Australia's Octanex NL has executed documentation for the previously announced investment by Sabah International Petroleum (SIP) in Octanex. SIP is wholly owned by Sabah Development Bank Berhad (SDB) which, in turn, is wholly owned by the Ministry of Finance, Sabah, a state of Malaysia.
SIP will provide a bridge loan facility to Octanex for an amount of $12 million with a maturity date of March 31, 2015. The bridge loan facility will be satisfied out of the share and convertible notes issue, following receipt of shareholder approvals. The bridge loan facility will attract an interest rate of 8%, assuming it is repaid by the share and convertible note placement.
SIP is to subscribe for 40,332,663 ordinary fully paid shares for a total of $5 million. Including this subscription, this will make SIP a holder of 21% of the existing listed fully paid ordinary shares in Octanex (17% of the total voting rights when including partly paid shares).
SIP will further subscribe for $12 million in convertible notes in three equal tranches with all tranches to be drawn down before June 30, 2015. The notes will be due for redemption on June 30, 2017, but may be converted at any time prior to the maturity date, at the election of SIP, into fully paid Octanex shares at conversion prices of 15, 20, and 25 cents per share for each of the tranches.
Until June 30, 2016, SIP has the right to exercise an alternative conversion of the notes to a 35% shareholding in Octanex Pte Ltd., the Singapore incorporated holding company of Octanex’s 50% shareholding in Ophir Production Sdn Bhd, the incorporated joint venture that holds the Ophir RSC with Petronas.
A cash coupon rate on the convertible notes of 8% per annum has been agreed, with a bullet payment on redemption to be satisfied by a further issue of Octanex fully paid shares to lift the internal rate of return of the note holder to 12%.
The agreements are subject to a number of conditions precedent predominantly satisfied by provision of documents and certain administrative matters. Octanex expects to satisfy the bridge facility conditions precedent before the end of December.
In addition to the conditions precedent contained in the bridge facility, the share and note subscription agreement is conditional upon shareholder approval for the share and note placement. Octanex will call a meeting of shareholders for this purpose in early 2014. The bridge facility, and, subsequently, the convertible notes, will be secured by a charge over the shares of Octanex Pte Ltd.