 77010. Primary contact: Thomas Raines, Managing Director, Energy Lending.
• Original Commitment Amount: $650,000,000.
• Outstanding Principal Balance (as of December 31, 2021): $612,500,000.
• Estimated Outstanding Principal Balance at Anticipated Closing Date: Approximately $612,500,000. No scheduled amortization payments are expected to come due between the date of filing of the S-1 and the anticipated IPO closing window. This figure should be confirmed with Priya Anand and Veltrano National Bank at the time the payoff letter is requested.
• Maturity Date: January 2029.
• Interest Rate: Term SOFR plus an applicable margin, determined based on a pricing grid set forth in the Corporate Credit Agreement. The current applicable margin is believed to be approximately 275 to 300 basis points based on the Company's current leverage ratio. The specific rate in effect at the time of prepayment should be confirmed with Priya Anand and Thomas Raines.
• Security: The Term Loan B is secured by substantially all of the assets of CBR and its material domestic subsidiaries (other than project-level subsidiaries with project finance indebtedness), as more fully described in the Corporate Credit Agreement.
B. Prepayment Provisions Under the Credit Agreement
The prepayment of the Term Loan B is governed by the voluntary prepayment provisions of the Corporate Credit Agreement. The key provisions relevant to the planned $200,000,000 partial prepayment are as follows:
• Reference: Section [] of the Corporate Credit Agreement dated [], 2022, as amended. The specific section number should be confirmed by reference to the executed credit agreement on file.
• Voluntary Prepayment Right: The Corporate Credit Agreement permits the Borrower to voluntarily prepay the outstanding principal balance of the Term Loan B in whole or in part at any time, subject to the conditions and requirements described below.
• Minimum Prepayment Amounts: Partial prepayments must be in a minimum amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof. The planned $200,000,000 prepayment satisfies this minimum threshold.
• Prepayment Premium / Call Protection: A prepayment premium of 1.00% of the principal amount prepaid is applicable during the first twenty-four (24) months following the closing date of the Term Loan B. It is necessary to confirm with Priya Anand and Thomas Raines whether the anticipated IPO closing date falls within the call-protection window. If the Term Loan B closed in or after January 2022, the 24-month call-protection period would extend into at least January 2024, which would likely encompass the anticipated IPO closing window. If the prepayment is made after the expiration of the call-protection period, no prepayment premium would be payable.
• No Prepayment Premium After Call-Protection Period: After the expiration of the 24-month call-protection period, voluntary prepayments may be made without any prepayment premium or penalty.
• Prepayment Notice Requirement: The Borrower must deliver irrevocable written notice to the Administrative Agent not less than three (3) business days prior to the date of the proposed prepayment. The notice must specify the prepayment date and the principal amount to be prepaid.
• SOFR Breakage Costs: If the prepayment is made on a date other than the last day of an applicable interest period for the SOFR-based loans being prepaid, the Borrower may be required to compensate the lenders for any resulting breakage, redeployment, or funding costs. To minimize or eliminate potential breakage costs, CBR should coordinate with Veltrano National Bank to align the prepayment date with the end of an applicable interest period, to the extent practicable given the IPO closing timeline. In practice, given that the IPO closing date is subject to market conditions and regulatory timing, perfect alignment may not be achievable, and the Company should budget for potential breakage costs as part of the total prepayment outflow.
C. Change-of-Control Provisions
The Corporate Credit Agreement contains a "Change of Control" provision that, if triggered, may require the Borrower to offer to repay the entire outstanding balance of the Term Loan B, or may constitute an event of default under the credit agreement. It is critical that the IPO not inadvertently trigger a Change of Control.
• Analysis of IPO Structure: The IPO, as currently structured, is a primary and secondary offering that is not expected to result in a change-of-control event under the Corporate Credit Agreement. The IPO will dilute the existing ownership of Pinnacle Vista and the founders but is not expected to cause any single person or group (other than those already holding a controlling interest) to acquire a controlling stake in the Company.
• Post-IPO Ownership Analysis: Following the IPO, Pinnacle Vista is expected to retain approximately 49% of the outstanding shares of common stock in the base offering scenario (no overallotment exercise) and approximately 47% in the full overallotment exercise scenario. When combined with the shares held by the founders and other pre-IPO shareholders, the existing control group is expected to continue to hold a majority of the outstanding voting equity. The definition of "Change of Control" in the Corporate Credit Agreement should be carefully reviewed to confirm that the proposed post-IPO ownership structure does not satisfy the trigger.
