Oilexco announced that the Company, The Royal Bank of Scotland PLC ("RBS") and the Company's banking syndicate (together, the "Banks") have agreed the lending of up to $47.5 million to Oilexco repayable on demand with a maturity date of January 31, 2009.
Further to the Company's announcement on November 20, 2008, Oilexco, alongside Morgan Stanley & Co Limited ("Morgan Stanley") and Merrill Lynch International ("Merrill Lynch"), continues to progress the evaluation of a variety of additional financing options and strategic alternatives, and discussions are ongoing with a number of parties concerning a potential investment in the Company or an acquisition of the Company and/or some or all of its assets (the "Potential Transaction"). However, there can be no certainty that any binding offers will be received or accepted or that any Potential Transaction will be completed.
In connection with the $47.5 million bridge financing, Oilexco has agreed to certain cash fees, and margin increases. The cash fees payable will range from approximately $5 million to approximately $37.5 million if all specified events occur such as the repayment of all indebtedness owed by the Company to the Banks being approximately $700 million assuming drawdown of the entire bridge facility. In addition, in recognition of the continued support of the Company by the Banks, the Company has agreed to pay them an equity success fee upon the occurrence of certain events.
In each case the specified events require a successful conclusion of the sale or recapitalization of the Company such that the Banks can participate in such a transaction pari passu with all common shareholders of Oilexco. The equity success fee will be payable in the form of common shares of Oilexco provided that certain legal and regulatory considerations can be satisfied. The maximum number of shares that could be issued to the Banks is equal to 24.9% of Oilexco's total issued and outstanding common shares from time to time (being, on today's date 55,527,000 common shares).
While there is no assurance that further advances will be forthcoming as incremental funding is likely to be required in the short term, the Banks have agreed that if any further advances are made prior to January 31, 2009, no additional success, equity-based or waiver fee will be required.
At this stage, as outlined at the time of the Company's Q3 results on November 12, 2008, Oilexco's cash flow from operating activities and the bridge facility announced today will not be sufficient to satisfy both its current obligations and the requirements of capital investment programs. The continued ability of the Company to undertake its capital investment and business plans in the short term is dependent on its ability to obtain additional financing and the continued support of its creditors.
Arthur Millholland, President and Chief Executive Officer, commented, "We would like to thank our syndicate of banks, led by RBS, and our trade creditors for their continued support in these difficult times. While there can be no assurances, we believe that the strength of our asset base combined with the corporate and financial interest that has been received to date, the Board remains focused on achieving a satisfactory outcome to our strategic and financing initiatives in the near future."
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