TIDMCOP
RNS Number : 6919E
Circle Oil PLC
12 February 2015
12 February 2015
Circle Oil Plc
("Circle" or the "Company")
Proposed Amendment and Extension of Convertible Loan
Agreement
and
Notice of Extraordinary General Meeting
Circle Oil Plc (AIM: COP), the Middle East and North Africa
focused oil and gas exploration, development and production
company, is pleased to announce that it has agreed terms with a
subsidiary of KGL Investment Company ("KGL") over proposed
amendments to the terms of the Convertible Loan Agreement dated 8
June 2007 (as amended and restated on 23 May 2012) (the
"Convertible Loan Agreement") under which US$30 million is due for
redemption by 19 July 2015 (the "Proposal").
The Proposal is subject to, inter alia, shareholder approval at
an Extraordinary General Meeting ("EGM") to be held at 11.00 am on
Tuesday 10 March 2015 at DoubleTree by Hilton Dublin, Upper Leeson
Street, Dublin 4. A circular containing a Notice of EGM,
Resolutions and accompanying proxy ("Circular") will today be
posted to shareholders regarding the Proposal and will be available
on the Company's website: www.circleoil.net.
Chairman Steve Jenkins commented:
"We are pleased to be able to announce the refinancing of the
convertible with KGL, it will provide Circle with increased
operational and financial flexibility in what is a difficult
industry backdrop. In conjunction with this refinancing and mindful
of ongoing oil price volatility, Circle is reviewing its cost base
and capital commitments to ensure it is optimally placed to
navigate market challenges".
For further information contact:
Circle Oil Plc (+44 20 7638 9571)
Stephen Jenkins
Investec (+44 20 7597 5970)
Chris Sim
George Price
James Rudd
Liberum Capital Limited (+44 20 3100 2222)
Clayton Bush
Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson
Shabnam Bashir
Murray Consultants (+353 1 498 0300)
Joe Heron
Pat Walsh
Notes to Editors
Circle Oil Plc (AIM: COP) is an international oil & gas
exploration, development and production Company holding a portfolio
of assets in Morocco, Tunisia, Oman, and Egypt with a combination
of low-risk, near-term production, and significant upside
exploration potential. The Company listed on AIM in October
2004.
Internationally, the Company has continued to expand its
portfolio over the past years and now has assets in the Rharb
Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the
Mahdia Permit offshore Tunisia, and the Zeit Bay area of Egypt.
Circle also has the largest licensed acreage of any company in
Oman. In addition to its prospective Block 52 offshore, Circle has
an ongoing exploration programme in Block 49 onshore.
Circle's strategy is to locate and secure additional licences in
prospective hydrocarbon provinces and, through targeted investment
programmes, monetise the value in those assets for the benefit of
shareholders. This could be achieved through farm-outs to selected
partners who would then invest in and continue the development of
the asset into production, or Circle may opt to use its own
expertise to appraise reserves and bring assets into production,
generating sustained cash flow for further investment.
Further information on Circle is available on its website at
www.circleoil.net.
Extraordinary General Meeting in connection with authorisation
to facilitate the
amendment and extension of the Convertible Loan Agreement
1. Introduction
The Board of Circle Oil plc ("Circle" or the "Company")
announced today that it has reached agreement with a subsidiary of
KGL Investment Company (otherwise "KGL") regarding proposed
amendments to the terms of the convertible loan agreement dated 8
June 2007 (as amended and restated on 23 May 2012) (the
"Convertible Loan Agreement") under which US$30 million is due for
redemption by 19 July 2015. Under the Heads of Terms it is proposed
that Circle repay US$10 million before 19 July 2015 whilst
extending the remaining US$20 million until 19 July 2017 at a
revised conversion price of GBP0.136 per ordinary share. The
amendments are conditional on, inter alia, Shareholder approval,
through the passing of appropriate resolutions (the "Resolutions")
at the Extraordinary General Meeting.
2. Background
Pursuant to the terms of the Convertible Loan Agreement,
Kuwait-based, KGL (through its subsidiary Circle Link S.ar.l) on 8
June 2007 provided an unsecured convertible loan of US$30 million
("Convertible Loan") for a period of 5 years, convertible into
ordinary shares in Circle at a price of GBP0.25 per ordinary share
and which carried a 6 per cent. coupon per annum. The term of the
loan was extended on 23 May 2012 by a further three years and the
conversion price amended dependent on the year of conversion, the
conversion price in 2015 is GBP0.30 per ordinary share.