• Lender Consent: Notwithstanding the foregoing analysis, as a matter of prudence and customary market practice, CBR is separately seeking a waiver and consent from Veltrano National Bank to confirm that the IPO does not constitute or trigger a Change of Control, a default, or an event of default under the Corporate Credit Agreement. The Draft Lender Consent Request Letter (Document 109) was transmitted to Veltrano National Bank (Thomas Raines) on May 12, 2022. The Lender Consent Analysis Memorandum (Document 108) sets forth the detailed analysis supporting the conclusion that the IPO should not trigger a Change of Control.
D. Restricted Payments and Debt Covenants
Two additional areas of the Corporate Credit Agreement require confirmation in connection with the use of IPO proceeds:
• Restricted Payments: The partial prepayment of the Term Loan B with IPO proceeds should not constitute a "Restricted Payment" under the Corporate Credit Agreement. The "Restricted Payments" covenant in a typical credit agreement of this type applies to dividends, distributions, and other payments in respect of equity interests, as well as to repurchases of junior or subordinated indebtedness. A prepayment of the Term Loan B itself is a repayment of senior secured indebtedness and should fall outside the scope of the Restricted Payments covenant. This analysis should be confirmed by reference to the specific definition of "Restricted Payment" in the Corporate Credit Agreement.
• Pro Forma Covenant Compliance: Following the partial prepayment and the other uses of proceeds, the Company must remain in compliance with the financial covenants set forth in the Corporate Credit Agreement, including the total leverage ratio and the interest coverage ratio. The $200,000,000 reduction in Term Loan B principal will improve the leverage ratio on a pro forma basis; however, the impact on the interest coverage ratio should also be analyzed, taking into account the reduction in interest expense offset by any changes in EBITDA. Priya Anand and Marcus Yoon (CFO) should be consulted to prepare and verify the pro forma covenant compliance calculations. These calculations should be completed prior to the IPO closing to ensure that no covenant default will result from the planned transactions.
IV. Prepayment Premium Calculation
The following table sets forth the calculation of the prepayment premium and the total estimated cash outflow required to effect the $200,000,000 partial prepayment of the Term Loan B, assuming the 1.00% prepayment premium is applicable (which remains subject to confirmation as described in Section III.B above).
The accrued and unpaid interest on the $200,000,000 portion of the Term Loan B being prepaid will be calculated by Veltrano National Bank as of the designated prepayment date and will be specified in the formal payoff letter. Based on the current estimated interest rate (Term SOFR plus approximately 275–300 bps), the daily interest accrual on $200,000,000 of principal is approximately $40,000–$45,000 per day (calculated on an actual/360 basis, as is customary for SOFR-based facilities). The exact amount will depend on the applicable rate and the number of accrued days since the most recent interest payment date.
SOFR breakage costs, if any, will similarly be calculated by Veltrano and specified in the payoff letter. As noted above, the Company should endeavor to align the prepayment date with the end of an applicable interest period to minimize these costs.
Remaining Balance Post-Prepayment:
Following the $200,000,000 prepayment, the outstanding principal balance of the Term Loan B is expected to be:
$612,500,000 − $200,000,000 = $412,500,000
This remaining balance will continue to accrue interest and will be subject to all other terms and conditions of the Corporate Credit Agreement, including the scheduled maturity in January 2029 and any mandatory prepayment provisions triggered by future events (e.g., asset sales, excess cash flow sweeps, or change-of-control events).
V. Step-by-Step Prepayment Mechanics
This section sets forth the step-by-step mechanics for executing the $200,000,000 partial prepayment of the Term Loan B on the IPO closing date. Each step is described in chronological order relative to the closing date and identifies the responsible parties, the required deliverables, and the key timing considerations.
Step 1: Obtain Lender Consent to IPO (Pre-Closing)
The first step in the prepayment process — and a critical path item for the entire IPO transaction — is to obtain executed lender consent from Veltrano National Bank, as Administrative Agent under the Corporate Credit Agreement. This consent is necessary to confirm that the IPO does not constitute or trigger a Change of Control, a default, or an event of default under the Corporate Credit Agreement.
• Action: Transmit the Draft Lender Consent Request Letter (Document 109) to Veltrano National Bank, addressed to Thomas Raines, Managing Director, Energy Lending.
