WSJ: Aurora Considers Dropping Bid For Eureka Energy-Source
May 21 2012 - 12:45AM
Dow Jones News
Aurora Oil & Gas Ltd. (AUT.AU) may drop its A$107 million
(US$105.5 million) cash offer for Eureka Energy Ltd. (EKA.AU) on
concerns about the terms and conditions of its target's new debt
facility, a person familiar with the matter told The Wall Street
Journal.
Aurora is exploring the withdrawal of the bid because it is
worried the up to US$50 million debt facility that Eureka has lined
up through Macquarie Bank is too costly and can be drawn down
without shareholder approval, the person said.
Eureka announced it had executed the debt facility, comprising
two tranches starting with an initial US$15 million, which it aims
to use for a major drilling and well development program underway
at its Sugarloaf shale oil project in Texas.
Terms of the loan involve Eureka paying a fee to Macquarie of up
to A$4.05 million to draw down the entire US$15 million in the
first tranche, representing a cost of capital of 27%.
Drawing down the first loan is permitted before Eureka issues
options, which will dilute the interests of existing shareholders
by 8%.
In a statement earlier Monday, Eureka's acting managing director
Bill Bloking said the company is pleased to have secured funding
from Macquarie.
"It is unfortunate that the requirements for shareholder
approval have necessitated the pre-payment of a fee, but this can
be returned if shareholders approve the issue of options," Mr
Bloking said.
Eureka has rejected Aurora's cash offer of A$0.45 a share, which
was launched at the end of April.
A spokesman for Eureka Energy declined to immediately
comment.
-By Gillian Tan, of The Wall Street Journal; +61-2-82724694;
gillian.tan@wsj.com
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