The origin of more than one of these discussions was the need, described at the time of Cardinalís 2006 results announcement on June 30, 2007, to conclude negotiations for a medium term financing package and raise equity finance either by way of institutional private placement or underwritten rights issue. Discussions with one or more potential equity providers continue.
On June 30, 2007, Cardinal announced that it was in discussions with Silver Point Capital to restructure the bridge PIK notes first issued on December 23, 2005 and that it had obtained a Commitment Letter from Hares Group Holdings GmbH ("Hares"), to fund the Companyís working capital requirements in case of any shortfall over the period ending July 1, 2008. The detailed terms of the Silver Point Capital PIK note facility require prior consent of Silver Point Capital (as is normal for a senior lender) before Cardinal is able to draw down on any subordinated loan such as that provided for by the Hares Commitment Letter. As part of the current negotiations, Silver Point Capital has not provided consent to such a drawdown. Instead of drawing down under the Hares Commitment, Cardinal is therefore seeking to re-designate and access a portion of the undrawn US$14.1 million RC re-instatement facility for general working capital purposes. Following the last covenant review, Silver Point Capital have neither waived covenant breaches nor issued any notice of default. In the meantime, Cardinalís cash flow remains very tight.
Conclusion of negotiations and improvements in cash flows have been hampered by a delay in start up of production and sales from the new gas gathering and separation facility which the Directors had hoped would commence some weeks ago. Start up has been delayed principally by the need, following Ukraine government inspection of the completed facility, to add further health and safety features. This additional work has now been completed and permission to commence production and sales is expected shortly.
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