1015-00001 · Graymont Brothers Inc · Diligence

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 599 Lexington Avenue New York, NY 10022

DUE DILIGENCE MEMORANDUM DEBT AND FINANCING ARRANGEMENTS

C&H Matter No. 1015-00001 April 25, 2022

Matter: Calloway-Briggs Renewables Inc. — Proposed Initial Public Offering

To: Jennifer Kwon, Responsible Partner, Capital Markets

From: Brendan Walsh, Lead Associate, Capital Markets; Natasha Forbes, Working Associate, Capital Markets

Re: Due Diligence Memorandum — Debt and Financing Arrangements of Calloway-Briggs Renewables Inc. and Subsidiaries

This memorandum is a confidential communication between attorneys at Calderwood & Harkness LLP and is protected by the attorney-client privilege and the attorney work-product doctrine. It has been prepared in anticipation of litigation and in connection with the rendering of legal advice. It should not be disclosed to any third party without the express prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any privilege or protection.

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I. Executive Summary

This memorandum summarizes the findings of our due diligence review of all outstanding indebtedness and financing arrangements of Calloway-Briggs Renewables Inc. ("CBR" or the "Company") and its direct and indirect subsidiaries in connection with the proposed initial public offering (the "IPO" or the "Offering") of shares of common stock of CBR on the New York Stock Exchange (proposed ticker symbol: CBRI). The base Offering is anticipated to consist of approximately $600,000,000 in aggregate gross proceeds, comprising both primary shares to be issued by the Company and secondary shares to be sold by Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista"), the Company's controlling stockholder.

As of December 31, 2021, CBR and its consolidated subsidiaries had total outstanding consolidated indebtedness of approximately $1,710,000,000 (approximately $1.71 billion). This total comprises a combination of corporate-level revolving and term credit facilities and project-level financing structures, including construction-to-term project finance credit facilities and a tax-equity partnership investment. These financing arrangements collectively support the Company's portfolio of operating and under-construction renewable energy assets, which includes onshore wind and utility-scale solar photovoltaic projects across Texas and New Mexico.

In connection with this review, we have examined five principal financing arrangements, which are summarized as follows:

1. Corporate Revolving Credit Facility ($400,000,000) — Veltrano National Bank, as Administrative Agent;

2. Corporate Term Loan B ($650,000,000 original commitment; $612,500,000 outstanding) — Veltrano National Bank, as Administrative Agent;

3. Tax-Equity Partnership — Solaris West Portfolio ($280,000,000 invested) — Veltara Basin Financial LLC, as tax-equity investor;

4. Construction-to-Term Facility — Mesquite Wind Project ($165,000,000) — Prairie Commercial Bank, N.A., as Administrative Agent; and

5. Construction-to-Term Facility — Cimarron Solar Project ($143,000,000) — Prairie Commercial Bank, N.A., as Administrative Agent.

Key Finding: The proposed IPO triggers consent or notice requirements under each of the five facilities identified above. Based on our review, we have not identified any insurmountable obstacles to completing the IPO under the existing debt and financing arrangements. However, timely solicitation and receipt of consents from the relevant lenders and investors is required, and the consent process should be prioritized in the pre-launch workstream. The most critical consents are (a) the change-of-control waiver from Veltrano National Bank under the corporate revolving credit facility and term loan B, and (b) the Sponsor Change of Control consent from Veltara Basin Financial LLC under the Solaris West tax-equity partnership agreement.

Use-of-Proceeds Nexus: Approximately $200,000,000 of the primary offering proceeds are intended to be applied to the voluntary prepayment of a portion of the outstanding principal balance of the Term Loan B. This prepayment will be subject to a prepayment premium of 1.00% of the amount prepaid, resulting in a premium payment of approximately $2,000,000, which must be disclosed in the Use of Proceeds section of the Registration Statement on Form S-1 (the "Registration Statement"). An additional approximately $100,000,000 of primary offering proceeds is intended to be contributed through the corporate structure to fund the construction of the Cimarron Solar project. The remaining proceeds of approximately $71,700,000 are intended for general corporate purposes, including pipeline development activities.

Companion Memoranda: This memorandum should be read in conjunction with the following related due diligence and advisory memoranda maintained in the electronic data room:

• Lender Consent Analysis Memorandum (Doc. 108);

• Tax-Equity Investor Consent Analysis (Doc. 113);

• Use-of-Proceeds / Debt Repayment Mechanics Memorandum (Doc. 115);

• Tax-Equity Structure Memorandum — Partnership-Flip Compliance (Doc. 102);

• ITC/PTC Analysis Memorandum (Doc. 103).

We have coordinated with Leonard Cross of Calderwood & Harkness's Tax Department regarding the tax-equity structure implications and potential ITC recapture considerations, and with Alan Kessler and the team at Kessler McBride & Associates LLP regarding HLBV accounting methodology and Investment Tax Credit compliance matters. All conclusions expressed in this memorandum are subject to the assumptions and qualifications set forth herein and in the referenced companion memoranda.

II. Corporate-Level Debt

A. Corporate Revolving Credit Facility

1. Summary of Terms

The corporate revolving credit facility (the "Revolving Credit Facility" or the "Revolver") is governed by that certain Credit Agreement, dated as of January 15, 2021, among Calloway-Briggs Operating Company LLC ("CB Operating"), as borrower, Calloway-Briggs Renewables Inc., as parent guarantor, the lenders party thereto from time to time, and Veltrano National Bank, as administrative agent and collateral agent (as amended, restated, supplemented, or otherwise modified from time to time, the "Corporate Credit Agreement"). The principal terms of the Revolving Credit Facility are as follows:

Borrower: Calloway-Briggs Operating Company LLC ("CB Operating"), a limited liability company organized under the laws of the State of Texas and a wholly owned subsidiary of CBR Holdings LLC, which is in turn a wholly owned subsidiary of Calloway-Briggs Renewables Inc.

Parent Guarantor: Calloway-Briggs Renewables Inc. CBR has executed and delivered a guaranty of all obligations of CB Operating under the Corporate Credit Agreement, pursuant to a Guaranty Agreement, dated as of January 15, 2021, in favor of Veltrano National Bank, as administrative agent for the secured parties.

Administrative Agent and Collateral Agent: Veltrano National Bank, 1401 McKinney Street, Houston, Texas 77010. The primary contact for purposes of the consent solicitation is Thomas Raines, Managing Director, Energy Lending Group (tel: (713) 555-4821; email: t.raines@ridgemontnational.com).

Facility Type: Senior secured revolving credit facility.

Aggregate Commitment Amount: $400,000,000.

Maturity Date: January 15, 2027 (the fifth anniversary of the closing date of the Corporate Credit Agreement).

Interest Rate: Amounts drawn under the Revolving Credit Facility bear interest at a rate per annum equal to, at the Borrower's election, either (a) Adjusted Term SOFR (as defined in the Corporate Credit Agreement, which incorporates a credit spread adjustment of 0.10% for one-month, 0.15% for three-month, and 0.25% for six-month interest periods) plus an applicable margin, or (b) the Alternate Base Rate (as defined, equal to the greatest of the federal funds rate plus 0.50%, one-month Adjusted Term SOFR plus 1.00%, and Veltrano's prime rate) plus an applicable margin. The applicable margin is determined on a pricing grid based on the Consolidated Total Net Leverage Ratio of CB Operating and its restricted subsidiaries, as follows:

Based on the Company's most recently delivered Compliance Certificate for the fiscal quarter ended December 31, 2021, the Consolidated Total Net Leverage Ratio was approximately 4.35:1.00, placing the Revolving Credit Facility at the SOFR + 2.75% / ABR + 1.75% pricing tier.

Security: The obligations under the Corporate Credit Agreement (including the Revolving Credit Facility and the Term Loan B, discussed below) are secured by a first-priority lien on substantially all tangible and intangible assets of CB Operating and each material domestic subsidiary of CB Operating that has been designated as a loan party, including but not limited to: accounts receivable, equipment, inventory (if any), general intangibles, intellectual property, equity interests in direct subsidiaries (limited to 65% of the equity interests in any first-tier foreign subsidiary, if applicable), intercompany notes, and real property (to the extent required by the Corporate Credit Agreement). Importantly, the collateral package excludes (a) the assets of any project-level special purpose vehicle ("SPV") that are separately pledged to project-finance lenders under non-recourse project-finance facilities, and (b) the equity interests in any such project-level SPV to the extent such pledge is prohibited by the applicable project-finance facility documentation. This exclusion is critical to the structural subordination analysis discussed in Section VII below.

Current Drawn Amount (as of December 31, 2021): Based on our review of the most recently available Compliance Certificate and the Borrowing Base Certificate delivered for the fiscal quarter ended December 31, 2021, approximately $90,000,000 was drawn under the Revolving Credit Facility as of such date. An additional approximately $35,000,000 in letters of credit had been issued under the letter of credit sublimit, leaving approximately $275,000,000 in available undrawn commitments. We note that the drawn balance may have fluctuated since the reporting date, and the Company's in-house counsel, Priya Anand, should confirm the current drawn balance prior to any filing of the Registration Statement.

Sublimits:

(a) Letter of Credit Sublimit: The Revolving Credit Facility includes a sublimit of $75,000,000 for the issuance of standby and commercial letters of credit. Veltrano National Bank serves as the issuing bank for all letters of credit under the facility. As of December 31, 2021, approximately $35,000,000 in letters of credit were outstanding, issued primarily to support interconnection deposit requirements and power purchase agreement credit support obligations.

(b) Swingline Sublimit: The Revolving Credit Facility includes a swingline sublimit of $25,000,000 for same-day borrowings, available on an ABR-only basis.

Financial Covenants: The Corporate Credit Agreement contains the following financial maintenance covenants, tested quarterly on a trailing four-quarter basis:

(a) Consolidated Total Net Leverage Ratio: CB Operating and its restricted subsidiaries must maintain a Consolidated Total Net Leverage Ratio (defined as Consolidated Total Net Debt to Consolidated Adjusted EBITDA) not to exceed 5.50:1.00, stepping down to 5.25:1.00 beginning with the fiscal quarter ending June 30, 2023, and further stepping down to 5.00:1.00 beginning with the fiscal quarter ending June 30, 2024.

(b) Consolidated Interest Coverage Ratio: CB Operating and its restricted subsidiaries must maintain a Consolidated Interest Coverage Ratio (defined as Consolidated Adjusted EBITDA to Consolidated Cash Interest Expense) of not less than 2.00:1.00.

(c) Minimum Liquidity: CB Operating must maintain at all times minimum unrestricted cash and cash equivalents plus availability under the Revolving Credit Facility of not less than $50,000,000.

Negative Covenants: The Corporate Credit Agreement contains customary negative covenants for a leveraged finance transaction of this type, including limitations on: (i) the incurrence of additional indebtedness (subject to enumerated baskets and a ratio-based incurrence test); (ii) the creation of liens (subject to permitted liens); (iii) restricted payments, including dividends and distributions to equity holders, stock repurchases, and payments on subordinated indebtedness (subject to a builder basket and other carve-outs); (iv) investments (subject to an investment basket and enumerated permitted investments); (v) asset dispositions (subject to de minimis thresholds and reinvestment provisions); (vi) affiliate transactions (subject to fair-value and arms'-length standards and board-approval requirements); and (vii) fundamental changes, including mergers, consolidations, and dissolutions.

Reporting Covenants: CB Operating is required to deliver to Veltrano National Bank the following periodic reports and certifications:

(a) Annual audited consolidated financial statements of CBR, within 120 days after each fiscal year-end;

(b) Quarterly unaudited consolidated financial statements of CBR, within 60 days after each fiscal quarter-end (other than the fourth quarter);

(c) A Compliance Certificate signed by an authorized financial officer of CB Operating, delivered concurrently with each set of annual and quarterly financial statements, certifying compliance with the financial covenants and confirming no default or event of default;

(d) Prompt notice (within five business days) of any default or event of default, any material litigation or regulatory proceeding, any material adverse change in the financial condition or operations of CB Operating or any material subsidiary, and any ERISA event; and

(e) Such other information as may be reasonably requested by the Administrative Agent from time to time.

2. Change-of-Control Provisions

Section 8.01(k) of the Corporate Credit Agreement provides that a "Change of Control" constitutes an immediate Event of Default. The term "Change of Control" is defined in Section 1.01 of the Corporate Credit Agreement as the occurrence of any of the following events:

(a) Any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than a Permitted Holder, becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of all then-outstanding voting stock of CBR, unless the Permitted Holders at such time beneficially own, directly or indirectly, in the aggregate a greater percentage of the total voting power of all then-outstanding voting stock of CBR than such other person or group;

(b) The Permitted Holders cease to beneficially own, directly or indirectly, in the aggregate at least 50.1% of the total voting power of all then-outstanding voting stock of CBR;

(c) During any period of 24 consecutive months, a majority of the members of the board of directors (or equivalent governing body) of CBR cease to be composed of individuals (i) who were members of such board on the first day of such period, (ii) whose election or nomination was approved by individuals referred to in clause (i) or previously so approved, or (iii) whose election or nomination was approved by the Permitted Holders;

(d) CBR ceases to directly or indirectly own and control 100% of the equity interests of CBR Holdings LLC; or

(e) CBR Holdings LLC ceases to directly or indirectly own and control 100% of the equity interests of CB Operating.

