(LOI-V) Dundee (DC.A-T) April 11, '14 has acquired 2,820 units of Longreach Oil and Gas Ltd. for $2.82-million. Each unit, priced at $1,000 each, consists of one 10-per-cent secured convertible debenture of Longreach in the principal amount of $1,000 and 1,000 ordinary share purchase warrants. Each warrant entitles Dundee to acquire one ordinary share of Longreach at a price of 30 cents for a term of two years following closing.
Following the first anniversary of the date of closing, Dundee may convert outstanding principal under the debentures into shares at a conversion price equal to the greater of: (a) 30 cents; and (b) the current market price of the shares at the time of conversion (based on a 20-day volume-weighted average trading price), and subject to certain restrictions described in the debentures and summarized in a news release issued by Longreach on April 10, 2014.
Dundee owns 12,291,146 shares, representing 15.15 per cent of the issued shares. Assuming Dundee fully converted the principal of the debentures at the minimum conversion price of 30 cents and fully exercised its warrants, Dundee would hold 24,511,146 shares, representing approximately 26.25 per cent of the issued shares on a partially diluted basis.
Dundee's interest in Longreach may be increased or decreased in the future in light of investment criteria, market conditions and other factors in accordance with the provisions of applicable securities legislation.
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April 10, '14 - NR
Longreach Oil and Gas Ltd. closed today a non-brokered private placement of units with investors for total gross proceeds to the company of $9.7-million. The subscription price per unit was $1,000, and each unit consisted of one 10-per-cent secured convertible debenture of the company in the principal amount of $1,000 and 1,000 ordinary share purchase warrants.
Net proceeds of the private placement will be used to support the continuing drilling of the company's Kamar well at Sidi Moktar, and for general corporate and administrative purposes. The completion of the private placement (described initially in the company's news release dated March 3, 2014) will permit the company to continue with its contracted drilling activities of the Kamar well at Sidi Moktar. The company intends to refinance or repay the indebtedness under the debentures through the proceeds of a subsequent public or private offering of equity securities, which may include a rights offering to all shareholders of the company.
The debentures mature two years from the date of closing and bear interest at a rate of 10 per cent per year, payable quarterly in arrears. Following the first anniversary of the date of closing, holders of debentures may convert from time to time, in whole or in part, outstanding principal under the debentures into ordinary shares of the company at a conversion price equal to the greater of 30 cents (subject to typical adjustments in certain circumstances) and the current market price of the shares at the time of conversion (based on the volume weighted average trading price of the shares for the 20 trading days ending on the fifth trading day preceding the date of conversion). Holders of debentures are restricted from converting debentures without the approval of the TSX Venture Exchange if, as a result of conversion, the holder would hold more than 20 per cent of the issued shares. In addition, following the first anniversary of the date of closing, the company may redeem from time to time, in whole or in part, outstanding principal under the debentures for cash at a redemption price equal to the face value of the principal amount being redeemed, plus an amount equal to three months of interest calculated on the amount of debentures being redeemed.
The obligations of the company under the debentures are secured by a security interest in the company's present and after acquired property, and, in connection therewith, the company and holders of debentures have executed a general security agreement under the laws of Jersey (Channel Islands) providing a security interest in favour of the debentureholders.
The debentures provide customary events of default, including failure to pay interest when due within 30 days, failure to repay principal on redemption or maturity and the occurrence of insolvency events or proceedings. In addition, the company has made certain covenants in favour of holders of debentures, including covenanting not to incur additional indebtedness, covenanting to use commercially reasonable efforts to complete an equity financing within one year for the purpose of repaying or refinancing the debentures, and covenanting to use commercially reasonable efforts to seek shareholder approval in certain circumstances for the creation of a new control person, if requested by a holder of debentures who would otherwise need such approval in order to permit the full conversion of debentures.
Each warrant is exercisable for a term of two years following closing and may be exercised for one share at an exercise price of 30 cents per share (subject to typical adjustments in certain circumstances). Holders of warrants are also restricted from exercising warrants without the approval of the TSX Venture Exchange if, as a result of exercise, the holder would hold more than 20 per cent of the issued shares.
A commission in the amount of $315,800, representing approximately 3.26 per cent of the gross proceeds, is payable to a finder in connection with the private placement.
Two of the investors in the private placement, being Dundee Corp. and funds advised by West Face Capital Inc., are significant shareholders of Longreach, holding 12,291,146 shares (representing approximately 15.15 per cent of the issued shares) and 8,571,453 shares (representing approximately 10.56 per cent of the issued shares), respectively. Accordingly, the participation of these insiders in the private placement is considered a related-party transaction pursuant to applicable securities laws and the policies of the TSX Venture Exchange.
Dundee subscribed for a total of 2,820 units comprising $2.82-million principal amount of debentures and 2.82 million warrants. Assuming Dundee fully converted the principal of the debentures at the minimum conversion price of 30 cents and fully exercised its warrants at 30 cents per warrant, and assuming there was no restriction on conversion and exercise as discussed above, Dundee would hold 24,511,146 shares, representing approximately 26.25 per cent of the issued shares (calculated on a partially diluted basis).
West Face subscribed for a total of 1,880 units comprising $1.88-million principal amount of debentures and 1.88 million warrants. Assuming West Face fully converted the principal amount of the debentures at the minimum conversion price of 30 cents and fully exercised its warrants at 30 cents per warrant, West Face would hold 16,718,119 shares, representing approximately 18.72 per cent of the issued shares (calculated on a partially diluted basis).
The private placement was unanimously approved by the board of directors of the company, excluding two directors who, as a result of their position with the participating insiders, declared their interest in the private placement and abstained from voting. The board has determined that the fair market value of the consideration for, and the subject matter of, the private placement, as it relates to the participation by related parties, is less than 25 per cent of the company's market capitalization. Accordingly, the company is exempt from the requirement to obtain a formal valuation and minority shareholder approval for the private placement. The company did not file a material change report at least 21 days prior to the closing of the private placement because the participation of, and subscription agreements with, participating insiders was not known or entered into until immediately prior to closing.
The private placement remains subject to final acceptance by the TSX Venture Exchange. The debentures and warrants (and the shares which may be issuable pursuant to the conversion and exercise thereof) are subject to a four-month hold period ending Aug. 11, 2014. |