• Status: A formal request letter from Calderwood & Harkness LLP (Brendan Walsh) to Veltrano National Bank (Thomas Raines) dated May 12, 2022, was previously transmitted. As of the date of this memorandum, no executed consent has been received. Follow-up correspondence and engagement with Thomas Raines should be undertaken promptly upon reactivation of the IPO process.
• Target Timeline: Obtain executed lender consent at least five (5) business days prior to the anticipated IPO closing date.
• Scope of Consent: The consent should cover, at a minimum, the following: (a) waiver of any change-of-control provisions triggered by the IPO and the resulting changes in beneficial ownership of the Company's equity; (b) acknowledgment of the IPO and the planned use of proceeds, including the $200,000,000 partial prepayment; and (c) confirmation that the consummation of the IPO, the receipt of proceeds, and the application of those proceeds as described in this memorandum do not constitute a default or event of default under the Corporate Credit Agreement.
• Related Documents: The Lender Consent Analysis Memorandum (Document 108) and the Draft Lender Consent (Document 110) have been prepared and are available for review.
Step 2: Request Payoff Letter from Veltrano National Bank (T-10 Business Days)
Once the lender consent has been obtained (or is expected to be obtained imminently), CBR should request a formal payoff letter from Veltrano National Bank setting forth the exact amounts required to effect the partial prepayment.
• Action: CBR (Priya Anand, SVP, Finance & Treasurer) to submit a written request to Veltrano National Bank for a payoff letter specifying the following information:
(a) The outstanding principal amount to be prepaid ($200,000,000);
(b) The prepayment premium payable in connection with such prepayment ($2,000,000, assuming 1.00% applicability);
(c) Accrued and unpaid interest on the $200,000,000 portion of the Term Loan B through the anticipated payoff date;
(d) SOFR breakage costs, if any, based on the anticipated payoff date relative to the applicable interest period end date;
(e) Per diem interest (in the event the actual prepayment date differs from the stated payoff date in the payoff letter);
(f) Wire transfer instructions for Veltrano National Bank, including the bank name, ABA routing number, account number, and reference or attention line (Thomas Raines, Energy Lending);
(g) Confirmation that, upon receipt of the aggregate payoff amount specified in the payoff letter, Veltrano National Bank will apply the funds to reduce the outstanding principal balance of the Term Loan B by $200,000,000 and that no further amounts will be due in connection with such prepayment (other than per diem adjustments, if applicable).
• Timeline: The payoff letter request should be submitted at least ten (10) business days prior to the anticipated IPO closing date to allow sufficient time for Veltrano to prepare the letter and for Calderwood & Harkness and CBR to review and verify the amounts.
• Addressees: The payoff letter should be addressed to CBR (Priya Anand) and Calderwood & Harkness LLP (Brendan Walsh).
• Review: Upon receipt, the payoff letter should be reviewed by Brendan Walsh and Priya Anand to confirm the accuracy of all amounts, the appropriateness of the prepayment premium calculation, and the correctness of the wire instructions.
Step 3: Deliver Irrevocable Prepayment Notice (T-3 Business Days)
The Corporate Credit Agreement requires the Borrower to deliver irrevocable written notice to the Administrative Agent not less than three (3) business days prior to the prepayment date. This notice formally initiates the prepayment process and commits the Company to effect the prepayment on the specified date.
• Action: CBR to deliver irrevocable written prepayment notice to Veltrano National Bank (as Administrative Agent) not less than three (3) business days prior to the designated prepayment date.
• Contents of Notice: The prepayment notice must specify:
(a) The prepayment date (which is intended to be the IPO closing date);
(b) The principal amount being prepaid ($200,000,000);
(c) The applicable interest period for the SOFR-based loans being prepaid; and
(d) That the prepayment is a voluntary prepayment made pursuant to [Section __] of the Corporate Credit Agreement.
• Preparation and Execution: The prepayment notice will be prepared by Calderwood & Harkness LLP and executed by Priya Anand (SVP, Finance & Treasurer) or Marcus Yoon (CFO) on behalf of CBR. A draft of the prepayment notice should be circulated for review at least five (5) business days before the intended delivery date.