The term "Permitted Holders" is defined as, collectively, (x) Pinnacle Vista Capital Partners III, LP and its affiliates (including any successor fund or parallel fund vehicles) and (y) each of James R. Calloway and Michael J. Briggs (the "Founders") and their respective family members, trusts, and controlled entities (collectively, the "Founder Holders").

Analysis — IPO Impact on Change-of-Control Definition:

Pinnacle Vista currently holds approximately 62% of the fully diluted pre-IPO common stock of CBR. Based on the contemplated base offering assumptions provided by the underwriters (Ashford Bancorp and Pinnacle Savings Bank, acting as joint book-running managers), following the completion of the IPO at the base offering level (assuming no exercise of the over-allotment option), Pinnacle Vista's beneficial ownership of the total voting power of CBR common stock is expected to decrease to approximately 49%. This decline below 50.1% would, standing alone, trigger clause (b) of the Change of Control definition.

However, the analysis is not wholly straightforward. We note that the Amended and Restated Stockholders' Agreement (the "Stockholders' Agreement"), which will be entered into in connection with the IPO, provides that Pinnacle Vista and the Founders will collectively agree to vote their shares in accordance with certain provisions, including director-nomination provisions that effectively give Pinnacle Vista the right to designate a majority of the board of directors of CBR for so long as Pinnacle Vista holds at least 30% of the outstanding common stock. The Founders, who will collectively hold approximately 9% of the outstanding common stock post-IPO, have entered into voting agreements with Pinnacle Vista with respect to board composition. As a result, the Permitted Holders, considered in the aggregate, are expected to beneficially own approximately 58% of the total voting power of CBR's outstanding common stock immediately following the completion of the IPO (49% Pinnacle Vista + 9% Founders), which would satisfy the 50.1% threshold under clause (b).

Nevertheless, the determination of whether the Founders' shares can be aggregated with Pinnacle Vista's shares for purposes of the "Permitted Holders" analysis depends on the precise interpretation of "beneficial ownership" and the scope of the "Permitted Holders" definition in the Corporate Credit Agreement. Certain lenders may take the position that the Founders' shares should not be aggregated with Pinnacle Vista's shares unless the Founders' beneficial ownership can be attributed to Pinnacle Vista under the beneficial-ownership rules of the Exchange Act (i.e., unless a "group" has been formed for purposes of Section 13(d)). The voting arrangements under the Stockholders' Agreement may or may not constitute group formation under applicable SEC guidance.

Additionally, if the over-allotment option is exercised in full by the underwriters, Pinnacle Vista's ownership percentage could decrease further, to approximately 45%, which would increase the significance of the Founders' aggregated holdings for purposes of the Permitted Holders threshold analysis.

In light of the foregoing uncertainty, and consistent with customary market practice for IPOs of sponsor-backed companies, we have determined that it is advisable to seek an affirmative waiver and consent from Veltrano National Bank confirming that the IPO does not constitute a Change of Control under the Corporate Credit Agreement, or, in the alternative, that any Change of Control event arising as a result of the IPO is waived by the requisite lenders. The specific consent request drafted by this office is contained in Doc. 109 of the electronic data room.

Conclusion: The IPO likely requires a waiver or consent from Veltrano National Bank (on behalf of the requisite lenders) with respect to the Change of Control provisions of the Corporate Credit Agreement. We have drafted a consent request letter (Doc. 109) and a form of lender consent (Doc. 110) for transmission to Thomas Raines at Veltrano National Bank.

3. IPO-Related Consent and Notice Requirements

Beyond the Change of Control provisions discussed above, the IPO implicates several additional provisions of the Corporate Credit Agreement that require analysis, consent, or notice:

Mandatory Prepayment — Equity Issuance Sweep: Section 2.11(b)(iii) of the Corporate Credit Agreement contains a mandatory prepayment provision triggered by "Equity Issuance Proceeds." Specifically, upon any issuance of equity interests by CBR or any of its restricted subsidiaries (other than Permitted Equity Issuances), CB Operating is required to apply an amount equal to 50% of the Net Cash Proceeds (as defined) of such issuance to prepay the Term Loan B within five business days of receipt of such Net Cash Proceeds. "Permitted Equity Issuances" include (among other things) equity issuances the Net Cash Proceeds of which are applied within 270 days to capital expenditures, acquisitions, or other investments permitted under the Corporate Credit Agreement. The interaction between this mandatory prepayment provision and the Company's planned voluntary prepayment of $200,000,000 of the Term Loan B is analyzed in detail in Section II.B.2 below.

Permitted Equity Issuance Provisions: The Corporate Credit Agreement does not contain an express prohibition on an initial public offering of the Borrower's parent company. However, the IPO does not fall within any of the enumerated "Permitted Equity Issuances" that are exempted from the mandatory prepayment trigger. As a result, the equity issuance sweep provision will apply unless the consent/waiver obtained from Veltrano includes an acknowledgment that the IPO constitutes a "Permitted Equity Issuance" or the mandatory prepayment obligation is otherwise waived or satisfied.

Restricted Payment Covenant — Secondary Offering Proceeds: A portion of the Offering consists of a secondary offering by Pinnacle Vista, which intends to sell approximately $150,000,000 of existing shares of common stock of CBR. The proceeds of the secondary offering will be paid directly to Pinnacle Vista as the selling stockholder and will not be received by CBR or any of its subsidiaries. Accordingly, the secondary offering should not trigger the restricted payment covenant under the Corporate Credit Agreement, as no cash or other value is being distributed from CB Operating, CBR Holdings, or CBR to Pinnacle Vista; rather, Pinnacle Vista is selling its own shares in a registered offering. We recommend, however, that the consent request letter include a confirmation from Veltrano that the secondary offering does not constitute a "Restricted Payment" under the Corporate Credit Agreement.

Notice Requirements: Section 6.02(g) of the Corporate Credit Agreement requires CB Operating to provide prompt written notice to the Administrative Agent of any "material event" affecting CBR or any of its subsidiaries, including any material transaction involving the equity interests of CBR. In addition, the Company should provide advance notice of the IPO under the general information-request provisions of Section 6.02(h) as a matter of good faith and to maintain the cooperative relationship with the lending syndicate. We recommend that notice be given no later than ten (10) business days prior to the expected pricing date of the Offering.

Status of Consent Solicitation: A draft consent request letter from CBR to Veltrano National Bank (Doc. 109) and a draft lender consent form (Doc. 110) have been prepared by this office. The consent request letter was transmitted by Calderwood & Harkness LLP to Thomas Raines at Veltrano National Bank by email on May 12, 2022, with a hard copy delivered by overnight courier. As of the date of this memorandum, the offering is in dormant status, and no formal response has been received from Veltrano. Follow-up correspondence will be required upon any decision by the Company and the underwriters to reactivate the offering process.

4. Other Material Provisions Relevant to IPO

Anti-Assignment Provisions: Section 10.06 of the Corporate Credit Agreement restricts the ability of CB Operating to assign its rights and obligations under the Corporate Credit Agreement without the prior written consent of the Administrative Agent and the requisite lenders. The IPO does not involve an assignment by CB Operating of its rights or obligations under the Corporate Credit Agreement; however, the IPO will result in a change in the indirect equity ownership of CB Operating (by virtue of the issuance of new shares of CBR common stock). The anti-assignment provisions should not be triggered by the IPO, as the borrower entity (CB Operating) and the guarantor entity (CBR) remain unchanged. Nevertheless, this point should be addressed in the consent request to eliminate any ambiguity.

Reporting Obligations — Transition to Public Company: Upon completion of the IPO, CBR will become subject to the periodic reporting requirements of the Securities Exchange Act of 1934, including the filing of annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities and Exchange Commission. We recommend that CBR request an amendment to the reporting covenants in the Corporate Credit Agreement to provide that delivery of CBR's SEC filings (10-K and 10-Q) will satisfy the annual and quarterly financial statement delivery requirements of Sections 6.01(a) and 6.01(b) of the Corporate Credit Agreement, subject to the continued requirement to deliver a Compliance Certificate. This amendment can be included in the consent solicitation or addressed in a separate administrative amendment following the IPO.

Events of Default — Cross-Default Provisions: Section 8.01(e) of the Corporate Credit Agreement includes a cross-default provision that triggers an Event of Default if CB Operating or any material subsidiary fails to make any payment when due under, or otherwise defaults under, any other indebtedness in an aggregate principal amount exceeding $15,000,000. This cross-default provision extends to the project-level financing arrangements discussed in Section III below (to the extent that a project-level default exceeds the threshold amount). As discussed in Section VI.C, however, the project-finance facilities are non-recourse to CB Operating and CBR, and the cross-default provision is limited to payment defaults and specified acceleration events, not to covenant defaults at the project level.

Events of Default — Material Adverse Effect: Section 8.01(j) of the Corporate Credit Agreement provides that a "Material Adverse Effect" on the business, operations, financial condition, or assets of CB Operating and its restricted subsidiaries, taken as a whole, constitutes an Event of Default. The IPO itself should not constitute a Material Adverse Effect; rather, the IPO is expected to significantly improve the Company's financial position by reducing leverage, increasing equity capitalization, and enhancing access to public capital markets.

Covenant Compliance Confirmation: Based on our review of the Compliance Certificate delivered for the fiscal quarter ended December 31, 2021, CB Operating was in compliance with all financial covenants as of such date. The Company's in-house counsel, Priya Anand, and Chief Financial Officer, Marcus Yoon, should confirm that no default or event of default has occurred and is continuing under the Corporate Credit Agreement as of the most recent practicable date. This confirmation should be obtained in writing and placed in the data room prior to the commencement of the roadshow.

B. Corporate Term Loan B

1. Summary of Terms

The corporate term loan B facility (the "Term Loan B" or "TLB") is governed by the same Corporate Credit Agreement described in Section II.A above. The Revolving Credit Facility and the Term Loan B are established as separate facilities under a single credit agreement, sharing common definitions, representations, covenants, and events of default. The Term Loan B lenders are a separate group of institutional investors and CLO funds, though Veltrano National Bank serves as the Administrative Agent for both facilities. The principal terms of the Term Loan B are as follows:

Borrower: Calloway-Briggs Operating Company LLC.

Parent Guarantor: Calloway-Briggs Renewables Inc.

Administrative Agent: Veltrano National Bank (same agent as the Revolving Credit Facility; both facilities are governed by the Corporate Credit Agreement).

Facility Type: Senior secured term loan facility.

Original Commitment Amount: $650,000,000.

Outstanding Principal (as of December 31, 2021): $612,500,000. The difference between the original commitment and the outstanding balance reflects quarterly amortization payments made since the closing date.

Maturity Date: January 15, 2029 (the eighth anniversary of the closing date of the Corporate Credit Agreement, which is two years beyond the maturity of the Revolving Credit Facility).

Interest Rate: Amounts outstanding under the Term Loan B bear interest at a rate per annum equal to, at the Borrower's election, either (a) Adjusted Term SOFR plus an applicable margin of 3.50%, or (b) the Alternate Base Rate plus an applicable margin of 2.50%. Unlike the Revolving Credit Facility, the Term Loan B margin is fixed and does not step up or down based on the Consolidated Total Net Leverage Ratio. The Term Loan B also includes a SOFR floor of 0.50%.

Amortization: The Term Loan B is subject to quarterly amortization payments equal to 0.25% of the original principal amount of $650,000,000 per quarter (i.e., 1.00% per annum), resulting in quarterly amortization payments of approximately $1,625,000. The remaining outstanding principal is due in a single bullet payment at the maturity date.

Security: The Term Loan B is secured on a pari passu basis with the Revolving Credit Facility by a first-priority lien on substantially all assets of CB Operating and its material domestic subsidiaries, subject to the same exclusions described in Section II.A.1 above (i.e., excluding project-level SPV assets pledged under project-finance facilities). The intercreditor arrangements between the Revolving Credit Facility lenders and the Term Loan B lenders are governed by the Corporate Credit Agreement itself, which provides for pro rata sharing of collateral proceeds and customary "waterfall" provisions governing the application of proceeds upon enforcement.

