(MENAFN- ProactiveInvestors - Australia) Carbon Energy Ltd (ASX:CNX) has secured funding for convertible note refinancing from its cornerstone investor, Kam Lung Investment Development Co Ltd.
The current convertible note will be extended for a further five years and Kam Lung will purchase the extended note from the current holder for a mixture of upfront and deferred cash.
Kam Lung will also pay a $10 million cash refinancing fee to the note holder, Pacific Road Group.
Kam Lung's purchase of the convertible note is conditional to Carbon Energy completing a rights issue raising a minimum of $5 million.
Kam Lung will underwrite $3.5 million of the rights issue.
Kerry Parker, managing director, commented:
'Extending the company's debt facility by a further five years and resolving the company's short-term financial capacity by securing underwriting support for our $5 million rights issue is a significant milestone and will allow management to focus on progressing the China Joint Venture with JinHong Investment Development Co. Ltd and to pursue additional joint venture and other business opportunities in particular Asia and Europe.
'We appreciate the support that Mr Zhuang (Kam Lung) is providing and this reinforces Mr Zhuang and JinHong's commitment to progressing the China Joint Venture.'
Rights issue details
The rights issue will be priced at $0.012 per share, being a 25% discount to the 90 trading day volume weighted average price (VWAP) and an 8% discount to the 5 day VWAP price.
Attached to every two shares subscribed for will be one listed option, with a strike price of $0.024 and a three year life.
Kam Lung has agreed to underpin the rights issue through the provision of $3.5 million in underwriting support.
The proceeds of the rights issue will be used to pay the costs associated with refinancing the current $10 million convertible note and general working capital.
Monetising coal assets
Carbon Energy has also appointed Pacific Road to seek offers for the sale of its thermal coal assets located in the Surat Basin of Queensland.
In consideration for the Pacific Road Group securing a buyer or buyers for the tenements, Carbon Energy will share the proceeds of the sale with Pacific Road on a 50:50 basis.
Pacific Road will not be entitled to any fees or reimbursement of expenses.
Chinese Joint venture
Carbon Energy recently received an initial US$10 million payment from joint venture partner, Beijing JinHong Investment Co. Ltd.
The $US 10 million is the first required milestone payment under the joint venture agreement that will see JinHong contribute a total of $US 30 million towards the development of a commercial demonstration project.
This will support Carbon Energy as it looks to commercialise its underground coal gasification (UCG) technology.
The joint venture aims to develop a vertically integrated gas company in China.
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