20-F: Crown LNG Completes Business Combination with Catcha Investment Corp, Secures Financing

Crown LNG Holdings Limited finalizes its business combination with Catcha Investment Corp, paving the way for Nasdaq listing and securing approximately $7.9 million in gross proceeds through various financing agreements.

Summary

• Crown LNG Holdings Limited completed its business combination with Catcha Investment Corp on July 9, 2024.
• The merger resulted in Catcha becoming a wholly-owned subsidiary of Crown LNG Holdings Limited (PubCo).
• PubCo issued ordinary shares and warrants in exchange for Catcha's outstanding securities.
• In connection with the closing, PubCo secured approximately $7.9 million in gross proceeds through various financing agreements.
• These agreements include convertible promissory notes, private placements, and a securities lending agreement.
• The company also entered into agreements to defer payment of transaction expenses, including issuing convertible promissory notes to vendors.
• The company's ordinary shares and warrants are now listed on the Nasdaq under the symbols CGBS and CGBSW, respectively.
• The business combination was accounted for as a capital reorganization, with Crown as the accounting acquirer.
• The company plans to use the proceeds from the sale of the Notes to fund its general working capital and to make certain expenses as contemplated pursuant to the terms of Merger Agreement.

Sentiment

Score: 4

Explanation: The document contains a mix of positive and negative elements. The completion of the business combination and securing financing are positive, but the company's financial condition and the risks associated with convertible notes and potential dilution are concerning. The overall sentiment is cautiously optimistic.

Positives

• Successful completion of the business combination provides Crown LNG access to public markets.
• Securing $7.9 million in gross proceeds strengthens the company's financial position.
• Listing on Nasdaq enhances the company's visibility and access to capital.
• Deferring vendor payments provides short-term cash flow relief.
• The company has the option to redeem the April 2024 Notes in full at any time after the Issuance Date and prior to maturity thereof upon 10 Trading Days notice for cash at a redemption price equal to 110% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon.

Negatives

• The company has a significant number of outstanding convertible notes which will be subject to reset provisions to the conversion price.
• The company may not be able to draw down the full amount of the capital available under the financing agreements it has entered into, should the required terms and conditions under the respective terms and conditions of the financing agreements not be met.
• The company may not have sufficient funds to develop its projects, service our expenses and other liquidity needs and may require additional capital, and our independent registered public accountants and management have determined that there is substantial doubt as to Crowns ability to continue as a going concern.

Risks

• The conversion of convertible notes at a reduced conversion price could result in significant dilution and an adverse impact on the share price.
• The company's ability to draw down the full amount of capital under financing agreements is subject to meeting specific terms and conditions.
• A decline in the value of pledged shares could reduce the amount available under the securities lending agreement.
• The company may not have sufficient funds to develop its projects and may require additional capital.
• There is substantial doubt about the company's ability to continue as a going concern.
• The issue sizes of the third and subsequent tranches are subject to certain trading volume conditions of Pubco shares.

Future Outlook

The company expects to continue incurring significant expenses and operating losses for the foreseeable future until it successfully completes its LNG terminals, secures commercial contracts, and commences operations. The company anticipates the Kakinada and Grangemouth Projects to be operational at the earliest in 2029 and 2027, respectively, and to begin generating revenues around that period, if at all.

Industry Context

The announcement aligns with the broader industry trend of increasing LNG demand and the need for reliable LNG infrastructure, particularly in harsh weather locations. The company's focus on offshore LNG terminals positions it to capitalize on the growing demand for LNG and the advantages of offshore technology over onshore solutions.

Comparison to Industry Standards

• The company's strategy of securing take-or-pay style fixed-price contracts is a common practice in the LNG industry to mitigate commodity price and volume risk.
• The company's focus on offshore LNG terminals aligns with the industry's increasing interest in offshore solutions due to regulatory demands, environmental impact, land acquisition, and security requirements.
• The company's target of achieving FID for its projects by 2027 and 2029 is consistent with the typical development timelines for large-scale LNG infrastructure projects.
• The company's reliance on project financing through a mix of debt and equity issuance at the project level is a common industry practice for such infrastructure projects.
• Comparible companies include New Fortress Energy, Excelerate Energy, and Golar LNG, which are all involved in the development and operation of LNG infrastructure.

Related Party Transactions

• The Sponsor transferred 6,511,627 Catcha Class A Ordinary Shares to third parties who provided financing in connection with the Business Combination, Transaction Expense Reduction as well as settlement of liabilities, including on behalf of Crown.
• From June 18, 2024 to June 26, 2024, Pubco issued five convertible promissory notes to the vendors Ernst & Young Advokatfirma AS, Wikborg Rein Advokatfirma AS, Ernst & Young AS, Ogier (Jersey) LLP, and Nelson Mullins Riley Scarborough LLP (each a Vendor, and collectively, the Vendors), agreeing to defer payment for services provided (the Convertible Vendor Notes).
• On July 8, 2024, PubCo, Catcha, Sponsor and Polar Multi-Strategy Master Fund (Polar) entered into an Amendment (the March Amendment) to the March 2023 Subscription Agreement, which was originally entered into between Catcha, Sponsor and Polar, pursuant to which Polar provided $300,000 to Catcha (the March Capital Contribution) for working capital purposes.
• On July 8, 2024, PubCo, Catcha, Sponsor and Polar entered into an Amendment (the October Amendment) to the October 2023 Subscription Agreement, which was originally entered into between Catcha, Sponsor and Polar, pursuant to which Polar provided $750,000 to Catcha (the October Capital Contribution) for working capital purposes.
• On July 8, 2024, PubCo and Polar entered into a Securities Purchase Agreement, pursuant to which PubCo shall issue Promissory Notes for an aggregate purchase price of up to $525,000, divided into two separate notes, with an aggregate principal amount of $583,334, reflecting original issue discount of 10%.
• On June 25, 2024, Cohen & Company Capital Markets division (CCM), Catcha and PubCo entered into an Amendment (CCM Amendment) to the Engagement Letter, which was originally entered into between CCM and Catcha on May 18, 2023.

Stakeholder Impact

• Shareholders face potential dilution from the conversion of convertible notes.
• Employees may experience changes in compensation and benefits as the company transitions to a public entity.
• Customers and suppliers may see changes in the company's operations and financial stability.
• Creditors face increased risk due to the company's high debt levels and uncertain financial outlook.

Next Steps

• File a registration statement with the SEC for the resale of PIPE Shares.
• Continue to seek opportunities for raising additional funds through potential alternatives, which may include, among other things, the issuance of equity, equity-linked, and/or debt securities, debt financings or other capital sources and/or strategic transactions.
• The company's management will continue to evaluate the impact of persistent inflation and rising interest rates, financial market instability, including the recent bank failures, the lingering effects of the COVID-19 pandemic and certain geopolitical events, including the current wars.

Key Dates

Keywords

Business Combination, Crown LNG, Catcha Investment Corp, Financing, Convertible Notes, Nasdaq, Merger, LNG, Warrants, PIPE