Prepayment Provisions:

(a) Voluntary Prepayment: CB Operating may voluntarily prepay the Term Loan B at any time, in whole or in part, in minimum amounts of $1,000,000 (or the entire remaining outstanding balance), upon not less than three (3) business days' prior written notice to the Administrative Agent (or one business day in the case of ABR borrowings). Voluntary prepayments of the Term Loan B are subject to a prepayment premium during the first 24 months following the closing date, as described below.

(b) Prepayment Premium: Any voluntary prepayment of the Term Loan B made prior to January 15, 2023 (the second anniversary of the closing date) is subject to a prepayment premium equal to 1.00% of the principal amount prepaid. After January 15, 2023, the prepayment premium is reduced to 0.50% for prepayments made prior to January 15, 2024 (the third anniversary), and no prepayment premium applies thereafter. As the planned prepayment in connection with the IPO is expected to occur in 2022 (prior to the second anniversary), the applicable prepayment premium is 1.00%.

(c) Mandatory Prepayment — Excess Cash Flow Sweep: Within ten (10) business days after the delivery of the annual financial statements for each fiscal year, CB Operating is required to prepay the Term Loan B in an amount equal to (i) 50% of Excess Cash Flow (as defined) for such fiscal year, minus (ii) voluntary prepayments of the Term Loan B made during such fiscal year, if the Consolidated Total Net Leverage Ratio exceeds 4.50:1.00 as of the last day of such fiscal year. The Excess Cash Flow sweep percentage steps down to 25% if the Consolidated Total Net Leverage Ratio is greater than 3.50:1.00 but less than or equal to 4.50:1.00, and to 0% if the Consolidated Total Net Leverage Ratio is equal to or less than 3.50:1.00.

(d) Mandatory Prepayment — Asset Sale Proceeds: CB Operating is required to prepay the Term Loan B with 100% of the Net Cash Proceeds of any asset sale or series of related asset sales in excess of $25,000,000 per fiscal year, unless such Net Cash Proceeds are reinvested in replacement assets within 270 days of receipt.

(e) Mandatory Prepayment — Equity Issuance Proceeds: As described in Section II.A.3 above, CB Operating is required to prepay the Term Loan B with 50% of the Net Cash Proceeds of any issuance of equity interests by CBR or any of its restricted subsidiaries (other than Permitted Equity Issuances).

Calculation for IPO-Related Prepayment: The Company plans to apply approximately $200,000,000 of the primary offering proceeds to voluntarily prepay a portion of the Term Loan B. The applicable prepayment premium is 1.00%, resulting in a total prepayment premium of $2,000,000. This prepayment premium will reduce the net proceeds available for other corporate purposes and must be disclosed in the Use of Proceeds section of the Registration Statement. The interaction between this planned voluntary prepayment and the mandatory equity issuance prepayment is analyzed in Section II.B.2 below.

2. Use-of-Proceeds Prepayment Analysis

The use-of-proceeds allocation for the primary offering proceeds is as follows (based on the current base offering assumptions):

Note: The above estimates are preliminary and are subject to adjustment based on the final offering size, the pricing of the Offering, and the final determination of underwriting discount and offering expenses. The underwriting discount of 6.5% is based on the preliminary range discussed with the underwriters and is subject to negotiation.

The Company's intended allocation of net proceeds is as follows:

(a) Approximately $200,000,000 (inclusive of the $2,000,000 prepayment premium) to repay a portion of the outstanding principal balance of the Term Loan B;

(b) Approximately $100,000,000 to fund construction costs of the Cimarron Solar project (to be contributed through the corporate structure as equity to Cimarron Solar Development LLC);

(c) Approximately $71,700,000 (or the balance remaining after the foregoing allocations) for general corporate purposes, including development costs for the Company's 6.2 GW development pipeline, working capital, and potential acquisitions.

Mandatory Prepayment Analysis — Equity Issuance Sweep: As noted above, the Corporate Credit Agreement requires CB Operating to apply 50% of the "Net Cash Proceeds" of equity issuances (other than Permitted Equity Issuances) to prepay the Term Loan B. The key question is whether the mandatory prepayment obligation requires a prepayment in excess of the planned $200,000,000 voluntary prepayment.

The "Net Cash Proceeds" of the primary offering are estimated at approximately $416,700,000 (as calculated above). If the mandatory prepayment provision applies in full, the required prepayment would be 50% of $416,700,000, or approximately $208,350,000. This is modestly in excess of the planned $200,000,000 voluntary prepayment. However, the definition of "Net Cash Proceeds" in the Corporate Credit Agreement permits a deduction for amounts used for capital expenditures or investments permitted under the Corporate Credit Agreement within 270 days of receipt. Because the Company intends to apply approximately $100,000,000 of Net Cash Proceeds to construction costs for the Cimarron Solar project (which constitutes a permitted investment in a wholly owned subsidiary), the Net Cash Proceeds subject to the mandatory prepayment sweep may be reduced to approximately $316,700,000 ($416,700,000 less $100,000,000 allocated to Cimarron Solar), resulting in a mandatory prepayment obligation of approximately $158,350,000, which would be fully satisfied by the planned $200,000,000 voluntary prepayment.

In the alternative, the consent solicitation to Veltrano National Bank should include a request to confirm that the IPO proceeds allocated to the Term Loan B prepayment and the Cimarron Solar construction satisfy the mandatory prepayment obligations under the Corporate Credit Agreement and that no additional prepayment is required. The Use-of-Proceeds / Debt Repayment Mechanics Memorandum (Doc. 115) contains a more detailed analysis of the interaction between voluntary and mandatory prepayment mechanics, including wire-transfer procedures and payoff-letter requirements.

Wire Instructions and Procedures: Funds for the Term Loan B prepayment are to be wired to Veltrano National Bank in accordance with the payoff letter procedures set forth in the Corporate Credit Agreement. A payoff letter will need to be requested from Veltrano National Bank no later than three (3) business days prior to the anticipated closing date of the Offering. The payoff letter will set forth the exact payoff amount, including accrued and unpaid interest, the prepayment premium, and any other amounts owing in respect of the portion of the Term Loan B being prepaid.

Post-Prepayment Outstanding Balance: Following the application of approximately $200,000,000 in voluntary prepayment, the outstanding principal balance of the Term Loan B will be reduced from approximately $612,500,000 (as of December 31, 2021) to approximately $412,500,000, subject to adjustment for any interim quarterly amortization payments made between December 31, 2021 and the closing date of the Offering. Assuming the IPO closes in Q3 or Q4 2022, two to three additional quarterly amortization payments of $1,625,000 each will have been made, reducing the pre-prepayment outstanding balance to approximately $609,250,000–$610,875,000, and the post-prepayment balance to approximately $409,250,000–$410,875,000.

3. Change-of-Control and Consent Requirements

Because the Term Loan B is governed by the same Corporate Credit Agreement as the Revolving Credit Facility, the Change of Control definition, consent requirements, and IPO-related notice provisions described in Sections II.A.2 and II.A.3 above apply equally to the Term Loan B. The consent request letter (Doc. 109) and consent form (Doc. 110) address both the Revolving Credit Facility and the Term Loan B simultaneously, and a single consent from the requisite lenders under the Corporate Credit Agreement will cover both facilities.

We note that the definition of "Required Lenders" under the Corporate Credit Agreement means lenders holding more than 50% of the sum of (a) the aggregate outstanding Revolving Credit Commitments and (b) the aggregate outstanding principal amount of the Term Loan B. Because the Term Loan B represents a significantly larger portion of total commitments and outstandings than the Revolving Credit Facility, the Term Loan B lenders will effectively control the consent outcome. Our preliminary review of the lender roster indicates that the largest three Term Loan B lenders (including certain CLO vehicles managed by the same asset managers) hold approximately 38% of the outstanding Term Loan B principal, and their support will be critical to obtaining the requisite consent.

Cross-reference to the Lender Consent Analysis Memorandum (Doc. 108), which contains a lender-by-lender analysis of the Term Loan B syndicate and a recommended consent solicitation strategy.

4. Financial Covenant Impact Post-IPO

The completion of the IPO and the application of approximately $200,000,000 of primary offering proceeds to prepay a portion of the Term Loan B will have a meaningful positive impact on the Company's consolidated financial covenants. We summarize the expected pro forma impact as follows:

Pro Forma Leverage Ratio: Based on the Company's Consolidated Adjusted EBITDA for the trailing twelve-month period ended December 31, 2021, of approximately $312,000,000, and assuming the application of $200,000,000 in Term Loan B prepayment and no change in other indebtedness or unrestricted cash, the pro forma Consolidated Total Net Leverage Ratio would improve as follows:

Pro forma unrestricted cash includes ~$71,700,000 of net proceeds for general corporate purposes, in addition to existing unrestricted cash of ~$50,000,000.

The pro forma leverage ratio of approximately 4.45x represents a significant improvement from the current ratio of approximately 5.32x and provides additional headroom under the 5.50x covenant maximum. Based on the step-down schedule, the Company will need to comply with the 5.25x covenant level beginning June 30, 2023, and the 4.45x pro forma ratio provides approximately 0.80x of headroom relative to that requirement.

Pro Forma Interest Coverage Ratio: The $200,000,000 reduction in Term Loan B principal will reduce annual cash interest expense by approximately $10,000,000–$11,000,000 (based on the current SOFR + 3.50% applicable rate), further improving the Consolidated Interest Coverage Ratio from approximately 2.75x to approximately 3.05x, well above the 2.00x covenant minimum.

Covenant Headroom Analysis: The post-IPO financial profile will provide CBR with significantly improved covenant headroom, which will support the Company's growth strategy and pipeline development activities. We recommend that the MD&A section of the Registration Statement include a discussion of the Company's expected post-IPO leverage profile and covenant compliance.

III. Project-Level Debt

A. Construction-to-Term Facility — Mesquite Wind

1. Summary of Terms

The Mesquite Wind construction-to-term credit facility (the "Mesquite Wind Facility") is governed by that certain Credit Agreement, dated as of September 1, 2021, among Mesquite Wind Holdings LLC ("Mesquite SPV"), as borrower, the lenders party thereto from time to time, and Prairie Commercial Bank, N.A., as administrative agent and collateral agent (as amended, restated, supplemented, or otherwise modified from time to time, the "Mesquite Wind Credit Agreement"). The principal terms of the Mesquite Wind Facility are as follows:

Borrower: Mesquite Wind Holdings LLC ("Mesquite SPV"), a limited liability company organized under the laws of the State of Texas and a wholly owned subsidiary of CB Operating. Mesquite SPV is a single-purpose entity formed for the purpose of owning, developing, constructing, and operating the Mesquite Wind project.

Lender / Administrative Agent: Prairie Commercial Bank, N.A., 2200 Ross Avenue, Suite 3600, Dallas, Texas 75201. The primary contact for purposes of the IPO notice process is Brent Hollowell, Senior Vice President, Project Finance Group (tel: (214) 555-7130; email: b.hollowell@prairiecommercial.com).

Facility Type: Construction-to-term project finance credit facility, consisting of (a) a construction loan facility available during the construction period, which converts to (b) a term loan facility upon satisfaction of the conversion conditions.

Aggregate Commitment Amount: $165,000,000.

Construction Period: The construction period under the Mesquite Wind Credit Agreement extends through the earlier of (a) the date on which all construction conversion conditions have been satisfied (the "Conversion Date") and (b) the date that is 18 months after the closing date of the Mesquite Wind Credit Agreement (i.e., March 1, 2023), subject to extension under certain circumstances (the "Construction Period Deadline"). The Mesquite Wind project is expected to achieve commercial operation (the "COD") in Q3 2022, and the Conversion Date is expected to occur promptly thereafter.

Conversion Date: The construction loan is expected to convert to a term loan upon the satisfaction of specified conversion conditions, which include (among others): (a) achievement of substantial completion of the project; (b) receipt of all material governmental approvals and permits necessary for the operation of the project; (c) execution of all power purchase agreements on final terms; (d) delivery of an independent engineer's completion certificate; (e) satisfaction of a minimum debt service coverage ratio of 1.20:1.00 on a projected basis; and (f) delivery of updated legal opinions. Based on the current construction schedule, the Conversion Date is expected to occur on or before December 31, 2024 (which represents the outside date for conversion under the credit agreement, as extended from the initial conversion deadline to allow for commissioning and testing).

Term Loan Maturity: Following conversion, the term loan has a final maturity date of September 1, 2039 (18 years from the closing date), which is consistent with the remaining term of the project's principal power purchase agreement.

Interest Rate: During the construction period, amounts drawn under the Mesquite Wind Facility bear interest at a rate per annum equal to Adjusted Term SOFR plus 2.25%. Following conversion to the term loan, the applicable margin decreases to SOFR plus 1.75%, reflecting the reduced risk profile of an operating project with contracted revenue. Interest during the construction period is capitalized and added to the outstanding principal balance.