Given the dramatic fall in oil price from US$115 per barrel in
June 2014 to less than US$60 per barrel in December 2014 and the
uncertain market backdrop, Circle, considers it prudent to amend
and extend the terms of the Convertible Loan Agreement which is due
for redemption on 19 July 2015.
3. Proposal
Following discussions between Circle and KGL the Board is
pleased to report that Heads of Terms have been agreed with Circle
Link S.ar.l (a subsidiary of PetroLink Holding Company, itself a
subsidiary of KGL) (the "Proposal") in connection with the
amendment and extension of the Convertible Loan Agreement including
revised terms on which the Convertible Loan may be converted, early
repayment of part of the Convertible Loan and the extension of the
date by which the remaining amount of the Convertible Loan must be
repaid.
The Proposal also recognises that a number of consents and
authorisations are required before Circle may amend the Convertible
Loan Agreement to give effect to the new terms. These conditions
include any necessary approvals pursuant to the Reserve Based
Lending facility with International Finance Corporation and all
necessary approvals and authorisations from Shareholders.
The Proposal includes the following key provisions:
i. Repayment: Circle will repay US$10 million in three tranches by 19 July 2015;
ii. Extension: the term of the remaining US$20 million
Convertible Loan ("Loan Amount") will be extended until 19 July
2017 (the "Amended Final Redemption Date") with a right to Circle
to further extend the date as outlined in (viii) below. Upon expiry
of the amended loan term, the Loan Amount would be due for
repayment in cash or KGL have the right to convert the loan to
ordinary shares in Circle;
iii. Coupon Rate: the coupon rate will increase from 6 per cent.
to 8 per cent. accruing daily and payable quarterly in arrears;
iv. Conversion Price: under the new conversion formula, KGL will
have the right to convert the Loan Amount into ordinary shares in
Circle at a price of GBP0.136 pence per ordinary share, which
represents a premium of 15 per cent. on Circle's average closing
share price of GBP0.118 pence per ordinary share over the 20
trading days prior to 31 January 2015;
v. Loan Extension Fee: a loan extension fee in the amount of
US$250,000 (the "Loan Extension Fee") shall become due on the
Amended Final Redemption Date. This may be satisfied by either cash
or ordinary shares in the Company at Circle's option. The formula
for calculating the price at which ordinary shares in Circle may be
issued to settle the Loan Extension Fee shall be by reference to
the average closing price of Circle's shares over the 20 trading
days prior to the Amended Final Redemption Date;
vi. Options: Circle will grant to KGL options over 30 million
ordinary shares in Circle at an exercise price of GBP0.136 pence
per ordinary share (such options to cease/lapse on the expiry of
the Convertible Loan Agreement, as extended under the terms of the
Proposal) (the "Options"). These Options will replace the existing
options over 30 million shares in Circle which KGL currently has in
place.
vii. PiK Fee: a payment-in-kind fee, payable in either cash or
Circle shares ("PiK") at Circle's option will apply to the Loan
Amount. The PiK Fee will be calculated at a rate of 1.5% per annum
of the Loan Amount in respect of the period up to 19 July 2017 and
satisfied as soon as reasonably practical after the Amended Final
Redemption Date. The formula for calculating the price at which
ordinary shares in Circle may be issued to discharge the PiK shall
be by reference to the average closing price of Circle's shares
over the 20 trading days prior to the Amended Final Redemption
Date; and
viii. Further Extension: Circle has the option to further extend
the Convertible Loan maturity until 19 July 2018 and 19 July 2019
respectively on amended terms. If Circle exercises its right to
extend the Convertible Loan maturity date until 19 July 2018 then
the PiK Fee will increase to the rate of 4.5% for the period from
20 July 2017 until the earlier of the 19 July 2018 or the date when
the Loan Amount is repaid in full. If Circle exercises its option
to extend the Convertible Loan maturity date until 19 July 2019 a
PiK Fee of 7.5% per annum will apply from 20 July 2018 until the
earlier of the date when the loan is repaid in full by Circle or 19
July 2019. During the period of each such extension the PiK Fee
shall be payable quarterly in arrears.
Although Circle has no plans at this time to extend the
Convertible Loan Agreement beyond July 2017, nor settle any PiK
payments or the Loan Extension Fee in shares, the Board believes it
is appropriate to maintain a degree of flexibility and to ensure
the Company is in a position to meet its commitments. Accordingly,
the Board is requesting that Shareholders approve the authorisation
of the full number of shares issuable should all extensions be
exercised and payments be made in shares.
