Wilks Brothers, LLC Provides Update on Calfrac Restructuring

CISCO, Texas, Dec. 4, 2020 /CNW/ - Wilks Brothers, LLC ("Wilks") responded today to the decision (the "Decision") of the Alberta Court of Appeal (the "Court") dismissing Wilks' appeal of the final order relating to Calfrac Well Services Inc.'s ("Calfrac") restructuring under the Canada Business Corporations Act ("CBCA").

Wilks respectfully, but fundamentally, disagrees with the Decision of the Court.  In particular, Wilks disagrees with the Court's determination that the discretion provided to the court under the CBCA to make "any order it sees fit", was intended to permit a CBCA applicant to substantially affect the legal rights of purportedly "unaffected" creditors through the use of "deemed waiver" clauses in a final order; particularly where those affected creditors were not provided with a vote on the transaction.    

Wilks also respectfully disagrees with the Court's finding that the CBCA (expressly reserved for solvent corporations) should be harmonized with Canada's two insolvency statutes, the Companies' Creditors Arrangement Act (CCAA) and Bankruptcy and Insolvency Act (BIA). 

The Decision is a gateway for the use of the CBCA to permit debtors to rewrite (or ignore) their contractual obligations with certain of their creditors (deemed "unaffected") under the guise of being for the benefit of all stakeholders. The Decision creates substantial uncertainty regarding the ability of affected creditors to protect their substantive legal rights, and the enforceability in Canada of market-standard and bargained-for contractual provisions, in a non-bankruptcy reorganization. The Decision represents an unprecedented extension of the use of the CBCA to compromise non-consenting creditor's legal rights who are not otherwise afforded a vote on a transaction that affects them. Wilks believes that if the Decision is allowed to stand, it will profoundly and adversely affect the Canadian capital markets and its participants and have a chilling effect on investment in, and into, Canada.

The ever-expanding use of the CBCA in every province in Canada to effect these "solvent restructurings", makes the Decision a matter of national importance. For this reason, Wilks intends to seek leave to appeal the Decision to the Supreme Court of Canada. The highest court in Canada should provide clear guidance, and certainty, on the limits – if any – of the arrangement procedures under the CBCA.

All of the actions taken by Wilks throughout the course of its principled opposition to the Calfrac restructuring were taken in reliance on rights available to it at law as a creditor and shareholder of Calfrac. These rights are provided to shareholders and creditors in order to ensure the substantive and procedural fairness of arrangements under the CBCA and were exercised by Wilks in strict compliance with such laws.

It was gratifying to Wilks that Slatter J.A. in the Court of Appeal of Alberta recognised Wilks' right to oppose the restructuring, and the positive impact that Wilks' actions had on Calfrac shareholders when he stated that "… Stakeholders are not required to acquiesce in a proposed arrangement; opposing an arrangement is not improper. If nothing else, Wilks Brothers' opposition caused Calfrac to sweeten the deal for the shareholders" (emphasis added). He also stated that:

"…although Wilks Brothers cannot assert any right to veto the Arrangement, it was entitled to pursue what it perceived to be its own best interests…Wilks Brothers was entitled to try to convince the other security holders that they would be better off financially under a sale scenario than under the Arrangement. Wilks Brothers was not successful, but it was not improper for it to try…"

And further:

"…There are extreme cases where the motivations of a particular stakeholder have been held to amount to an "improper purpose". However, merely opposing an arrangement, or promoting an interest that differs from that of other stakeholders does not qualify. Merely attempting to direct the corporation into liquidation also does not qualify, as it is open to any stakeholder to conclude that its economic interests will best be served by winding up rather than arrangement".

Wilks also announced today that, as the conditions to its formal take over bid dated September 9, 2020 are not capable of being fulfilled, it will not take up and pay for any Calfrac Shares deposited pursuant to the bid and the bid should be regarded as withdrawn and terminated.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain information in this Press Release may constitute "forward-looking information", as such term is defined in applicable Canadian securities legislation, about the objectives of Wilks as they relate to Calfrac. All statements other than statements of historical fact may be forward-looking information. Forward-looking information is often, but not always, identified by words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions.

Material factors or assumptions that were applied in providing forward-looking information include, but are not limited to: the intention of Wilks to seek leave to appeal the Decision to the Supreme Court of Canada.

Forward-looking information contained in this Press Release reflects current reasonable assumptions, beliefs, opinions and expectations of Wilks regarding future events and speaks only as of the date of this  Press Release. Such forward-looking information is based on currently publicly available competitive, financial and economic data and operating plans and is subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.

Should any factor or any assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the events predicted. All of the forward-looking information reflected in this Press Release is qualified by these cautionary statements. Forward-looking information is provided, and forward-looking statements are made as of the date of this Press Release and except as may be required by applicable law, Wilks disclaims any intention and assumes no obligation to publicly update or revise such forward-looking information or forward-looking statements whether as a result of new information, future events or otherwise.

SOURCE Wilks Brothers, LLC.

Matt Wilks, 817.850.3600, [email protected]