Security: The obligations under the Mesquite Wind Credit Agreement are secured by a first-priority lien on substantially all assets of Mesquite Wind Holdings LLC, including: (a) all project assets, including turbines, towers, foundations, and balance-of-plant equipment; (b) all real property interests, including the lease of approximately 32,000 acres in Oldham County, Texas; (c) all project agreements, including the power purchase agreements (PPAs) with Permian Electric Cooperative and Lone Star Energy Corp.; (d) all interconnection agreements with the Electric Reliability Council of Texas (ERCOT); (e) all revenue accounts, reserve accounts, and depositary accounts; (f) all insurance proceeds; and (g) the equity interests in Mesquite SPV held by CB Operating.

Non-Recourse Structure: The Mesquite Wind Facility is structured as a non-recourse project financing. Prairie Commercial Bank and the term loan lenders have recourse solely to the assets of Mesquite SPV and do not have recourse to CBR, CBR Holdings, or CB Operating (as the direct parent of Mesquite SPV), except with respect to customary sponsor-support obligations, which include:

(a) Completion Guaranty: CB Operating has provided a completion guaranty pursuant to which it guarantees that the Mesquite Wind project will achieve substantial completion by the Construction Period Deadline and that all construction conversion conditions will be satisfied. The completion guaranty is limited to the amount necessary to fund any construction cost overruns and to bring the project to completion, and terminates upon the conversion of the construction loan to the term loan.

(b) Cost-Overrun Guaranty: CB Operating has agreed to fund, or cause to be funded, any construction cost overruns in excess of the project budget, up to an aggregate amount of $20,000,000. Cost overruns in excess of $20,000,000 constitute an event of default under the Mesquite Wind Credit Agreement.

(c) Equity Contribution Commitment: CB Operating has committed to contribute equity of approximately $55,000,000 to Mesquite SPV in accordance with the equity contribution agreement, representing the sponsor equity required for the project in addition to the debt financing provided by the Mesquite Wind Facility. As of December 31, 2021, approximately $40,000,000 of this commitment had been funded, leaving an unfunded equity commitment of approximately $15,000,000.

Project: The Mesquite Wind project is a 420 MW onshore wind generation facility located in Oldham County, Texas, approximately 40 miles west of Amarillo. The project consists of 140 Brightwater Enterprises 3.0-154 wind turbine generators and associated balance-of-plant infrastructure. The project's output is contracted under two long-term power purchase agreements: (i) a 15-year PPA with Permian Electric Cooperative for 250 MW and (ii) a 12-year PPA with Lone Star Energy Corp. for 170 MW. The project is expected to achieve commercial operation in Q3 2022.

2. Change-of-Control / Transfer Restrictions

The Mesquite Wind Credit Agreement contains change-of-control and transfer restriction provisions that are relevant to the IPO analysis.

Definition of "Change of Control": Section 1.01 of the Mesquite Wind Credit Agreement defines "Change of Control" as the occurrence of any of the following events:

(a) CB Operating ceases to directly own and control 100% of the membership interests of Mesquite SPV;

(b) CBR Holdings LLC ceases to directly own and control 100% of the membership interests of CB Operating;

(d) A "Sponsor Change of Control" occurs.

A "Sponsor Change of Control" is defined as the occurrence of any event that would constitute a "Change of Control" (as defined in the Corporate Credit Agreement). In other words, the Mesquite Wind Credit Agreement incorporates by reference the Change of Control definition from the corporate-level credit agreement, effectively looking through to changes in ownership at the ultimate parent level.

Analysis — IPO Impact: Because the Mesquite Wind Credit Agreement cross-references the Change of Control definition in the Corporate Credit Agreement, the analysis of whether the IPO constitutes a Change of Control at the project level is the same as the analysis set forth in Section II.A.2 above. To the extent the IPO triggers a Change of Control under the Corporate Credit Agreement (due to the potential decrease in Pinnacle Vista's ownership below the Permitted Holders threshold), the same event would constitute a Sponsor Change of Control under the Mesquite Wind Credit Agreement.

However, we note an important distinction. Clauses (a) through (c) of the Mesquite Wind Change of Control definition are not triggered by the IPO, because the direct and indirect ownership chain from CBR through CBR Holdings to CB Operating to Mesquite SPV remains unchanged. The IPO involves the issuance of new shares by CBR to public investors; it does not alter the 100% ownership of CBR Holdings by CBR, the 100% ownership of CB Operating by CBR Holdings, or the 100% ownership of Mesquite SPV by CB Operating. Only clause (d) — the Sponsor Change of Control — is potentially triggered.

Consequence of Sponsor Change of Control: Under Section 8.01(j) of the Mesquite Wind Credit Agreement, a Sponsor Change of Control constitutes an Event of Default, which would entitle Prairie Commercial Bank to accelerate the outstanding obligations under the facility. However, Section 7.08 of the Mesquite Wind Credit Agreement provides that a Sponsor Change of Control does not automatically constitute an Event of Default if (i) the Borrower delivers written notice to the Administrative Agent at least 15 business days prior to the occurrence of such Sponsor Change of Control, and (ii) the successor sponsor (or the existing sponsor following such event) satisfies certain minimum financial capacity tests (net worth of at least $500,000,000 and a corporate credit rating of at least BB/Ba2). Following the IPO, CBR's net worth is expected to exceed $1,500,000,000, and the Company's anticipated corporate credit rating (based on preliminary discussions with rating agencies) is expected to be at least BB+. Accordingly, the Sponsor Change of Control notice-and-qualification procedure should apply, and full lender consent may not be required under the Mesquite Wind Facility.

Conclusion: The IPO requires advance written notice to Prairie Commercial Bank under the Mesquite Wind Credit Agreement. Full lender consent is likely not required, provided that the notice and qualification conditions of Section 7.08 are satisfied. A draft notice letter from Mesquite Wind Holdings LLC to Prairie Commercial Bank has been prepared (Doc. 111) and is pending transmission.

3. IPO Notice Requirements

Section 6.02(f) of the Mesquite Wind Credit Agreement requires the Borrower to provide prompt written notice to the Administrative Agent of any event that could reasonably be expected to result in a Sponsor Change of Control. In addition, Section 7.08 requires advance written notice of at least fifteen (15) business days prior to the closing of any transaction that would result in a Sponsor Change of Control.

A draft notice letter from Mesquite Wind Holdings LLC (executed by an authorized officer of CB Operating, as managing member of Mesquite SPV) to Prairie Commercial Bank, N.A. has been prepared and is maintained in the electronic data room as Doc. 111. The notice letter describes the proposed IPO, confirms that the direct and indirect ownership chain of Mesquite SPV will remain unchanged, and provides the financial information necessary to satisfy the successor-sponsor qualification requirements of Section 7.08. The notice letter is pending transmission and will be sent promptly upon any determination to reactivate the offering.

4. Completion Guaranty / Sponsor Support

Impact of IPO on Completion Guaranty: CB Operating serves as the completion guarantor under the Mesquite Wind Credit Agreement. The IPO does not directly affect CB Operating's legal identity, organizational structure, or financial capacity. However, the completion guaranty contains a representation that the completion guarantor has a net worth of at least $250,000,000 and a requirement that the completion guarantor maintain certain financial ratios during the construction period. Following the IPO, CB Operating's financial capacity is expected to improve as a result of the equity contributions flowing from the primary offering proceeds. We do not anticipate that the IPO will adversely affect CB Operating's ability to perform its obligations under the completion guaranty.

Unfunded Equity Contribution Obligations: As noted in Section III.A.1 above, CB Operating has an unfunded equity commitment of approximately $15,000,000 to Mesquite SPV. This unfunded commitment is a contingent obligation of CB Operating and should be disclosed in the Registration Statement, both in the Description of Indebtedness section and in the notes to the consolidated financial statements. The Company's independent auditor, Severin Beck CPAs LLP, should confirm that this commitment is appropriately disclosed in the financial statements.

Insurance Requirements: The Mesquite Wind Credit Agreement requires Mesquite SPV to maintain (a) builder's risk insurance during the construction period with coverage of not less than 100% of the replacement cost of the project, (b) commercial general liability insurance with a combined single limit of not less than $50,000,000 per occurrence and $100,000,000 in the aggregate, (c) property insurance following COD, and (d) business interruption insurance. We have confirmed with the Company that all required insurance policies are in place and current. The IPO does not affect the insurance requirements.

B. Construction-to-Term Facility — Cimarron Solar

1. Summary of Terms

The Cimarron Solar construction-to-term credit facility (the "Cimarron Solar Facility") is governed by that certain Credit Agreement, dated as of November 15, 2021, among Cimarron Solar Development LLC ("Cimarron SPV"), as borrower, the lenders party thereto from time to time, and Prairie Commercial Bank, N.A., as administrative agent and collateral agent (as amended, restated, supplemented, or otherwise modified from time to time, the "Cimarron Solar Credit Agreement"). The structural and commercial terms of the Cimarron Solar Facility are substantially similar to those of the Mesquite Wind Facility, and we describe below the key terms and differences.

Borrower: Cimarron Solar Development LLC ("Cimarron SPV"), a limited liability company organized under the laws of the State of New Mexico and a wholly owned subsidiary of CB Operating. Cimarron SPV is a single-purpose entity formed for the purpose of owning, developing, constructing, and operating the Cimarron Solar project.

Lender / Administrative Agent: Prairie Commercial Bank, N.A. (same lender and agent as the Mesquite Wind Facility). The primary contact is Brent Hollowell, Senior Vice President, Project Finance Group.

Facility Type: Construction-to-term project finance credit facility.

Aggregate Commitment Amount: $143,000,000.

Construction Period: The construction period extends through the earlier of (a) the date on which all construction conversion conditions have been satisfied and (b) the date that is 18 months after the closing date of the Cimarron Solar Credit Agreement (i.e., May 15, 2023), subject to extension. The Cimarron Solar project is expected to achieve commercial operation in Q1 2023.

Conversion Date: The construction loan is expected to convert to a term loan upon satisfaction of conversion conditions substantially similar to those described for the Mesquite Wind Facility, including achievement of substantial completion, receipt of governmental approvals, execution of power purchase agreements on final terms, delivery of an independent engineer's certificate, satisfaction of a minimum DSCR of 1.25:1.00, and delivery of legal opinions. The Conversion Date is expected to occur on or before March 31, 2025 (the outside date for conversion under the credit agreement).

Term Loan Maturity: Following conversion, the term loan has a final maturity date of November 15, 2041 (20 years from the closing date), consistent with the remaining term of the project's principal power purchase agreement with Sunstone Municipal Utility District.

Interest Rate: During the construction period, amounts drawn bear interest at Adjusted Term SOFR plus 2.50%. Following conversion to the term loan, the applicable margin decreases to SOFR plus 2.00%. As with the Mesquite Wind Facility, interest during the construction period is capitalized.

Security: First-priority lien on substantially all assets of Cimarron Solar Development LLC, including: (a) all project assets, including solar panels, inverters, tracking systems, and balance-of-plant equipment; (b) all real property interests, including approximately 2,800 acres in Doña Ana County, New Mexico; (c) all project agreements, including the 20-year PPA with Sunstone Municipal Utility District and a 15-year PPA with Rio Bravo Electric Authority; (d) all interconnection agreements with Hollowell Group; (e) all revenue accounts, reserve accounts, and depositary accounts; (f) all insurance proceeds; and (g) the equity interests in Cimarron SPV held by CB Operating.

Non-Recourse Structure: The Cimarron Solar Facility is structured as a non-recourse project financing, with recourse solely to the assets of Cimarron SPV, except for customary sponsor-support obligations:

(a) Completion Guaranty: CB Operating has provided a completion guaranty for the Cimarron Solar project, substantially similar to the completion guaranty provided for the Mesquite Wind project.

(b) Cost-Overrun Guaranty: CB Operating has agreed to fund cost overruns up to $15,000,000.

(c) Equity Contribution Commitment: CB Operating has committed to contribute equity of approximately $75,000,000 to Cimarron SPV. As of December 31, 2021, approximately $22,000,000 of this commitment had been funded, leaving an unfunded equity commitment of approximately $53,000,000. As discussed below, approximately $100,000,000 of the primary offering proceeds is intended to fund the remaining construction costs of the Cimarron Solar project, which will include satisfaction of this unfunded equity commitment and additional equity contributions.