• Irrevocability and Conditionality: The prepayment notice, once delivered, becomes irrevocable under the terms of the Corporate Credit Agreement. This presents a timing issue in the IPO context: if the prepayment notice is delivered three (3) business days before the anticipated closing date, but the IPO is subsequently delayed or withdrawn after delivery of the notice, the Company would be obligated to make the prepayment notwithstanding the absence of IPO proceeds. To mitigate this risk, the following approach should be considered:
• Preferred Approach: Confirm whether the Corporate Credit Agreement permits conditional prepayment notices — i.e., a notice that conditions the prepayment on the consummation of the IPO closing and the receipt of proceeds. Many modern credit agreements include such a provision.
• Alternative Approach: If the credit agreement does not permit conditional prepayment notices, the prepayment notice should be timed so that it is delivered only after (i) the underwriting agreement has been executed and (ii) pricing has occurred, thereby substantially reducing the risk that the IPO will not close. Given that the underwriting agreement is typically executed on the evening of pricing (T-1), and the prepayment notice must be delivered at least three (3) business days before the prepayment date (the closing date, typically T+3 after pricing), the timeline should work — the notice can be delivered on the morning of T-1 (after pricing) or on T (the day after pricing), which would provide the requisite three (3) business days' notice before closing on T+3. However, this analysis depends on the precise timing of pricing and the applicable definition of "business day."
• Open Item: Whether the Corporate Credit Agreement permits conditional prepayment notices is an open item to be confirmed. See Section XI (Open Items), Item 2.
Step 4: IPO Pricing and Execution of Underwriting Agreement (T-1 Business Day)
The IPO pricing and execution of the underwriting agreement are the critical commercial milestones that set the final terms of the Offering and lock in the net proceeds available to the Company.
• Action: Upon completion of the book-building process and determination of the final offering price, the underwriting agreement among CBR, Pinnacle Vista Capital Partners III, LP (as selling stockholder), and the underwriters (with Hargrove Keating & Co. acting as representative of the several underwriters) will be executed.
• Pricing Agreement: The pricing agreement (Document 67) will be executed simultaneously with the underwriting agreement and will set forth the final offering price per share, the final number of primary and secondary shares to be sold, and the underwriting discount. The pricing agreement is the definitive document from which the Company's net primary proceeds can be calculated.
• Confirmation of Proceeds: Upon execution of the pricing agreement, Natasha Forbes (Working Associate) should immediately update the funds-flow summary table (Section IX below) with the final pricing-derived figures and confirm that the net primary proceeds are sufficient to cover the aggregate Term Loan B prepayment amount (approximately $202,000,000 plus accrued interest and any breakage costs), the Cimarron Solar construction funding allocation (approximately $100,000,000), and the general corporate purposes allocation (residual amount). If the net proceeds are less than the aggregate of the committed use-of-proceeds amounts (which would be unusual given the current structure), the deal team should confer immediately to determine the appropriate course of action.
Step 5: IPO Closing and Receipt of Proceeds (T = Closing Date, Typically T+3 After Pricing)
The IPO closing is expected to occur on a settlement basis of T+3 following pricing, consistent with standard market practice for U.S. equity offerings. On the closing date, the shares will be delivered to the underwriters, and the purchase price (net of the underwriting discount) will be wired to the Company.
• Settlement Mechanics: The closing will occur through delivery versus payment ("DVP") via The Depository Trust Company ("DTC"). The shares of common stock will be delivered through the book-entry facilities of DTC, and the underwriters will simultaneously wire the aggregate purchase price for the primary shares (less the underwriting discount) to CBR's designated receiving bank account.
• Receiving Account: CBR's receiving bank account for the IPO proceeds is to be specified in the Wire Transfer Instructions Template (Document 143). Priya Anand should confirm the account details and ensure that the account is established with sufficient capacity and that the relevant banking officers are on notice of the expected incoming wire.
• Verification: Upon receipt of the incoming wire from the underwriters, CBR treasury (Priya Anand) should verify that the amount received matches the expected net primary proceeds as calculated from the pricing agreement. Any discrepancy should be flagged immediately to the deal team. No outgoing wire transfers should be initiated until receipt of the IPO proceeds has been confirmed.
Step 6: Execute Wire Transfer to Veltrano National Bank (Closing Date, Same Day)
Immediately upon confirmation of receipt of the IPO proceeds, CBR should initiate the wire transfer to Veltrano National Bank to effect the partial prepayment of the Term Loan B.
• Action: Upon confirmation of receipt of IPO proceeds into CBR's designated account, Priya Anand (or her designee) should initiate a wire transfer to Veltrano National Bank in accordance with the wire instructions specified in the payoff letter.
