TIDMINFA
RNS Number : 4915T
Infrastrata PLC
06 January 2017
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
6 January 2017
InfraStrata plc
("InfraStrata" or the "Company")
New secured loan facility
The Board of InfraStrata plc (AIM:INFA), the independent gas
storage company, is pleased to announce that it has signed a
secured loan facility agreement ("Loan Agreement") dated 5 January
2017 with Baron Oil plc ("Baron") an AIM-quoted resources
company.
Terms of the Loan Agreement
Under the terms of the Loan Agreement, Baron will provide a loan
facility of up to GBP300,000 to InfraStrata (the "Loan"), which
will be applied towards InfraStrata's working capital requirements.
The Board believes that these funds are sufficient, with existing
funds, to meet InfraStrata's minimum levels of corporate costs and
care and maintenance costs on the Islandmagee gas storage project
(the "Project") to the end of 2017. The progression of the
Front-End Engineering Design ("FEED") for the Project, as announced
on 4 November 2016, will require the securing of additional
funding, further details of which can be found below.
The Loan is for a term of 12 months from the date of the Loan
Agreement. Baron is entitled, acting in its sole discretion, to
extend the term of the Loan Agreement by an additional 12 months.
The Loan will convert to an on-demand facility, repayable at any
time following Baron's demand, with effect from 30 April 2017 in
the event that GBP3.0m of further funding, the amount required to
complete the funding for the FEED, has not been received by the
Company on or prior to that date. In the event that the Loan does
not convert to an on-demand facility, it is repayable by way of a
single, bullet repayment on the date falling 12 months from the
date of the Loan Agreement or 24 months from the date of the Loan
Agreement if Baron exercises its discretion to extend the term of
the Loan Agreement, as described above. The Company benefits from a
right to prepay the Loan, in full, at any time by giving Baron not
less than 10 business days' notice (which notice period may be
shortened with the agreement of Baron).
The Loan is subject to an interest rate of 6% of the funds drawn
down, which is payable monthly in advance (rising to 9% in a
payment default situation). The Loan is available to be utilised by
the Company during the period from (and including) the date of the
Loan Agreement to (and including) 31 December 2017.
Baron will receive an additional GBP200,000 (the "Additional
Payment") in the event of a sale or disposal by InfraStrata or its
subsidiaries, Islandmagee Storage Limited ("IMSL") and InfraStrata
UK Limited ("InfraStrata UK"), of substantially all of their
assets, which now comprise interests in the Project, and/or a
change in control of InfraStrata, IMSL or InfraStrata UK, within
two years from the date of the Loan Agreement. Any such disposal or
change of control will also trigger a mandatory prepayment of the
Loan. In the event of a partial disposal of InfraStrata, IMSL or
InfraStrata UK's interests in the Project (whereby InfraStrata and
InfraStrata UK retain control of IMSL, the company through which
InfraStrata holds its 90% interest in the Project and the operation
of the Project) the Additional Payment will be reduced to
GBP100,000, with the remaining GBP100,000 payable in the event of a
subsequent disposal or change in control of IMSL or the Project
(whereby InfraStrata or InfraStrata UK then lose control of IMSL or
the Project) during the two year period, with any such subsequent
disposal also triggering a mandatory prepayment of the Loan. The
Additional Payment is payable in the above scenarios for the full
two year period of the Loan, regardless of whether the Loan has
been repaid or prepaid during this period. Notwithstanding survival
of the Additional Payment obligation post-repayment or prepayment
of the Loan, all security granted in favour of Baron is to be
released on the repayment or prepayment of the Loan, leaving the
Additional Payment obligation as an unsecured claim.
The Loan is secured by, inter alia: (i) a first-ranking
debenture over the undertakings and assets of InfraStrata UK
Limited ("InfraStrata UK"), the wholly owned subsidiary of the
Company which owns 90% of IMSL; and (ii) charges over shares in
InfraStrata UK (granted by the Company) and IMSL (granted by
InfraStrata UK). The Loan can be repaid by InfraStrata in full at
any time during its term, which would lead to the release of the
security arrangements.
The terms of the Loan Agreement contain a number of customary
representations and warranties, information undertakings, and
general covenants, which include a negative pledge restricting the
Company and InfraStrata UK's ability to grant further security over
their assets. The terms of the Loan Agreement also impose certain
obligations and restrictions on InfraStrata and InfraStrata UK,
including, inter alia, restrictions on disposals, acquisitions and
joint ventures, further borrowing and guarantees. The Loan
Agreement contains a number of events of default, which are
summarised below. Should any of these events of default arise,
Baron will be entitled to accelerate repayment of the Loan (if it
has not already converted to an on-demand facility, as described
above) and to seek to take enforcement action under the security
granted in its favour.
The Loan Agreement contains a number of events of default, which
are detailed further below. Shareholders should be aware that a
number of the events of default contained in the Loan Agreement,
such as for example the suspension or cancellation of trading of
the Company's ordinary shares on AIM, may be triggered by the
action of third parties or circumstances not directly within the
Company's control.
In the event that an event of default occurs which cannot be
remedied and in the absence of additional financing to allow for
repayment of the Loan, then the enforcement of Baron's security
arrangements would likely result in the value attributable to
shareholders being severely reduced or potentially becoming
nil.