Project: The Cimarron Solar project is a 350 MW utility-scale solar photovoltaic generation facility located in Doña Ana County, New Mexico, approximately 20 miles south of Las Cruces. The project utilizes single-axis tracking systems and bifacial solar modules manufactured by Greaves Enterprises The project's output is contracted under two long-term power purchase agreements: (i) a 20-year PPA with Sunstone Municipal Utility District for 200 MW and

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue New York, NY 10022
DUE DILIGENCE MEMORANDUM DEBT AND FINANCING ARRANGEMENTS
C&H Matter No. 1015-00001 April 25, 2022
Matter: Calloway-Briggs Renewables Inc. — Proposed Initial Public Offering
To: Jennifer Kwon, Responsible Partner, Capital Markets
From: Brendan Walsh, Lead Associate, Capital Markets; Natasha Forbes, Working Associate, Capital Markets
Re: Due Diligence Memorandum — Debt and Financing Arrangements of Calloway-Briggs Renewables Inc. and Subsidiaries
This memorandum is a confidential communication between attorneys at Calderwood & Harkness LLP and is protected by the attorney-client privilege and the attorney work-product doctrine. It has been prepared in anticipation of litigation and in connection with the rendering of legal advice. It should not be disclosed to any third party without the express prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any privilege or protection.
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I. Executive Summary
This memorandum summarizes the findings of our due diligence review of all outstanding indebtedness and financing arrangements of Calloway-Briggs Renewables Inc. ("CBR" or the "Company") and its direct and indirect subsidiaries in connection with the proposed initial public offering (the "IPO" or the "Offering") of shares of common stock of CBR on the New York Stock Exchange (proposed ticker symbol: CBRI). The base Offering is anticipated to consist of approximately $600,000,000 in aggregate gross proceeds, comprising both primary shares to be issued by the Company and secondary shares to be sold by Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista"), the Company's controlling stockholder.
As of December 31, 2021, CBR and its consolidated subsidiaries had total outstanding consolidated indebtedness of approximately $1,710,000,000 (approximately $1.71 billion). This total comprises a combination of corporate-level revolving and term credit facilities and project-level financing structures, including construction-to-term project finance credit facilities and a tax-equity partnership investment. These financing arrangements collectively support the Company's portfolio of operating and under-construction renewable energy assets, which includes onshore wind and utility-scale solar photovoltaic projects across Texas and New Mexico.
In connection with this review, we have examined five principal financing arrangements, which are summarized as follows:
1.  Corporate Revolving Credit Facility ($400,000,000) — Veltrano National Bank, as Administrative Agent;
2.  Corporate Term Loan B ($650,000,000 original commitment; $612,500,000 outstanding) — Veltrano National Bank, as Administrative Agent;
3.  Tax-Equity Partnership — Solaris West Portfolio ($280,000,000 invested) — Veltara Basin Financial LLC, as tax-equity investor;
4.  Construction-to-Term Facility — Mesquite Wind Project ($165,000,000) — Prairie Commercial Bank, N.A., as Administrative Agent; and
5.  Construction-to-Term Facility — Cimarron Solar Project ($143,000,000) — Prairie Commercial Bank, N.A., as Administrative Agent.
Key Finding: The proposed IPO triggers consent or notice requirements under each of the five facilities identified above. Based on our review, we have not identified any insurmountable obstacles to completing the IPO under the existing debt and financing arrangements. However, timely solicitation and receipt of consents from the relevant lenders and investors is required, and the consent process should be prioritized in the pre-launch workstream. The most critical consents are (a) the change-of-control waiver from Veltrano National Bank under the corporate revolving credit facility and term loan B, and (b) the Sponsor Change of Control consent from Veltara Basin Financial LLC under the Solaris West tax-equity partnership agreement.
Use-of-Proceeds Nexus: Approximately $200,000,000 of the primary offering proceeds are intended to be applied to the voluntary prepayment of a portion of the outstanding principal balance of the Term Loan B. This prepayment will be subject to a prepayment premium of 1.00% of the amount prepaid, resulting in a premium payment of approximately $2,000,000, which must be disclosed in the Use of Proceeds section of the Registration Statement on Form S-1 (the "Registration Statement"). An additional approximately $100,000,000 of primary offering proceeds is intended to be contributed through the corporate structure to fund the construction of the Cimarron Solar project. The remaining proceeds of approximately $71,700,000 are intended for general corporate purposes, including pipeline development activities.
Companion Memoranda: This memorandum should be read in conjunction with the following related due diligence and advisory memoranda maintained in the electronic data room:
•  Lender Consent Analysis Memorandum (Doc. 108);
•  Tax-Equity Investor Consent Analysis (Doc. 113);
•  Use-of-Proceeds / Debt Repayment Mechanics Memorandum (Doc. 115);
•  Tax-Equity Structure Memorandum — Partnership-Flip Compliance (Doc. 102);
•  ITC/PTC Analysis Memorandum (Doc. 103).
We have coordinated with Leonard Cross of Calderwood & Harkness's Tax Department regarding the tax-equity structure implications and potential ITC recapture considerations, and with Alan Kessler and the team at Kessler McBride & Associates LLP regarding HLBV accounting methodology and Investment Tax Credit compliance matters. All conclusions expressed in this memorandum are subject to the assumptions and qualifications set forth herein and in the referenced companion memoranda.
II. Corporate-Level Debt
A. Corporate Revolving Credit Facility
1. Summary of Terms
The corporate revolving credit facility (the "Revolving Credit Facility" or the "Revolver") is governed by that certain Credit Agreement, dated as of January 15, 2021, among Calloway-Briggs Operating Company LLC ("CB Operating"), as borrower, Calloway-Briggs Renewables Inc., as parent guarantor, the lenders party thereto from time to time, and Veltrano National Bank, as administrative agent and collateral agent (as amended, restated, supplemented, or otherwise modified from time to time, the "Corporate Credit Agreement"). The principal terms of the Revolving Credit Facility are as follows:
Borrower: Calloway-Briggs Operating Company LLC ("CB Operating"), a limited liability company organized under the laws of the State of Texas and a wholly owned subsidiary of CBR Holdings LLC, which is in turn a wholly owned subsidiary of Calloway-Briggs Renewables Inc.
Parent Guarantor: Calloway-Briggs Renewables Inc. CBR has executed and delivered a guaranty of all obligations of CB Operating under the Corporate Credit Agreement, pursuant to a Guaranty Agreement, dated as of January 15, 2021, in favor of Veltrano National Bank, as administrative agent for the secured parties.
Administrative Agent and Collateral Agent: Veltrano National Bank, 1401 McKinney Street, Houston, Texas 77010. The primary contact for purposes of the consent solicitation is Thomas Raines, Managing Director, Energy Lending Group (tel: (713) 555-4821; email: t.raines@ridgemontnational.com).
Facility Type: Senior secured revolving credit facility.
Aggregate Commitment Amount: $400,000,000.
Maturity Date: January 15, 2027 (the fifth anniversary of the closing date of the Corporate Credit Agreement).
Interest Rate: Amounts drawn under the Revolving Credit Facility bear interest at a rate per annum equal to, at the Borrower's election, either (a) Adjusted Term SOFR (as defined in the Corporate Credit Agreement, which incorporates a credit spread adjustment of 0.10% for one-month, 0.15% for three-month, and 0.25% for six-month interest periods) plus an applicable margin, or (b) the Alternate Base Rate (as defined, equal to the greatest of the federal funds rate plus 0.50%, one-month Adjusted Term SOFR plus 1.00%, and Veltrano's prime rate) plus an applicable margin. The applicable margin is determined on a pricing grid based on the Consolidated Total Net Leverage Ratio of CB Operating and its restricted subsidiaries, as follows:
Based on the Company's most recently delivered Compliance Certificate for the fiscal quarter ended December 31, 2021, the Consolidated Total Net Leverage Ratio was approximately 4.35:1.00, placing the Revolving Credit Facility at the SOFR + 2.75% / ABR + 1.75% pricing tier.
Security: The obligations under the Corporate Credit Agreement (including the Revolving Credit Facility and the Term Loan B, discussed below) are secured by a first-priority lien on substantially all tangible and intangible assets of CB Operating and each material domestic subsidiary of CB Operating that has been designated as a loan party, including but not limited to: accounts receivable, equipment, inventory (if any), general intangibles, intellectual property, equity interests in direct subsidiaries (limited to 65% of the equity interests in any first-tier foreign subsidiary, if applicable), intercompany notes, and real property (to the extent required by the Corporate Credit Agreement). Importantly, the collateral package excludes (a) the assets of any project-level special purpose vehicle ("SPV") that are separately pledged to project-finance lenders under non-recourse project-finance facilities, and (b) the equity interests in any such project-level SPV to the extent such pledge is prohibited by the applicable project-finance facility documentation. This exclusion is critical to the structural subordination analysis discussed in Section VII below.
Current Drawn Amount (as of December 31, 2021): Based on our review of the most recently available Compliance Certificate and the Borrowing Base Certificate delivered for the fiscal quarter ended December 31, 2021, approximately $90,000,000 was drawn under the Revolving Credit Facility as of such date. An additional approximately $35,000,000 in letters of credit had been issued under the letter of credit sublimit, leaving approximately $275,000,000 in available undrawn commitments. We note that the drawn balance may have fluctuated since the reporting date, and the Company's in-house counsel, Priya Anand, should confirm the current drawn balance prior to any filing of the Registration Statement.
Sublimits:
(a) Letter of Credit Sublimit: The Revolving Credit Facility includes a sublimit of $75,000,000 for the issuance of standby and commercial letters of credit. Veltrano National Bank serves as the issuing bank for all letters of credit under the facility. As of December 31, 2021, approximately $35,000,000 in letters of credit were outstanding, issued primarily to support interconnection deposit requirements and power purchase agreement credit support obligations.
(b) Swingline Sublimit: The Revolving Credit Facility includes a swingline sublimit of $25,000,000 for same-day borrowings, available on an ABR-only basis.
Financial Covenants: The Corporate Credit Agreement contains the following financial maintenance covenants, tested quarterly on a trailing four-quarter basis:
(a) Consolidated Total Net Leverage Ratio: CB Operating and its restricted subsidiaries must maintain a Consolidated Total Net Leverage Ratio (defined as Consolidated Total Net Debt to Consolidated Adjusted EBITDA) not to exceed 5.50:1.00, stepping down to 5.25:1.00 beginning with the fiscal quarter ending June 30, 2023, and further stepping down to 5.00:1.00 beginning with the fiscal quarter ending June 30, 2024.
(b) Consolidated Interest Coverage Ratio: CB Operating and its restricted subsidiaries must maintain a Consolidated Interest Coverage Ratio (defined as Consolidated Adjusted EBITDA to Consolidated Cash Interest Expense) of not less than 2.00:1.00.
(c) Minimum Liquidity: CB Operating must maintain at all times minimum unrestricted cash and cash equivalents plus availability under the Revolving Credit Facility of not less than $50,000,000.
Negative Covenants: The Corporate Credit Agreement contains customary negative covenants for a leveraged finance transaction of this type, including limitations on: (i) the incurrence of additional indebtedness (subject to enumerated baskets and a ratio-based incurrence test); (ii) the creation of liens (subject to permitted liens); (iii) restricted payments, including dividends and distributions to equity holders, stock repurchases, and payments on subordinated indebtedness (subject to a builder basket and other carve-outs); (iv) investments (subject to an investment basket and enumerated permitted investments); (v) asset dispositions (subject to de minimis thresholds and reinvestment provisions); (vi) affiliate transactions (subject to fair-value and arms'-length standards and board-approval requirements); and (vii) fundamental changes, including mergers, consolidations, and dissolutions.
Reporting Covenants: CB Operating is required to deliver to Veltrano National Bank the following periodic reports and certifications:
(a) Annual audited consolidated financial statements of CBR, within 120 days after each fiscal year-end;
(b) Quarterly unaudited consolidated financial statements of CBR, within 60 days after each fiscal quarter-end (other than the fourth quarter);
(c) A Compliance Certificate signed by an authorized financial officer of CB Operating, delivered concurrently with each set of annual and quarterly financial statements, certifying compliance with the financial covenants and confirming no default or event of default;
(d) Prompt notice (within five business days) of any default or event of default, any material litigation or regulatory proceeding, any material adverse change in the financial condition or operations of CB Operating or any material subsidiary, and any ERISA event; and
(e) Such other information as may be reasonably requested by the Administrative Agent from time to time.
2. Change-of-Control Provisions
Section 8.01(k) of the Corporate Credit Agreement provides that a "Change of Control" constitutes an immediate Event of Default. The term "Change of Control" is defined in Section 1.01 of the Corporate Credit Agreement as the occurrence of any of the following events:
(a) Any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than a Permitted Holder, becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of all then-outstanding voting stock of CBR, unless the Permitted Holders at such time beneficially own, directly or indirectly, in the aggregate a greater percentage of the total voting power of all then-outstanding voting stock of CBR than such other person or group;