As a result, Circle is seeking Shareholder approval to issue up
to 143,342,474 ordinary shares in the Company. This equates to an
additional 49,636,033 ordinary shares under the Proposal when
compared to the maximum number of shares to be issued under the
existing Convertible Loan Agreement, inclusive of KGL's existing
options;
-- 33,374,906 of the additional 49,636,033 ordinary shares
represents the increase in the number of ordinary shares issuable
on conversion of the Loan Amount, which represents a dilution of
5.03 per cent. on the fully diluted share capital of the Company
under the existing Convertible Loan Agreement, (being 663,053,080
ordinary shares); and
-- 16,261,127 of the additional 49,636,033 ordinary shares
represents the ordinary shares to be issued on the basis the PiK
Fees and Loan Extension Fee are settled in shares(1) which
represents a dilution of 2.45 per cent. on the fully diluted share
capital of the Company under the existing Convertible Loan
Agreement, (being 663,053,080 ordinary shares).
The Shareholder approval is strictly for the purpose of the
extension and variation of the Convertible Loan Agreement and grant
of associated options and may not be used for any other purposes.
The passing of the Resolutions is an essential prerequisite to any
binding contractual commitment by Circle to the revised Convertible
Loan Agreement and the grant of options as contemplated by the
Proposal.
4. Financial and Operating Update
Circle today released a financial and operating update, a copy
of this is included at page 9 of the Circular.
5. Extraordinary General Meeting
Set out at the end of this document is the notice convening an
Extraordinary General Meeting to be held at 11.00 am on Tuesday 10
March 2015 at DoubleTree by Hilton Dublin, Upper Leeson Street,
Dublin 4 at which Resolution 1 and Resolution 2 will be proposed
for the purposes of implementing the Proposal.
Resolution 1, which will be proposed as an Ordinary Resolution
to authorise the Board to exercise the powers of Circle to allot up
to 143,342,474 relevant securities. Relevant securities are shares
in Circle (other than shares shown to have been taken by
subscribers to the memorandum of Circle or shares allotted in
pursuance of an Employee Share Scheme) and any right to subscribe
for or to convert any security into shares of Circle; and
Resolution 2, which will be proposed as a Special Resolution, to
dis-apply pre-emption rights over 143,342,474 ordinary shares
(which equates to the maximum number of ordinary shares in Circle
to be allotted on the conversion of the Convertible Loan, exercise
of the Options and settlement of PiK and Loan Extension Fees).
6. Action to be Taken
At the Extraordinary General Meeting, the Resolutions set out in
the Notice of Extraordinary General Meeting will be proposed. A
Form of Proxy for use at the Extraordinary General Meeting is
enclosed. Whether or not you wish to attend the Extraordinary
General Meeting, you should complete and sign the Form of Proxy and
return it to Circle's Registrars, Capita Asset Services,
Shareholder solutions (Ireland), P.O. Box 7117, Dublin 2 or by hand
to 2 Grand Canal Square, Dublin so as to arrive no later than
11.00am on 8 March 2015. The return of the Form of Proxy will not
prevent you from attending and voting in person at the
Extraordinary General Meeting, or any adjournment thereof, should
you wish to do so.
IMPORTANCE OF APPROVAL OF THE RESOLUTIONS:
On the basis that the Resolutions are approved, Circle will have
enhanced overall operational and financial flexibility to fund the
Company's operational plans going forward. If Shareholders fail to
support either of the necessary Resolutions Circle must repay the
US$30 million due pursuant to the Convertible Loan Agreement on its
maturity on 19 July 2015. Circle will require additional financing
in order to meet this obligation.
7. Recommendation
The Board, with the exception of Mr Mohammad Sultan, who is the
representative of KGL on the Board and has absented himself from
consideration of this Proposal due to a conflict of interest,
believes that the Proposal including amendments to the Convertible
Loan Agreement and to grant the associated Options is in the best
interests of Circle and its Shareholders as a whole and
accordingly, recommend that Shareholders vote in favour of the
Resolutions. The directors of Circle intend to vote in favour of
the Resolutions in respect of their own respective beneficial
holdings, which amount, as at the date of this Circular, to an
aggregate 856,177 ordinary shares, representing approximately 0.15%
of the existing issued share capital of the Company.
Yours sincerely,
STEPHEN JENKINS
Chairman
(1) Calculated on the basis of a share price of GBP0.136
This information is provided by RNS
The company news service from the London Stock Exchange
END
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