• Wire Amount: The aggregate payoff amount as stated in the payoff letter, which is expected to consist of:
• Principal prepayment: $200,000,000
• Prepayment premium: $2,000,000
• Accrued and unpaid interest: as specified in the payoff letter
• SOFR breakage costs (if any): as specified in the payoff letter
• Wire Instructions: The wire instructions for Veltrano National Bank will be set forth in the payoff letter and are expected to include the bank name, ABA routing number, account number, and a reference or attention line directed to Thomas Raines, Energy Lending. The wire instructions should be independently verified by Priya Anand and Natasha Forbes prior to the closing date to guard against errors or potential fraud.
• Timing: The wire should be sent by 12:00 PM Eastern Time on the closing date, or no later than 1:00 PM Eastern Time, to ensure that the funds are received and credited by Veltrano National Bank on the same business day. Late-day wires risk carryover to the following business day, which could result in additional per diem interest charges and potential technical non-compliance with the prepayment notice.
• Confirmation: Calderwood & Harkness LLP should be copied on all wire confirmation communications, including the Fedwire confirmation receipt and any email or other correspondence confirming that the wire has been initiated.
Step 7: Confirm Receipt and Application of Funds (Closing Date + 1)
Following the closing date, the final step in the prepayment process is to obtain written confirmation from Veltrano National Bank that the funds have been received and properly applied.
• Action: On the business day following the closing date (T+1), Brendan Walsh and Priya Anand should contact Thomas Raines at Veltrano National Bank to confirm receipt and application of the prepayment funds.
• Written Confirmation: CBR and Calderwood & Harkness should request written confirmation from Veltrano National Bank (which may take the form of a letter, email, or loan system printout) confirming each of the following:
(a) Funds in the aggregate payoff amount have been received by Veltrano National Bank;
(b) The prepayment has been applied to reduce the outstanding principal balance of the Term Loan B by $200,000,000;
(c) The remaining outstanding principal balance of the Term Loan B is approximately $412,500,000 (subject to adjustment for any payments or accruals occurring between December 31, 2021, and the prepayment date); and
(d) No default or event of default exists under the Corporate Credit Agreement following the consummation of the IPO and the application of proceeds as described herein.
• Filing: The written confirmation from Veltrano should be filed in the Calderwood & Harkness matter file (Matter No. 1015-00001) and a copy should be provided to CBR's treasury and legal departments for their records.
VI. Cimarron Solar Construction Funding Mechanics
A. Overview
Approximately $100,000,000 of the net primary proceeds from the IPO are intended to be used to fund a portion of the construction costs of the Cimarron Solar project. The Cimarron Solar project is a 350 MW solar photovoltaic facility under development in Doña Ana County, New Mexico, with an expected commercial operations date ("COD") in the first quarter of 2023.
The project is owned and operated by Cimarron Solar Development LLC, a New Mexico limited liability company and a wholly owned subsidiary of Calloway-Briggs Operating Company LLC, which is in turn a wholly owned subsidiary of CBR Holdings LLC, which is a wholly owned subsidiary of CBR. The equity contribution of IPO proceeds to Cimarron Solar Development LLC will therefore pass through multiple levels of the corporate structure.
The Cimarron Solar project currently has in place a $143,000,000 construction-to-term credit facility with Prairie Commercial Bank, N.A. (contact: Brent Hollowell, Senior Vice President, Project Finance). The facility is structured to convert from a construction facility to a term facility upon achievement of COD, with a scheduled conversion date of March 2025. The equity contribution from IPO proceeds will be used alongside draws under the Prairie Commercial Bank construction facility to fund the remaining construction costs of the project.
B. Funding Mechanics
The flow of IPO proceeds from CBR to Cimarron Solar Development LLC will require a series of intercompany equity contributions through the subsidiary chain:
CBR → CBR Holdings LLC → Calloway-Briggs Operating Company LLC → Cimarron Solar Development LLC
Each intermediate entity in the chain must have organizational documents (operating agreements or limited liability company agreements) that permit the receipt and downstream contribution of equity capital. Calderwood & Harkness should confirm, in consultation with the Company, that each entity's organizational documents authorize the contemplated equity contributions and that no consents or approvals (other than those of the Company's board of directors or authorized officers) are required.
