CGX Energy (TSXV: OYL) has finally closed on a previously announced financing with its largest shareholder, Frontera Energy (TSX: FEC), albeit on slightly different terms than initially announced. The arrangement will see CGX provided with up to US$35.0 million in loans from Frontera.
The financing, which was previously classified as a short term loan, has seen the proposed maturity date expand from July 31, 2022, to that of September 10, 2023. The loan is set to bear interest at a rate of 9.7% per annum until this date, after which the interest rate is to climb to 15% per annum, with the debt secured by all assets of the company.
Drawdowns on the loan is set to occur in tranches on a non-revolving basis, however a standby fee is in play on the undrawn capital. The company will be subject to a 2% standby fee on any capital in excess of US$19.0 million that remains undrawn.
Furthermore, the debt may be converted to equity after July 31, 2022 at Frontera’s discretion, at a rate of C$3.10 per common share, or US$2.42 per share. The maximum amount of additional shares this could amount to for Frontera’s portfolio is 14.5 million, which would bring their total ownership to 77.93% of CGX.
Proceeds from the financing are to be used by CGX for its share of costs related to the Corentyne Block, the Barbice deepwater port, and other identified budgeted costs that have been approved for use of proceeds by Frontera.
At last report, CGX had a total cash position of $15.2 million as of December 31, while trade and other payables currently sits at $41.9 million.
CGX Energy last traded at $1.61 on the TSX Venture.
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