Stratic Energy Corporation has reached agreement for a private placement of US$42.5 million Subordinated Convertible Notes, due 2013, to a group of US investors, subject to certain conditions described below. The Company may issue further Notes on the same terms up to the total maximum facility amount of US$50.0 million.
The Notes will be convertible, at the option of the holders, into common shares of Stratic at a price of US$1.00 per common share, at any time until their maturity. This represents a premium of 45% to yesterday's closing price of the Company's common shares on the TSX-Venture Exchange, translated at the exchange rate at that time.
The Notes will be redeemable by the Company after the second anniversary of issuance, at par plus accrued interest to the redemption date, provided that the average closing price of the Company's common shares on their primary exchange for the preceding 20 trading days is greater than Canadian $1.75 per share.
Interest on the Notes is 9.0% per annum, payable semi-annually. At the Company's option, interest may either be paid in cash or capitalised as additional principal of the Notes, subject to the same interest and conversion terms. The final maturity of the Notes is five years from the date of closing.
The notes will be subordinated to Stratic's senior secured debt and rank pari passu with the Company's existing US$15.0 million convertible Notes due 2011.
Closing of the transaction is subject to full documentation, approval by the TSX-Venture Exchange and limited further due diligence.
Ingalls & Snyder Value Partners L.P., an advisory client of Ingalls & Snyder LLC, certain of whose other clients own 14,702,561 common shares of the Company, has agreed to purchase US$25.0 million of the Notes.
Proceeds of the Notes will be available to fund Stratic's capital expenditure programs and for general corporate purposes. In particular, the Company anticipates using the proceeds to support its capital expenditure programs for 2008/09, principally in the United Kingdom and Dutch sectors of the North Sea. While the majority of the expenditure on its development projects is expected to be funded from Stratic's recently announced new debt facilities, the Company considers it appropriate to maintain a balance of funding sources for its capital expenditures. Work towards completion of those debt facilities is progressing satisfactorily.
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