(b) The Permitted Holders cease to beneficially own, directly or indirectly, in the aggregate at least 50.1% of the total voting power of all then-outstanding voting stock of CBR;
(c) During any period of 24 consecutive months, a majority of the members of the board of directors (or equivalent governing body) of CBR cease to be composed of individuals (i) who were members of such board on the first day of such period, (ii) whose election or nomination was approved by individuals referred to in clause (i) or previously so approved, or (iii) whose election or nomination was approved by the Permitted Holders;
(d) CBR ceases to directly or indirectly own and control 100% of the equity interests of CBR Holdings LLC; or
(e) CBR Holdings LLC ceases to directly or indirectly own and control 100% of the equity interests of CB Operating.
The term "Permitted Holders" is defined as, collectively, (x) Pinnacle Vista Capital Partners III, LP and its affiliates (including any successor fund or parallel fund vehicles) and (y) each of James R. Calloway and Michael J. Briggs (the "Founders") and their respective family members, trusts, and controlled entities (collectively, the "Founder Holders").
Analysis — IPO Impact on Change-of-Control Definition:
Pinnacle Vista currently holds approximately 62% of the fully diluted pre-IPO common stock of CBR. Based on the contemplated base offering assumptions provided by the underwriters (Ashford Bancorp and Pinnacle Savings Bank, acting as joint book-running managers), following the completion of the IPO at the base offering level (assuming no exercise of the over-allotment option), Pinnacle Vista's beneficial ownership of the total voting power of CBR common stock is expected to decrease to approximately 49%. This decline below 50.1% would, standing alone, trigger clause (b) of the Change of Control definition.
However, the analysis is not wholly straightforward. We note that the Amended and Restated Stockholders' Agreement (the "Stockholders' Agreement"), which will be entered into in connection with the IPO, provides that Pinnacle Vista and the Founders will collectively agree to vote their shares in accordance with certain provisions, including director-nomination provisions that effectively give Pinnacle Vista the right to designate a majority of the board of directors of CBR for so long as Pinnacle Vista holds at least 30% of the outstanding common stock. The Founders, who will collectively hold approximately 9% of the outstanding common stock post-IPO, have entered into voting agreements with Pinnacle Vista with respect to board composition. As a result, the Permitted Holders, considered in the aggregate, are expected to beneficially own approximately 58% of the total voting power of CBR's outstanding common stock immediately following the completion of the IPO (49% Pinnacle Vista + 9% Founders), which would satisfy the 50.1% threshold under clause (b).
Nevertheless, the determination of whether the Founders' shares can be aggregated with Pinnacle Vista's shares for purposes of the "Permitted Holders" analysis depends on the precise interpretation of "beneficial ownership" and the scope of the "Permitted Holders" definition in the Corporate Credit Agreement. Certain lenders may take the position that the Founders' shares should not be aggregated with Pinnacle Vista's shares unless the Founders' beneficial ownership can be attributed to Pinnacle Vista under the beneficial-ownership rules of the Exchange Act (i.e., unless a "group" has been formed for purposes of Section 13(d)). The voting arrangements under the Stockholders' Agreement may or may not constitute group formation under applicable SEC guidance.
Additionally, if the over-allotment option is exercised in full by the underwriters, Pinnacle Vista's ownership percentage could decrease further, to approximately 45%, which would increase the significance of the Founders' aggregated holdings for purposes of the Permitted Holders threshold analysis.
In light of the foregoing uncertainty, and consistent with customary market practice for IPOs of sponsor-backed companies, we have determined that it is advisable to seek an affirmative waiver and consent from Veltrano National Bank confirming that the IPO does not constitute a Change of Control under the Corporate Credit Agreement, or, in the alternative, that any Change of Control event arising as a result of the IPO is waived by the requisite lenders. The specific consent request drafted by this office is contained in Doc. 109 of the electronic data room.
Conclusion: The IPO likely requires a waiver or consent from Veltrano National Bank (on behalf of the requisite lenders) with respect to the Change of Control provisions of the Corporate Credit Agreement. We have drafted a consent request letter (Doc. 109) and a form of lender consent (Doc. 110) for transmission to Thomas Raines at Veltrano National Bank.
3. IPO-Related Consent and Notice Requirements
Beyond the Change of Control provisions discussed above, the IPO implicates several additional provisions of the Corporate Credit Agreement that require analysis, consent, or notice:
Mandatory Prepayment — Equity Issuance Sweep: Section 2.11(b)(iii) of the Corporate Credit Agreement contains a mandatory prepayment provision triggered by "Equity Issuance Proceeds." Specifically, upon any issuance of equity interests by CBR or any of its restricted subsidiaries (other than Permitted Equity Issuances), CB Operating is required to apply an amount equal to 50% of the Net Cash Proceeds (as defined) of such issuance to prepay the Term Loan B within five business days of receipt of such Net Cash Proceeds. "Permitted Equity Issuances" include (among other things) equity issuances the Net Cash Proceeds of which are applied within 270 days to capital expenditures, acquisitions, or other investments permitted under the Corporate Credit Agreement. The interaction between this mandatory prepayment provision and the Company's planned voluntary prepayment of $200,000,000 of the Term Loan B is analyzed in detail in Section II.B.2 below.
Permitted Equity Issuance Provisions: The Corporate Credit Agreement does not contain an express prohibition on an initial public offering of the Borrower's parent company. However, the IPO does not fall within any of the enumerated "Permitted Equity Issuances" that are exempted from the mandatory prepayment trigger. As a result, the equity issuance sweep provision will apply unless the consent/waiver obtained from Veltrano includes an acknowledgment that the IPO constitutes a "Permitted Equity Issuance" or the mandatory prepayment obligation is otherwise waived or satisfied.
Restricted Payment Covenant — Secondary Offering Proceeds: A portion of the Offering consists of a secondary offering by Pinnacle Vista, which intends to sell approximately $150,000,000 of existing shares of common stock of CBR. The proceeds of the secondary offering will be paid directly to Pinnacle Vista as the selling stockholder and will not be received by CBR or any of its subsidiaries. Accordingly, the secondary offering should not trigger the restricted payment covenant under the Corporate Credit Agreement, as no cash or other value is being distributed from CB Operating, CBR Holdings, or CBR to Pinnacle Vista; rather, Pinnacle Vista is selling its own shares in a registered offering. We recommend, however, that the consent request letter include a confirmation from Veltrano that the secondary offering does not constitute a "Restricted Payment" under the Corporate Credit Agreement.
Notice Requirements: Section 6.02(g) of the Corporate Credit Agreement requires CB Operating to provide prompt written notice to the Administrative Agent of any "material event" affecting CBR or any of its subsidiaries, including any material transaction involving the equity interests of CBR. In addition, the Company should provide advance notice of the IPO under the general information-request provisions of Section 6.02(h) as a matter of good faith and to maintain the cooperative relationship with the lending syndicate. We recommend that notice be given no later than ten (10) business days prior to the expected pricing date of the Offering.
Status of Consent Solicitation: A draft consent request letter from CBR to Veltrano National Bank (Doc. 109) and a draft lender consent form (Doc. 110) have been prepared by this office. The consent request letter was transmitted by Calderwood & Harkness LLP to Thomas Raines at Veltrano National Bank by email on May 12, 2022, with a hard copy delivered by overnight courier. As of the date of this memorandum, the offering is in dormant status, and no formal response has been received from Veltrano. Follow-up correspondence will be required upon any decision by the Company and the underwriters to reactivate the offering process.
4. Other Material Provisions Relevant to IPO
Anti-Assignment Provisions: Section 10.06 of the Corporate Credit Agreement restricts the ability of CB Operating to assign its rights and obligations under the Corporate Credit Agreement without the prior written consent of the Administrative Agent and the requisite lenders. The IPO does not involve an assignment by CB Operating of its rights or obligations under the Corporate Credit Agreement; however, the IPO will result in a change in the indirect equity ownership of CB Operating (by virtue of the issuance of new shares of CBR common stock). The anti-assignment provisions should not be triggered by the IPO, as the borrower entity (CB Operating) and the guarantor entity (CBR) remain unchanged. Nevertheless, this point should be addressed in the consent request to eliminate any ambiguity.
Reporting Obligations — Transition to Public Company: Upon completion of the IPO, CBR will become subject to the periodic reporting requirements of the Securities Exchange Act of 1934, including the filing of annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities and Exchange Commission. We recommend that CBR request an amendment to the reporting covenants in the Corporate Credit Agreement to provide that delivery of CBR's SEC filings (10-K and 10-Q) will satisfy the annual and quarterly financial statement delivery requirements of Sections 6.01(a) and 6.01(b) of the Corporate Credit Agreement, subject to the continued requirement to deliver a Compliance Certificate. This amendment can be included in the consent solicitation or addressed in a separate administrative amendment following the IPO.
Events of Default — Cross-Default Provisions: Section 8.01(e) of the Corporate Credit Agreement includes a cross-default provision that triggers an Event of Default if CB Operating or any material subsidiary fails to make any payment when due under, or otherwise defaults under, any other indebtedness in an aggregate principal amount exceeding $15,000,000. This cross-default provision extends to the project-level financing arrangements discussed in Section III below (to the extent that a project-level default exceeds the threshold amount). As discussed in Section VI.C, however, the project-finance facilities are non-recourse to CB Operating and CBR, and the cross-default provision is limited to payment defaults and specified acceleration events, not to covenant defaults at the project level.
Events of Default — Material Adverse Effect: Section 8.01(j) of the Corporate Credit Agreement provides that a "Material Adverse Effect" on the business, operations, financial condition, or assets of CB Operating and its restricted subsidiaries, taken as a whole, constitutes an Event of Default. The IPO itself should not constitute a Material Adverse Effect; rather, the IPO is expected to significantly improve the Company's financial position by reducing leverage, increasing equity capitalization, and enhancing access to public capital markets.
Covenant Compliance Confirmation: Based on our review of the Compliance Certificate delivered for the fiscal quarter ended December 31, 2021, CB Operating was in compliance with all financial covenants as of such date. The Company's in-house counsel, Priya Anand, and Chief Financial Officer, Marcus Yoon, should confirm that no default or event of default has occurred and is continuing under the Corporate Credit Agreement as of the most recent practicable date. This confirmation should be obtained in writing and placed in the data room prior to the commencement of the roadshow.
B. Corporate Term Loan B
1. Summary of Terms
The corporate term loan B facility (the "Term Loan B" or "TLB") is governed by the same Corporate Credit Agreement described in Section II.A above. The Revolving Credit Facility and the Term Loan B are established as separate facilities under a single credit agreement, sharing common definitions, representations, covenants, and events of default. The Term Loan B lenders are a separate group of institutional investors and CLO funds, though Veltrano National Bank serves as the Administrative Agent for both facilities. The principal terms of the Term Loan B are as follows:
Borrower: Calloway-Briggs Operating Company LLC.
Parent Guarantor: Calloway-Briggs Renewables Inc.
Administrative Agent: Veltrano National Bank (same agent as the Revolving Credit Facility; both facilities are governed by the Corporate Credit Agreement).
Facility Type: Senior secured term loan facility.
Original Commitment Amount: $650,000,000.
Outstanding Principal (as of December 31, 2021): $612,500,000. The difference between the original commitment and the outstanding balance reflects quarterly amortization payments made since the closing date.
Maturity Date: January 15, 2029 (the eighth anniversary of the closing date of the Corporate Credit Agreement, which is two years beyond the maturity of the Revolving Credit Facility).
Interest Rate: Amounts outstanding under the Term Loan B bear interest at a rate per annum equal to, at the Borrower's election, either (a) Adjusted Term SOFR plus an applicable margin of 3.50%, or (b) the Alternate Base Rate plus an applicable margin of 2.50%. Unlike the Revolving Credit Facility, the Term Loan B margin is fixed and does not step up or down based on the Consolidated Total Net Leverage Ratio. The Term Loan B also includes a SOFR floor of 0.50%.
Amortization: The Term Loan B is subject to quarterly amortization payments equal to 0.25% of the original principal amount of $650,000,000 per quarter (i.e., 1.00% per annum), resulting in quarterly amortization payments of approximately $1,625,000. The remaining outstanding principal is due in a single bullet payment at the maturity date.
Security: The Term Loan B is secured on a pari passu basis with the Revolving Credit Facility by a first-priority lien on substantially all assets of CB Operating and its material domestic subsidiaries, subject to the same exclusions described in Section II.A.1 above (i.e., excluding project-level SPV assets pledged under project-finance facilities). The intercreditor arrangements between the Revolving Credit Facility lenders and the Term Loan B lenders are governed by the Corporate Credit Agreement itself, which provides for pro rata sharing of collateral proceeds and customary "waterfall" provisions governing the application of proceeds upon enforcement.
