Chemtrade Logistics to redeem, buy back debentures

Executive Summary

• Chemtrade Logistics Income Fund announced the mandatory redemption of its 6.25% convertible unsecured subordinated debentures due August 31, 2027, and initiated a substantial issuer bid to purchase these debentures at a premium prior to redemption.
• The Fund also launched a substantial issuer bid for its 7.00% convertible unsecured subordinated debentures due June 30, 2028, offering holders the choice between a cash payment or an exchange for new non-convertible debentures.
• The strategic move aims to optimize the capital structure, eliminate potential dilution from conversions, and reduce exposure to convertible debt instruments by replacing them with non-dilutive senior notes or cash.

Key Details

• 2027 Debentures (6.25% due Aug 31, 2027):

  • Mandatory Redemption: All outstanding 2027 debentures will be redeemed on November 4, 2025, at par value plus accrued interest ($1,011.13 per $1,000 principal).
  • Issuer Bid: The Fund offers to purchase up to all outstanding 2027 debentures at a cash price of $1,340 per $1,000 principal amount, plus accrued interest.
  • Bid Expiration: The 2027 offer expires at 5 p.m. Eastern Time on November 3, 2025.
  • Outstanding Principal: $129.93 million as of September 19, 2025.
  • Market Price Context: Closing price on Sept 19, 2025, was $1,290.70 per $1,000 principal.
  • Non-Tendered Units: Any 2027 debentures not tendered will be redeemed at par ($1,011.13) on Nov 4, 2025.

• 2028 Debentures (7.00% due June 30, 2028):

  • Issuer Bid: The Fund offers to purchase up to all outstanding 2028 debentures.
  • Cash Election Option: Holders may elect to receive $1,200 in cash per $1,000 principal amount, plus accrued interest.
  • Debenture Election Option: Holders may elect to receive $1,000 principal amount of new 7.00% unsecured subordinated debentures due June 30, 2028, plus $200 in cash, plus accrued interest.
  • New Debenture Terms: The new debentures are substantially similar to the 2028 debentures but are non-convertible and have restricted redemption rights (only redeemable after a change of control).
  • Minimum Tender Condition: The debenture election is conditional on at least $30 million in principal amount being validly tendered under this election.
  • Bid Expiration: The 2028 offer expires at 5 p.m. Eastern Time on November 3, 2025, unless extended.
  • Outstanding Principal: $110 million as of September 19, 2025.
  • Market Price Context: Closing price on Sept 19, 2025, was $1,142.90 per $1,000 principal.

• Financing and Rationale:

  • Funding: Cash portions for both offers will be financed from existing credit facilities and/or cash on hand. The Fund has sufficient availability under its credit facilities.
  • Strategic Goal: Eliminate dilution from convertible instruments and optimize capital structure by replacing dilutive debt with non-dilutive instruments (e.g., senior unsecured notes).
  • Valuation: PricewaterhouseCoopers LLP provided formal valuations of the fair market value of the debentures and new debentures under Multilateral Instrument 61-101.
  • Advisers: Desjardins Capital Markets is acting as dealer-manager and financial adviser. Computershare Investor Services Inc. is the depositary.

• Administrative Updates:

  • The automatic securities purchase plan for the normal course issuer bid for units was automatically terminated.
  • The Fund will suspend further purchases under its existing normal course issuer bid until the earlier of August 18, 2026, and the date both offers have expired or terminated.

Notable Quotes

• "The board's decision to offer to purchase and redeem the 2027 debentures and to offer to purchase the 2028 debentures at the stated premiums remains consistent with our ongoing strategy of optimizing our capital structure," said Rohit Bhardwaj, chief financial officer.
• "As the 2027 debentures are trading well above their par value, the redemption notice is likely to result in these debentures being converted into units to realize the price appreciation rather than being redeemed at par. We believe the fund's offer to buy both series of the debentures above their current and historic trading price provides debentureholders with a convenient option to crystallize price appreciation."
• "The introduction of the 2028 debenture election is intended to provide our debentureholders with an opportunity to exchange their convertible debentures for new non-convertible debentures bearing the same interest rate and maturity date, which we view as an efficient reallocation of capital with no material impact on the fund's overall leverage."