Replacement of New Debt Facility

RNS Number : 1723P

Roxi Petroleum Plc

29 September 2011

 



This replaces the Roxi Petroleum release RNS number 1511P that went out on RNS at 07.00 this morning.

For immediate release                                                                                                                 29 September 2011

Roxi Petroleum plc

New debt facilities, the conversion to equity of existing debt & Directors dealings

Roxi Petroleum ("Roxi" or "the Company"), the Central Asian oil and gas company with a focus on Kazakhstan, announces

·     The signing of a new $5 million debt facility

·     The conversion of $9.4 million of existing debt to 188,771,895 of Roxi shares at a price of 3.2p per 
 share

·     The extension of repayment dates until July 2013 for the remaining $10 million facility that will not 
 be converted to equity

·     The increase in the effective shareholding of Mr Kuat Oraziman from 46 per cent. to 62.7 per cent.

In the interim statement released on 26 September 2011 the Company referred to the need to reduce the level of short term debt in the company while at the same time raising additional funds to continue development work at its BNG asset pending the signing of a replacement farm-out deal following the cancellation of the previous arrangements with Canamens.

The Independent Directors, being the Directors other than Mr Oraziman, are pleased to announce that $9.4 million (principal and accrued interest) owed by Roxi to Mr Oraziman or companies associated with him has been converted into 188,771,895 of Roxi shares.  This reduces the indebtedness of the Company to more manageable levels and removes an annual interest burden of some $1.1 million.

Additionally Mr Oraziman has made available (through an associated company) a new facility of $5 million principally to assist in the continued development of BNG and has agreed to extend the repayment date on the remaining $10 million facility (under which an aggregate of $8.4 million (comprising $5 million in principal and $3.4 million in accrued interest) is currently outstanding) until 2 July 2013.

Background

Roxi owes Kuat Oraziman, and companies with which he is associated, in aggregate, $17.9 million (principal and accrued interest). Mr Oraziman is a director of the company and its largest shareholder, being beneficially interested in some 46 per cent of the shares in Roxi.  

The loans provided by Mr Oraziman and the companies with which he is associated were not intended to be other than short term arrangements. However, because of the lack of farm-out funding in recent periods it has been necessary on several occasions to ask Mr Oraziman, and the companies with which he is associated, to roll over debt repayment and to roll up the interest due.

In the absence of a replacement farm-out partner at BNG Roxi is obliged to start work on fulfilling its work programme commitments of 3 shallow well and one deep well.  Roxi's intention is that these should be completed by the end of 2012 to allow 6 months to apply for a licence extension before the licence expires in the summer of 2013. Preparation for the deep well is expected to take 12 months and the drilling period is expected to be 90 days.

The Company has therefore requested a further loan of $5 million from a company associated with Mr Oraziman to go towards funding the cost of the continued development of BNG asset and other working capital needs of the group, pending completion of a suitable replacement farm-out arrangement at BNG, which is not expected to be completed until much nearer the end of the year.

Without any conversion of the existing debt, and together with accrued interest to date, this would have taken the short term indebtedness of the Company to Mr Oraziman and companies with which he is associated to some $22.9 million, with interest accruing at $2.6 million annually.

In the opinion of the Independent Directors such a level of short term debt would not in the best interests of the Company.

Debt conversion

The Company has therefore agreed with Mr Oraziman that $9.4 million of the Company's indebtedness to him and companies with which he is associated be converted into 188,771,895 of new Roxi shares at a conversion price of 3.2p per share ("New Shares").

As a result of the debt conversion the number of Roxi shares in issue will increase from 420,818,386 to 609,590,281 and the number of shares in which Mr Oraziman is beneficially interested will increase from 193,393,821, representing 46 per cent. of the total to 382,165,716, representing 62.7 per cent. of the enlarged total.

The debt conversion is conditional upon the New Shares being admitted to AIM. Application will be made to AIM for admission of the New Shares as soon as practicable.

New Debt facility

The  Company has also entered into a new $5 million debt facility with Vertom International NV, (a company associated with Mr Oraziman), which will bear interest at 12% per annum and will be repayable on or before 29 September 2013. The Company has offered Vertom International NV security over its investments in its operating assets, in respect of this additional loan.

Related Party Transaction

As Mr Oraziman is a director of the Company, the conversion of the $9.4 million of existing debt into Roxi shares and the new $5 million debt facility are related party transactions.   With regard to the Company's requirement for further funding, the Independent Directors have considered alternative sources of funding, including bank debt and the issue of equity, and have concluded that such alternatives would be not available to the Company on terms more beneficial than those offered by Mr Oraziman and his associated companies.

The Independent Directors consider, having consulted with the Company's nominated adviser, Strand Hanson, that the terms of the debt conversion with Mr Oraziman and the new Vertom $5 million debt facility are fair and reasonable insofar as the Company's shareholders are concerned.

Clive Carver, non Executive Chairman commented

"I am pleased that we have been able to continue to finance the working capital needs of the group pending finding a new farm-out partner for BNG, without increasing our short term indebtedness to levels that would be difficult for the Company to sustain."

Enquiries

Roxi Petroleum plc

David Wilkes CEO                                                                  [phone]

Strand Hanson Limited

Andrew Emmott / Rory Chichester                                [phone]

Buchanan Communications (Financial PR)

Tim Thompson / Ben Romney / Helen Chan               [phone]

 

END

 

 

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