Prepayment Provisions:
(a) Voluntary Prepayment: CB Operating may voluntarily prepay the Term Loan B at any time, in whole or in part, in minimum amounts of $1,000,000 (or the entire remaining outstanding balance), upon not less than three (3) business days' prior written notice to the Administrative Agent (or one business day in the case of ABR borrowings). Voluntary prepayments of the Term Loan B are subject to a prepayment premium during the first 24 months following the closing date, as described below.
(b) Prepayment Premium: Any voluntary prepayment of the Term Loan B made prior to January 15, 2023 (the second anniversary of the closing date) is subject to a prepayment premium equal to 1.00% of the principal amount prepaid. After January 15, 2023, the prepayment premium is reduced to 0.50% for prepayments made prior to January 15, 2024 (the third anniversary), and no prepayment premium applies thereafter. As the planned prepayment in connection with the IPO is expected to occur in 2022 (prior to the second anniversary), the applicable prepayment premium is 1.00%.
(c) Mandatory Prepayment — Excess Cash Flow Sweep: Within ten (10) business days after the delivery of the annual financial statements for each fiscal year, CB Operating is required to prepay the Term Loan B in an amount equal to (i) 50% of Excess Cash Flow (as defined) for such fiscal year, minus (ii) voluntary prepayments of the Term Loan B made during such fiscal year, if the Consolidated Total Net Leverage Ratio exceeds 4.50:1.00 as of the last day of such fiscal year. The Excess Cash Flow sweep percentage steps down to 25% if the Consolidated Total Net Leverage Ratio is greater than 3.50:1.00 but less than or equal to 4.50:1.00, and to 0% if the Consolidated Total Net Leverage Ratio is equal to or less than 3.50:1.00.
(d) Mandatory Prepayment — Asset Sale Proceeds: CB Operating is required to prepay the Term Loan B with 100% of the Net Cash Proceeds of any asset sale or series of related asset sales in excess of $25,000,000 per fiscal year, unless such Net Cash Proceeds are reinvested in replacement assets within 270 days of receipt.
(e) Mandatory Prepayment — Equity Issuance Proceeds: As described in Section II.A.3 above, CB Operating is required to prepay the Term Loan B with 50% of the Net Cash Proceeds of any issuance of equity interests by CBR or any of its restricted subsidiaries (other than Permitted Equity Issuances).
Calculation for IPO-Related Prepayment: The Company plans to apply approximately $200,000,000 of the primary offering proceeds to voluntarily prepay a portion of the Term Loan B. The applicable prepayment premium is 1.00%, resulting in a total prepayment premium of $2,000,000. This prepayment premium will reduce the net proceeds available for other corporate purposes and must be disclosed in the Use of Proceeds section of the Registration Statement. The interaction between this planned voluntary prepayment and the mandatory equity issuance prepayment is analyzed in Section II.B.2 below.
2. Use-of-Proceeds Prepayment Analysis
The use-of-proceeds allocation for the primary offering proceeds is as follows (based on the current base offering assumptions):
Note: The above estimates are preliminary and are subject to adjustment based on the final offering size, the pricing of the Offering, and the final determination of underwriting discount and offering expenses. The underwriting discount of 6.5% is based on the preliminary range discussed with the underwriters and is subject to negotiation.
The Company's intended allocation of net proceeds is as follows:
(a) Approximately $200,000,000 (inclusive of the $2,000,000 prepayment premium) to repay a portion of the outstanding principal balance of the Term Loan B;
(b) Approximately $100,000,000 to fund construction costs of the Cimarron Solar project (to be contributed through the corporate structure as equity to Cimarron Solar Development LLC);
(c) Approximately $71,700,000 (or the balance remaining after the foregoing allocations) for general corporate purposes, including development costs for the Company's 6.2 GW development pipeline, working capital, and potential acquisitions.
Mandatory Prepayment Analysis — Equity Issuance Sweep: As noted above, the Corporate Credit Agreement requires CB Operating to apply 50% of the "Net Cash Proceeds" of equity issuances (other than Permitted Equity Issuances) to prepay the Term Loan B. The key question is whether the mandatory prepayment obligation requires a prepayment in excess of the planned $200,000,000 voluntary prepayment.
The "Net Cash Proceeds" of the primary offering are estimated at approximately $416,700,000 (as calculated above). If the mandatory prepayment provision applies in full, the required prepayment would be 50% of $416,700,000, or approximately $208,350,000. This is modestly in excess of the planned $200,000,000 voluntary prepayment. However, the definition of "Net Cash Proceeds" in the Corporate Credit Agreement permits a deduction for amounts used for capital expenditures or investments permitted under the Corporate Credit Agreement within 270 days of receipt. Because the Company intends to apply approximately $100,000,000 of Net Cash Proceeds to construction costs for the Cimarron Solar project (which constitutes a permitted investment in a wholly owned subsidiary), the Net Cash Proceeds subject to the mandatory prepayment sweep may be reduced to approximately $316,700,000 ($416,700,000 less $100,000,000 allocated to Cimarron Solar), resulting in a mandatory prepayment obligation of approximately $158,350,000, which would be fully satisfied by the planned $200,000,000 voluntary prepayment.
In the alternative, the consent solicitation to Veltrano National Bank should include a request to confirm that the IPO proceeds allocated to the Term Loan B prepayment and the Cimarron Solar construction satisfy the mandatory prepayment obligations under the Corporate Credit Agreement and that no additional prepayment is required. The Use-of-Proceeds / Debt Repayment Mechanics Memorandum (Doc. 115) contains a more detailed analysis of the interaction between voluntary and mandatory prepayment mechanics, including wire-transfer procedures and payoff-letter requirements.
Wire Instructions and Procedures: Funds for the Term Loan B prepayment are to be wired to Veltrano National Bank in accordance with the payoff letter procedures set forth in the Corporate Credit Agreement. A payoff letter will need to be requested from Veltrano National Bank no later than three (3) business days prior to the anticipated closing date of the Offering. The payoff letter will set forth the exact payoff amount, including accrued and unpaid interest, the prepayment premium, and any other amounts owing in respect of the portion of the Term Loan B being prepaid.
Post-Prepayment Outstanding Balance: Following the application of approximately $200,000,000 in voluntary prepayment, the outstanding principal balance of the Term Loan B will be reduced from approximately $612,500,000 (as of December 31, 2021) to approximately $412,500,000, subject to adjustment for any interim quarterly amortization payments made between December 31, 2021 and the closing date of the Offering. Assuming the IPO closes in Q3 or Q4 2022, two to three additional quarterly amortization payments of $1,625,000 each will have been made, reducing the pre-prepayment outstanding balance to approximately $609,250,000–$610,875,000, and the post-prepayment balance to approximately $409,250,000–$410,875,000.
3. Change-of-Control and Consent Requirements
Because the Term Loan B is governed by the same Corporate Credit Agreement as the Revolving Credit Facility, the Change of Control definition, consent requirements, and IPO-related notice provisions described in Sections II.A.2 and II.A.3 above apply equally to the Term Loan B. The consent request letter (Doc. 109) and consent form (Doc. 110) address both the Revolving Credit Facility and the Term Loan B simultaneously, and a single consent from the requisite lenders under the Corporate Credit Agreement will cover both facilities.
We note that the definition of "Required Lenders" under the Corporate Credit Agreement means lenders holding more than 50% of the sum of (a) the aggregate outstanding Revolving Credit Commitments and (b) the aggregate outstanding principal amount of the Term Loan B. Because the Term Loan B represents a significantly larger portion of total commitments and outstandings than the Revolving Credit Facility, the Term Loan B lenders will effectively control the consent outcome. Our preliminary review of the lender roster indicates that the largest three Term Loan B lenders (including certain CLO vehicles managed by the same asset managers) hold approximately 38% of the outstanding Term Loan B principal, and their support will be critical to obtaining the requisite consent.
Cross-reference to the Lender Consent Analysis Memorandum (Doc. 108), which contains a lender-by-lender analysis of the Term Loan B syndicate and a recommended consent solicitation strategy.
4. Financial Covenant Impact Post-IPO
The completion of the IPO and the application of approximately $200,000,000 of primary offering proceeds to prepay a portion of the Term Loan B will have a meaningful positive impact on the Company's consolidated financial covenants. We summarize the expected pro forma impact as follows:
Pro Forma Leverage Ratio: Based on the Company's Consolidated Adjusted EBITDA for the trailing twelve-month period ended December 31, 2021, of approximately $312,000,000, and assuming the application of $200,000,000 in Term Loan B prepayment and no change in other indebtedness or unrestricted cash, the pro forma Consolidated Total Net Leverage Ratio would improve as follows:
Pro forma unrestricted cash includes ~$71,700,000 of net proceeds for general corporate purposes, in addition to existing unrestricted cash of ~$50,000,000.
The pro forma leverage ratio of approximately 4.45x represents a significant improvement from the current ratio of approximately 5.32x and provides additional headroom under the 5.50x covenant maximum. Based on the step-down schedule, the Company will need to comply with the 5.25x covenant level beginning June 30, 2023, and the 4.45x pro forma ratio provides approximately 0.80x of headroom relative to that requirement.
Pro Forma Interest Coverage Ratio: The $200,000,000 reduction in Term Loan B principal will reduce annual cash interest expense by approximately $10,000,000–$11,000,000 (based on the current SOFR + 3.50% applicable rate), further improving the Consolidated Interest Coverage Ratio from approximately 2.75x to approximately 3.05x, well above the 2.00x covenant minimum.
Covenant Headroom Analysis: The post-IPO financial profile will provide CBR with significantly improved covenant headroom, which will support the Company's growth strategy and pipeline development activities. We recommend that the MD&A section of the Registration Statement include a discussion of the Company's expected post-IPO leverage profile and covenant compliance.
III. Project-Level Debt
A. Construction-to-Term Facility — Mesquite Wind
1. Summary of Terms
The Mesquite Wind construction-to-term credit facility (the "Mesquite Wind Facility") is governed by that certain Credit Agreement, dated as of September 1, 2021, among Mesquite Wind Holdings LLC ("Mesquite SPV"), as borrower, the lenders party thereto from time to time, and Prairie Commercial Bank, N.A., as administrative agent and collateral agent (as amended, restated, supplemented, or otherwise modified from time to time, the "Mesquite Wind Credit Agreement"). The principal terms of the Mesquite Wind Facility are as follows:
Borrower: Mesquite Wind Holdings LLC ("Mesquite SPV"), a limited liability company organized under the laws of the State of Texas and a wholly owned subsidiary of CB Operating. Mesquite SPV is a single-purpose entity formed for the purpose of owning, developing, constructing, and operating the Mesquite Wind project.
Lender / Administrative Agent: Prairie Commercial Bank, N.A., 2200 Ross Avenue, Suite 3600, Dallas, Texas 75201. The primary contact for purposes of the IPO notice process is Brent Hollowell, Senior Vice President, Project Finance Group (tel: (214) 555-7130; email: b.hollowell@prairiecommercial.com).
Facility Type: Construction-to-term project finance credit facility, consisting of (a) a construction loan facility available during the construction period, which converts to (b) a term loan facility upon satisfaction of the conversion conditions.
Aggregate Commitment Amount: $165,000,000.
Construction Period: The construction period under the Mesquite Wind Credit Agreement extends through the earlier of (a) the date on which all construction conversion conditions have been satisfied (the "Conversion Date") and (b) the date that is 18 months after the closing date of the Mesquite Wind Credit Agreement (i.e., March 1, 2023), subject to extension under certain circumstances (the "Construction Period Deadline"). The Mesquite Wind project is expected to achieve commercial operation (the "COD") in Q3 2022, and the Conversion Date is expected to occur promptly thereafter.
Conversion Date: The construction loan is expected to convert to a term loan upon the satisfaction of specified conversion conditions, which include (among others): (a) achievement of substantial completion of the project; (b) receipt of all material governmental approvals and permits necessary for the operation of the project; (c) execution of all power purchase agreements on final terms; (d) delivery of an independent engineer's completion certificate; (e) satisfaction of a minimum debt service coverage ratio of 1.20:1.00 on a projected basis; and (f) delivery of updated legal opinions. Based on the current construction schedule, the Conversion Date is expected to occur on or before December 31, 2024 (which represents the outside date for conversion under the credit agreement, as extended from the initial conversion deadline to allow for commissioning and testing).
Term Loan Maturity: Following conversion, the term loan has a final maturity date of September 1, 2039 (18 years from the closing date), which is consistent with the remaining term of the project's principal power purchase agreement.
Interest Rate: During the construction period, amounts drawn under the Mesquite Wind Facility bear interest at a rate per annum equal to Adjusted Term SOFR plus 2.25%. Following conversion to the term loan, the applicable margin decreases to SOFR plus 1.75%, reflecting the reduced risk profile of an operating project with contracted revenue. Interest during the construction period is capitalized and added to the outstanding principal balance.