Summary events of default (note, unless otherwise specified, an
event of default will arise if any of these events occurs in
relation to either the Company or InfraStrata UK):
(a) Non-payment of sums due under the Loan Agreement and
security documents;
(b) Beyond a non-payment, there is a breach of any other term of
any of the documents entered into with Baron in connection with the
Loan;
(c) Misrepresentation in relation to any representation,
warranty or statement made in the documents entered into with Baron
in connection with the Loan;
(d) Suspension or cessation (or threatened suspension or
cessation) of all or a material part of business;
(e) A default under the terms of any other loan documentation
entered into with a third party;
(f) Insolvency or any distress, attachment, execution,
expropriation, sequestration or other analogous legal process being
taken against the Company's assets;
(g) Any of the security granted in favour of Baron becomes
enforceable;
(h) All or any part of the documents entered into with Baron in
connection with the Loan become invalid, unlawful, unenforceable,
terminated, disputed or cease to be effective;
(i) The Company rejects, or shows an intention to reject, the
terms of any of the documents entered into with Baron in connection
with the Loan;
(j) An event or circumstance arises which Baron (acting
reasonably) considers will materially adversely affect the Company
or InfraStrata UK's: (i) ability to perform their obligations under
the documents entered into with Baron in connection with the Loan;
(ii) the enforceability of those documents or the rights and
remedies under them; or (iii) their business;
(j) The suspension or cancellation of trading of the Company's
ordinary shares on AIM; and
(k) Qualification of financial statements by the relevant
company's auditor.
Certain of the events of default are subject to grace periods
during which the Company can seek to cure the relevant default. In
addition, a number of events of default are subject to materiality
qualifiers and financial thresholds, which must be established if
the relevant event is to constitute an event of default.
Background to and reasons for the Loan
The Board has explored various options to secure the necessary
funding for the Company's short to medium term requirements,
although as stated in the Company's announcement of 4 January 2017,
prior to the execution of the Loan Agreement the Company's working
capital position was constrained. Given these circumstances, the
Board believes that it would not be possible for the Company to
raise debt finance without the granting of security arrangements
and in the absence of such finance in the short-term the Company
would likely not be able to meet its financial commitments as they
fall due and consequently may result in an insolvency event. The
Board therefore believes that the Loan represents the best
opportunity at this time for the Company to raise funds in short
order given the circumstances and its strategy.
The Board aims to raise additional finance to repay the Loan
before 30 April 2017. However, in the event that the Loan were to
convert to an on-demand facility and Baron subsequently demanded
repayment of the Loan, then in the absence of additional financing
to allow for repayment, the enforcement of Baron's security
arrangements would likely result in the value attributable to
shareholders being severely reduced or potentially becoming
nil.
As previously announced, the Project has been awarded an EU
grant to fund up to 50% of the FEED (the "EU Grant") and been
offered conditional secured loans ("Contractor Loans") of, in
aggregate, up to GBP1.1 million from the selected FEED contractors,
the latter of which is subject to contract and securing the
remaining funding for the FEED. At present, the Contractor Loans
cannot be entered into until the Loan's security arrangements have
been released through repayment of the Loan.
At this point and as outlined in the Company's announcement on 4
November 2016, in addition to the EU Grant and the Contractor
Loans, a further amount of GBP3 million will be required to
complete the FEED and commercialisation process on the Project, of
a gross GBP6 million programme which includes funds for corporate
overheads, working capital, bridging finance on the EU grant and
repayment of the Loan. The bridging finance, which may be in the
form of debt, is required to cover the timing of receipt of funds
from the European Commission grant which is paid in two stages,
with EUR1.6 million having already been received by the Company but
which is not available to meet the Company's short term working
capital needs and can only be deployed in the delivery of the FEED
services and is therefore held as restricted cash. The balance of
the EU Grant is receivable once the FEED work has been
completed.
As referred to in the announcement on 4 January 2017, the
Company is continuing to examine its options with its advisers for
securing the necessary balance of funding to enable work to
commence on the FEED and associated activities, including
additional working capital for the Company. The Board has recently
engaged with potential investors with a view to securing the GBP3
million of balance funding and this process remains ongoing.
Further announcements will be made in due course as
appropriate.
The Front End Engineering & Design (FEED) and Insitu
Downhole Testing programme for the Islandmagee gas storage project
is co-financed by the European Union's Connecting Europe
Facility.
Disclaimer releasing the European Union from any liability in
terms of the content of the dissemination materials:
"The sole responsibility of this publication lies with the
author. The European Union is not responsible for any use that may
be made of the information contained therein."
For further information please contact:
InfraStrata plc
Stewart McGarrity, Joint Managing Director 020 8332 1200
Anita Gardiner, Joint Managing Director
Nominated Adviser and Broker - Allenby Capital Limited
Jeremy Porter / Alex Brearley / Liz Kirchner 020 3328 5656
Financial PR - Camarco
Billy Clegg / Gordon Poole 020 3757 4980
Notes:
Background on InfraStrata plc
InfraStrata is an independent gas storage company focused on the
UK and Ireland.
Further information is available on the Company's website
www.infrastrata.co.uk.
Background on the Islandmagee Storage Project
The Islandmagee gas storage project company, Islandmagee Storage
Limited ("IMSL"), is owned 90% by a wholly owned subsidiary of
InfraStrata plc and 10% by a wholly owned subsidiary of Mutual
Energy Limited. The project is a proposed salt cavern gas storage
facility located on Islandmagee in County Antrim, Northern Ireland.
Work commenced in 2007 with the acquisition of 3D seismic data to
image the Permian salt in the Larne Lough area. During 2012,
planning permission was granted for the project and a gas storage
licence was issued by the Utility Regulator. In October 2013, the
gas storage project was granted a 'Project of Common Interest'
("PCI") status by the European Commission. In 2015 a well was
drilled to core the salt and confirm the technical feasibility of
the project, supported in part by the Commission. The final stage
before a Final Investment Decision will be the Front-End
Engineering Design and Commercialisation of the project. To date
approximately GBP11m has been invested in the project.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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