TerraCom Limited (ASX:TER) provided a market update on its debt restructuring options and seeks to enter into a strategic agreement with SPG Holdings.
TerraCom, which was formerly known as Guildford Coal is a mining company and has its operations based in Queensland. The company announced that it will continue its existing relationship with its financial backers, Nobel Group and OCP. TerraCom has announced two debt restructuring options in order achieve stability and funding security to the company and enable it to deliver its strategic objectives.
The first option comprises a US$115 million five year interest-only bond with OCP and Noble. The terms of the bond include semi-annual interest payments paid in arrears and a variable component of the interest payments linked to actual coal sales. The bond will also consist of an option to capitalise a pre-agreed portion of the interest payments.
TerraCom stated that the structure will provide the company with greater flexibility to manage its cash flows. The documents are set to be drafted this week and the company plans to finalise it in early 2016. The decision is subject to a successful vote by shareholders at the upcoming EGM which is scheduled for 12 January 2016.
The second option consists of a traditional debt facility and the company is currently in the process of formulating the structure and is not certain of the completion.
TerraCom will also seek the approval of shareholders regarding SPG Holdings Limited’s interest for a strategic placement in the company. SPG and the company have reached an agreement to issue 583.3 million shares at $0.012 per share, which is worth $7 million.
Morning Crest Capital Management Limited and SPG have entered into an agreement whereby Morning Crest will acquire 50 percent of the convertible notes in order to convert them into equity. The company states that the remaining 50 percent of the convertible notes will likely be owned by their original investors. At the current stage, TerraCom stated that it is not aware of any further details regarding the conversion of the notes. The conversion is also subject to shareholder approval.
TER was last traded at $0.007 on 30 December, 2015 and is down more than 81% for the year.
Author: Simon Herrmann
Jan 04, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.