Security: The obligations under the Mesquite Wind Credit Agreement are secured by a first-priority lien on substantially all assets of Mesquite Wind Holdings LLC, including: (a) all project assets, including turbines, towers, foundations, and balance-of-plant equipment; (b) all real property interests, including the lease of approximately 32,000 acres in Oldham County, Texas; (c) all project agreements, including the power purchase agreements (PPAs) with Permian Electric Cooperative and Lone Star Energy Corp.; (d) all interconnection agreements with the Electric Reliability Council of Texas (ERCOT); (e) all revenue accounts, reserve accounts, and depositary accounts; (f) all insurance proceeds; and (g) the equity interests in Mesquite SPV held by CB Operating.
Non-Recourse Structure: The Mesquite Wind Facility is structured as a non-recourse project financing. Prairie Commercial Bank and the term loan lenders have recourse solely to the assets of Mesquite SPV and do not have recourse to CBR, CBR Holdings, or CB Operating (as the direct parent of Mesquite SPV), except with respect to customary sponsor-support obligations, which include:
(a) Completion Guaranty: CB Operating has provided a completion guaranty pursuant to which it guarantees that the Mesquite Wind project will achieve substantial completion by the Construction Period Deadline and that all construction conversion conditions will be satisfied. The completion guaranty is limited to the amount necessary to fund any construction cost overruns and to bring the project to completion, and terminates upon the conversion of the construction loan to the term loan.
(b) Cost-Overrun Guaranty: CB Operating has agreed to fund, or cause to be funded, any construction cost overruns in excess of the project budget, up to an aggregate amount of $20,000,000. Cost overruns in excess of $20,000,000 constitute an event of default under the Mesquite Wind Credit Agreement.
(c) Equity Contribution Commitment: CB Operating has committed to contribute equity of approximately $55,000,000 to Mesquite SPV in accordance with the equity contribution agreement, representing the sponsor equity required for the project in addition to the debt financing provided by the Mesquite Wind Facility. As of December 31, 2021, approximately $40,000,000 of this commitment had been funded, leaving an unfunded equity commitment of approximately $15,000,000.
Project: The Mesquite Wind project is a 420 MW onshore wind generation facility located in Oldham County, Texas, approximately 40 miles west of Amarillo. The project consists of 140 Brightwater Enterprises 3.0-154 wind turbine generators and associated balance-of-plant infrastructure. The project's output is contracted under two long-term power purchase agreements: (i) a 15-year PPA with Permian Electric Cooperative for 250 MW and (ii) a 12-year PPA with Lone Star Energy Corp. for 170 MW. The project is expected to achieve commercial operation in Q3 2022.
2. Change-of-Control / Transfer Restrictions
The Mesquite Wind Credit Agreement contains change-of-control and transfer restriction provisions that are relevant to the IPO analysis.
Definition of "Change of Control": Section 1.01 of the Mesquite Wind Credit Agreement defines "Change of Control" as the occurrence of any of the following events:
(a) CB Operating ceases to directly own and control 100% of the membership interests of Mesquite SPV;
(b) CBR Holdings LLC ceases to directly own and control 100% of the membership interests of CB Operating;
(c) CBR ceases to directly or indirectly own and control 100% of the equity interests of CBR Holdings LLC; or
(d) A "Sponsor Change of Control" occurs.
A "Sponsor Change of Control" is defined as the occurrence of any event that would constitute a "Change of Control" (as defined in the Corporate Credit Agreement). In other words, the Mesquite Wind Credit Agreement incorporates by reference the Change of Control definition from the corporate-level credit agreement, effectively looking through to changes in ownership at the ultimate parent level.
Analysis — IPO Impact: Because the Mesquite Wind Credit Agreement cross-references the Change of Control definition in the Corporate Credit Agreement, the analysis of whether the IPO constitutes a Change of Control at the project level is the same as the analysis set forth in Section II.A.2 above. To the extent the IPO triggers a Change of Control under the Corporate Credit Agreement (due to the potential decrease in Pinnacle Vista's ownership below the Permitted Holders threshold), the same event would constitute a Sponsor Change of Control under the Mesquite Wind Credit Agreement.
However, we note an important distinction. Clauses (a) through (c) of the Mesquite Wind Change of Control definition are not triggered by the IPO, because the direct and indirect ownership chain from CBR through CBR Holdings to CB Operating to Mesquite SPV remains unchanged. The IPO involves the issuance of new shares by CBR to public investors; it does not alter the 100% ownership of CBR Holdings by CBR, the 100% ownership of CB Operating by CBR Holdings, or the 100% ownership of Mesquite SPV by CB Operating. Only clause (d) — the Sponsor Change of Control — is potentially triggered.
Consequence of Sponsor Change of Control: Under Section 8.01(j) of the Mesquite Wind Credit Agreement, a Sponsor Change of Control constitutes an Event of Default, which would entitle Prairie Commercial Bank to accelerate the outstanding obligations under the facility. However, Section 7.08 of the Mesquite Wind Credit Agreement provides that a Sponsor Change of Control does not automatically constitute an Event of Default if (i) the Borrower delivers written notice to the Administrative Agent at least 15 business days prior to the occurrence of such Sponsor Change of Control, and (ii) the successor sponsor (or the existing sponsor following such event) satisfies certain minimum financial capacity tests (net worth of at least $500,000,000 and a corporate credit rating of at least BB/Ba2). Following the IPO, CBR's net worth is expected to exceed $1,500,000,000, and the Company's anticipated corporate credit rating (based on preliminary discussions with rating agencies) is expected to be at least BB+. Accordingly, the Sponsor Change of Control notice-and-qualification procedure should apply, and full lender consent may not be required under the Mesquite Wind Facility.
Conclusion: The IPO requires advance written notice to Prairie Commercial Bank under the Mesquite Wind Credit Agreement. Full lender consent is likely not required, provided that the notice and qualification conditions of Section 7.08 are satisfied. A draft notice letter from Mesquite Wind Holdings LLC to Prairie Commercial Bank has been prepared (Doc. 111) and is pending transmission.
3. IPO Notice Requirements
Section 6.02(f) of the Mesquite Wind Credit Agreement requires the Borrower to provide prompt written notice to the Administrative Agent of any event that could reasonably be expected to result in a Sponsor Change of Control. In addition, Section 7.08 requires advance written notice of at least fifteen (15) business days prior to the closing of any transaction that would result in a Sponsor Change of Control.
A draft notice letter from Mesquite Wind Holdings LLC (executed by an authorized officer of CB Operating, as managing member of Mesquite SPV) to Prairie Commercial Bank, N.A. has been prepared and is maintained in the electronic data room as Doc. 111. The notice letter describes the proposed IPO, confirms that the direct and indirect ownership chain of Mesquite SPV will remain unchanged, and provides the financial information necessary to satisfy the successor-sponsor qualification requirements of Section 7.08. The notice letter is pending transmission and will be sent promptly upon any determination to reactivate the offering.
4. Completion Guaranty / Sponsor Support
Impact of IPO on Completion Guaranty: CB Operating serves as the completion guarantor under the Mesquite Wind Credit Agreement. The IPO does not directly affect CB Operating's legal identity, organizational structure, or financial capacity. However, the completion guaranty contains a representation that the completion guarantor has a net worth of at least $250,000,000 and a requirement that the completion guarantor maintain certain financial ratios during the construction period. Following the IPO, CB Operating's financial capacity is expected to improve as a result of the equity contributions flowing from the primary offering proceeds. We do not anticipate that the IPO will adversely affect CB Operating's ability to perform its obligations under the completion guaranty.
Unfunded Equity Contribution Obligations: As noted in Section III.A.1 above, CB Operating has an unfunded equity commitment of approximately $15,000,000 to Mesquite SPV. This unfunded commitment is a contingent obligation of CB Operating and should be disclosed in the Registration Statement, both in the Description of Indebtedness section and in the notes to the consolidated financial statements. The Company's independent auditor, Severin Beck CPAs LLP, should confirm that this commitment is appropriately disclosed in the financial statements.
Insurance Requirements: The Mesquite Wind Credit Agreement requires Mesquite SPV to maintain (a) builder's risk insurance during the construction period with coverage of not less than 100% of the replacement cost of the project, (b) commercial general liability insurance with a combined single limit of not less than $50,000,000 per occurrence and $100,000,000 in the aggregate, (c) property insurance following COD, and (d) business interruption insurance. We have confirmed with the Company that all required insurance policies are in place and current. The IPO does not affect the insurance requirements.
B. Construction-to-Term Facility — Cimarron Solar
1. Summary of Terms
The Cimarron Solar construction-to-term credit facility (the "Cimarron Solar Facility") is governed by that certain Credit Agreement, dated as of November 15, 2021, among Cimarron Solar Development LLC ("Cimarron SPV"), as borrower, the lenders party thereto from time to time, and Prairie Commercial Bank, N.A., as administrative agent and collateral agent (as amended, restated, supplemented, or otherwise modified from time to time, the "Cimarron Solar Credit Agreement"). The structural and commercial terms of the Cimarron Solar Facility are substantially similar to those of the Mesquite Wind Facility, and we describe below the key terms and differences.
Borrower: Cimarron Solar Development LLC ("Cimarron SPV"), a limited liability company organized under the laws of the State of New Mexico and a wholly owned subsidiary of CB Operating. Cimarron SPV is a single-purpose entity formed for the purpose of owning, developing, constructing, and operating the Cimarron Solar project.
Lender / Administrative Agent: Prairie Commercial Bank, N.A. (same lender and agent as the Mesquite Wind Facility). The primary contact is Brent Hollowell, Senior Vice President, Project Finance Group.
Facility Type: Construction-to-term project finance credit facility.
Aggregate Commitment Amount: $143,000,000.
Construction Period: The construction period extends through the earlier of (a) the date on which all construction conversion conditions have been satisfied and (b) the date that is 18 months after the closing date of the Cimarron Solar Credit Agreement (i.e., May 15, 2023), subject to extension. The Cimarron Solar project is expected to achieve commercial operation in Q1 2023.
Conversion Date: The construction loan is expected to convert to a term loan upon satisfaction of conversion conditions substantially similar to those described for the Mesquite Wind Facility, including achievement of substantial completion, receipt of governmental approvals, execution of power purchase agreements on final terms, delivery of an independent engineer's certificate, satisfaction of a minimum DSCR of 1.25:1.00, and delivery of legal opinions. The Conversion Date is expected to occur on or before March 31, 2025 (the outside date for conversion under the credit agreement).
Term Loan Maturity: Following conversion, the term loan has a final maturity date of November 15, 2041 (20 years from the closing date), consistent with the remaining term of the project's principal power purchase agreement with Sunstone Municipal Utility District.
Interest Rate: During the construction period, amounts drawn bear interest at Adjusted Term SOFR plus 2.50%. Following conversion to the term loan, the applicable margin decreases to SOFR plus 2.00%. As with the Mesquite Wind Facility, interest during the construction period is capitalized.
Security: First-priority lien on substantially all assets of Cimarron Solar Development LLC, including: (a) all project assets, including solar panels, inverters, tracking systems, and balance-of-plant equipment; (b) all real property interests, including approximately 2,800 acres in Doña Ana County, New Mexico; (c) all project agreements, including the 20-year PPA with Sunstone Municipal Utility District and a 15-year PPA with Rio Bravo Electric Authority; (d) all interconnection agreements with Hollowell Group; (e) all revenue accounts, reserve accounts, and depositary accounts; (f) all insurance proceeds; and (g) the equity interests in Cimarron SPV held by CB Operating.
Non-Recourse Structure: The Cimarron Solar Facility is structured as a non-recourse project financing, with recourse solely to the assets of Cimarron SPV, except for customary sponsor-support obligations:
(a) Completion Guaranty: CB Operating has provided a completion guaranty for the Cimarron Solar project, substantially similar to the completion guaranty provided for the Mesquite Wind project.
(b) Cost-Overrun Guaranty: CB Operating has agreed to fund cost overruns up to $15,000,000.
(c) Equity Contribution Commitment: CB Operating has committed to contribute equity of approximately $75,000,000 to Cimarron SPV. As of December 31, 2021, approximately $22,000,000 of this commitment had been funded, leaving an unfunded equity commitment of approximately $53,000,000. As discussed below, approximately $100,000,000 of the primary offering proceeds is intended to fund the remaining construction costs of the Cimarron Solar project, which will include satisfaction of this unfunded equity commitment and additional equity contributions.
Project: The Cimarron Solar project is a 350 MW utility-scale solar photovoltaic generation facility located in Doña Ana County, New Mexico, approximately 20 miles south of Las Cruces. The project utilizes single-axis tracking systems and bifacial solar modules manufactured by Greaves Enterprises The project's output is contracted under two long-term power purchase agreements: (i) a 20-year PPA with Sunstone Municipal Utility District for 200 MW and

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