December Conference Call Summary

ZooShare Community Bond Call – Summary

(ZooShare Member Newsletter, originally sent December 9th, 2019)

Dear ZooShare supporter,

Thank you to those of you who took the time to join us for last week’s Community Bond Conference Call.

The recording (51 minutes in total) can be found here.

If you don’t have time to listen to the call, here’s a brief summary of the main points:

  • The call was for discussion purposes only.  The plan to pay down accrued interest and re-finance maturing bonds with a new round of bonds has been presented to the ZooShare Board but yet not approved.
  • ZooShare has 3 series of Community Bonds outstanding (7%, 6% and 5%) totalling $3.8 million that will begin to mature in October of 2020, and all bonds maturing by July of 2023.
  • Our offering statement and marketing materials stated that we wouldn’t be able to pay out accrued interest until the project began to operate and generate cash flow.  Due to various reasons it has taken us longer to start operations than originally thought.
  • The recent investment from Oshawa Power will enable the project to complete construction, will facilitate repayment of our obligations to members, and has also secured an experienced operator in exchange for a 49% stake in the project.
  • Once construction is complete in October or November 2020, ZooShare will distribute all remaining funds it has available as accrued interest payments. Depending on the final construction cost, the projected funds should be sufficient to get current with all community bondholders.
  • Since the first bonds begin to mature in October 2020, we will need to refinance those as the co-op will not have sufficient cash flow to also pay down principal right when the plant is starting to operate.
  • Thought not yet decided by the Board, our current plan is that the new bonds will be issued towards mid 2020, and be of two types:
    ◦ a 5%, 5 year bond
    ◦ a 5.5% 10 year bond
  • We will offer these bonds to existing bondholders first, and will then offer them to foundations and other interested investors if additional funds are required. Existing bondholders will have the option to re-invest some or all of their principal and accrued interest.
  • We will do our best to accommodate redemption requests, however, we will be limited to the amount of funds we are able to secure from new investors.
  • Going forward, the co-op’s 51% stake in the project will provide sufficient cash to cover ongoing interest payments and allow the co-op to redeem a small amount of bonds year to year.
  • Furthermore, in the next 5 years, Oshawa Power intends to increase its investment in the project up to a maximum of 75%.  These future purchases of the co-op’s shares will give the co-op additional cash which it may use to re-invest in the expansion of the plant or to further redeem Community Bonds

Questions & Answers:

  1. Are early redemptions possible? Is there a possibility to pay out interest on the interest outstanding? A: No, we won’t have the cash
  2. Will the new bonds pay interest annually? A: Yes, once the plant begins operations, we will make annual payments as originally intended.
  3. Is RRSP eligibility still a possibility? A: Yes, we will go through the process of making the bonds RRSP eligible, but it is not in our control if your bank will accept them.  As part of this process we will work with our partners at Tapestry Capital to find an institution who allows members to hold ZooShare bonds.
  4. Is there a possibility that no new investments come in? What if redemption requests are greater than available funds? What kind of foundation interest has there been? A: The possibility that no new investors come in exists, but based on the discussions we’ve had to date, it is only a remote possibility. Multiple foundations have contacted us to invest in the next issuance of bonds, but it is hard to say for certain how much could be raised through this avenue.  If redemption requests are greater than available funds, bondholders will have to stay in until we have the cash to redeem those bonds.
  5. Do you anticipate that the bondholders will have to take any haircuts? A: No, our plans involve repaying all funds borrowed from the membership.  The primary give from bondholders will be patience on repayment, but all funds owing will eventually be repaid.
  6. Are any other grants expected to come in? A: The possibility exists as the federal government is focused on climate change and solutions like ours, but we are not assuming any additional grants are made.  If a program opens that is a fit, we will certainly apply.
  7. How is construction going? Is the necessary feedstock under contract? A: Construction is going well.  We have had a couple of minor delays due to the wet Fall weather, but nothing major. We will of course be receiving 11% of the feedstock from the Zoo, and continue to hold a contract with Canada’s largest grocer for about 30% of the remaining feedstock requirements.  We are in discussions with waste haulers for the remaining volumes, but unlike previous communications on this topic, we are in a stronger negotiating position now that the plant is under construction and financed.  It still remains very difficult to get a multi-year commitment from a waste hauler, but we no longer need those types of commitments as we moved away from long term debt financing with our Oshawa Power partnership.  Now we can take the material we need at the best possible price from year to year.
  8. If the 5% interest started to accrue to the Series 3 bonds in July of 2018, why did my 2018 T5 only reflect a 0.5% interest rate?  A: This was an error on our part.  The interest has been accounted for and the correct amount will be reflected on your 2019 T5 (including the added 2018 interest). There is no need to refile your 2018 taxes.
  9. When will we hear about next steps? A: Our intention is to contact you around March 2020 to ask what you think your plans will be at maturity.  While not set in stone, your answers will help us to plan for and seek sufficient outside investment to cover the necessary redemptions.  We will then follow up again in June with information on the new bonds.

Thank you again to those who attended the call and sent in questions.  Please do not hesitate to reply to this message with any other questions you have.

Thank you for your ongoing patience and support,

The ZooShare Team

Daniel, Barry, Chris, John, Melissa, Newton, and Paul