After providing $200 million in critical financing and strategic guidance, Canadian alternative capital leader Third Eye Capital has exited its 2019 investment in Pieridae Energy Limited (TSX: PEA), with significant returns.
Third Eye Capital CEO Arif Bhalwani made the announcement, pointing to the investment as the type of private credit support that is a lifeline for many asset-rich Canadian companies that are typically overlooked by traditional lenders.
Surrounded by the vast energy sector of Alberta’s storied Oil Patch, Pieridae Energy Limited nonetheless found it difficult to access needed capital. Pieridae’s status as an asset-rich company in an out-of-favour industry was tailor-made for Third Eye Capital’s business model and investment strategies, says Bhalwani.
Through Erikson National Energy, Third Eye Capital made a net loan of $200 million to a subsidiary of Pieridae Energy in October of 2019, which was repaid primarily through financing from Prudential Private Capital and Voya Investment Management.
Over the course of the investment, Erikson received more than $370 million in cash payments comprising principal, interest, and fees. With Pieridae’s early repayment of the term loan, Erikson will now retain a $20 million short-term, senior secured loan at Pieridae Energy, and will maintain its estimated 15% stake in the common stock of the company.
“We backed Pieridae Energy to complete a transformational acquisition at a time when capital allocation to Canadian oil and natural gas businesses was scarce,” explained Mark Horrox, Principal at Third Eye Capital. “Our analysis proved correct and Pieridae has successfully positioned itself as an environmentally conscious market leader in Alberta’s Foothills region, delivering substantial benefits to our investors.”
Third Eye Capital provided the senior secured term loan to Pieridae to help finance its purchase of Shell Canada Energy’s midstream and upstream assets in the Southern Alberta Foothills. The transaction and term loan allowed Pieridae to retain more than 200 jobs for former Shell Canada employees.
Today, Pieridae is a major employer in the region, with roughly 300 team members. It contributes millions of dollars to the local, provincial and Canadian economies. The integration of the Shell assets has enabled Pieridae to become the largest Foothills producer in North America, growing net operating income from $25 million in 2019 to $201 million in 2022.
“The success of Third Eye Capital’s Pieridae investment not only demonstrates our ability to identify hidden gems and capitalize on market inefficiencies, but also shows how our private credit strategy empowers our borrowers and their own employees, stakeholders, and local economies,” said Bhalwani.
Founded in 2005, Toronto-based Third Eye Capital has made nearly $5 billion in lending commitments across more than 125 portfolio investments. The firm focuses on often-overlooked companies that are experiencing rapid change or stress. It describes its approach as actively engaging with a company’s key assets to bridge the gap between perceived value and actual worth, and providing access to both capital and expertise.
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