The equity contribution to the Cimarron Solar SPV will be applied, together with draws under the Prairie Commercial Bank construction facility, to fund construction costs in accordance with the project's construction budget and draw schedule. The exact timing and amounts of the equity contributions may be staged over multiple disbursements depending on the construction milestone schedule, rather than contributed in a single lump sum on the IPO closing date. Priya Anand should coordinate with Tomás Quintero (SVP, Project Development) regarding the construction milestone schedule and draw timing to optimize the deployment of the equity contribution.
In connection with the existing Prairie Commercial Bank construction facility, a lender notice letter (Document 112) has been previously prepared to notify Prairie Commercial Bank of the IPO and the planned equity contribution to the project. Calderwood & Harkness should confirm that the equity contribution does not trigger any adverse provisions under the project-finance credit agreement, including, without limitation, any change-of-control triggers, mandatory prepayment events, or restrictions on the source of equity contributions. Brent Hollowell at Prairie Commercial Bank should be consulted as needed.
C. Intercompany Documentation
Proper intercompany documentation is essential for both legal and tax purposes. The following documentation should be prepared or confirmed at each entity level prior to or concurrent with the equity contributions:
• Intercompany Contribution Agreements / Capital Call Documentation: At each level of the subsidiary chain, a written intercompany contribution agreement or capital call notice should be executed to document the equity contribution. These documents should specify the amount of the contribution, the date of the contribution, the source of funds, and the purpose of the contribution.
• Tax Basis and Accounting Coordination: Proper documentation of the intercompany equity contributions is necessary to establish and track the tax basis of each entity's investment in its immediate subsidiary. This is particularly important for Cimarron Solar Development LLC, which may be a partnership or disregarded entity for tax purposes, and where the tax treatment of the equity contribution may have implications for depreciation, investment tax credits, and future distributions. Leonard Cross (Specialist Partner, Tax) should coordinate with Kessler McBride & Associates LLP (Alan Kessler) to ensure that the intercompany documentation satisfies all requirements for tax basis tracking and that the accounting treatment is properly reflected in the Company's consolidated financial statements.
VII. General Corporate Purposes — Residual Proceeds
Approximately $71,700,000 of gross primary proceeds has been allocated to general corporate purposes. On a net basis, after deducting the underwriting discount and estimated offering expenses attributable to the primary offering, the amount available for general corporate purposes in the base offering scenario is expected to be approximately $46,500,000 (or approximately $120,500,000 if the overallotment option is exercised in full).
The general corporate purposes allocation is intentionally broad and may include, without limitation, the following uses:
• Working capital and operating expenses;
• Development-stage project investment, including the Silverleaf Wind project and the Copper Basin Solar + Storage project, both of which are in early-to-mid stage development and may require equity contributions or development capital in the near term;
• Potential acquisitions of complementary renewable energy assets or companies, should attractive opportunities arise;
• Capital expenditures related to existing operations; and
• Other general corporate expenditures as the Company's board of directors may determine from time to time.
There are no specific pre-committed obligations with respect to the general corporate purposes allocation. The residual proceeds will be deposited into CBR's general corporate bank accounts and will be available for deployment at the discretion of the Company's management and board of directors, subject to applicable fiduciary duties, corporate governance requirements, and any contractual restrictions (including those under the Corporate Credit Agreement and the project-finance credit agreements).
It is important to ensure that the use-of-proceeds disclosure in the S-1 is sufficiently flexible to accommodate the actual use of the residual proceeds, including the possibility that the amounts allocated to each category may shift depending on the final net proceeds received by the Company, the exact timing of the use of funds, and changes in the Company's strategic priorities. Natasha Forbes should review the current draft of the use-of-proceeds section (Document 34) to confirm that the disclosure adequately reflects this flexibility.
VIII. Notification and Coordination Timeline
The following table sets forth the key action items and milestones for the use-of-proceeds and prepayment mechanics, organized chronologically relative to the IPO closing date ("T"). All dates are expressed in business days unless otherwise noted.
IX. Funds-Flow Summary Table
The following table summarizes the estimated flow of funds from the IPO proceeds on and following the closing date. All amounts are based on the base offering scenario at the assumed midpoint offering price of $22.00 per share and are subject to adjustment upon final pricing.
Note: The amounts shown above are estimates and will be updated upon execution of the pricing agreement. Natasha Forbes will prepare a final funds-flow table at pricing with actual figures.