Buffalo Coal Secures an Additional US$4.0 Million Loan Facility
Buffalo Coal Corp. announces that the Company has signed a term sheet (the "Term Sheet") to secure an additional US$4.0 million loan facility from Resource Capital Fund V L.P ("RCF").
Despite the restructuring initiatives which have been implemented throughout the Company during 2013 and 2014 and the financing already secured from RCF, current market conditions and operational performance have necessitated further restructuring and a requirement for additional capital in order to improve operating efficiencies, support the Company's working capital requirements during the proposed restructuring period and return to profitability, thereby ensuring that Buffalo remains sustainable into the future.
Under the terms set out in the Term Sheet, the US$4.0 million will be advanced as a bridge loan ("the Bridge Loan"), and subject to receiving regulatory and shareholder approvals as may be required (the "Approvals"), will roll over into Buffalo's existing US$25.0 million convertible loan with RCF ("the Existing Convertible Loan"), under the same terms and conditions except for the proposed amendments to the interest rate and conversion price as set out below and the increased amount available under the loan.
Bridge Loan
The Bridge Loan will be used for capital investments, general working capital and to implement the proposed restructuring process at Buffalo's operations in Dundee, South Africa, as announced on December 22, 2014. Funds from the Bridge Loan will be available upon satisfaction of the conditions precedent set out in the Term Sheet and will be drawn on an as needed basis.
The Bridge Loan will bear interest at a rate of 15% per annum, payable on the maturity date which is the earlier of the date on which all Approvals are received or June 30, 2015. Subject to receipt of the Approvals, interest will be payable in common shares of Buffalo ("Common Shares") at a price per share equal to the 20-day volume weighted average price ("VWAP") as at the date the payment is due.
No establishment fees will be incurred on the Bridge Loan.
Upon receipt of the Approvals, the Bridge Loan will roll into the Existing Convertible Loan (as discussed below). If the Approvals are not received by June 30, 2015, the Bridge Loan and all accrued but unpaid interest due to RCF will be immediately due and payable in cash.
Convertible Loan
Subject to receipt of the Approvals, the Bridge Loan will roll over into the Existing Convertible Loan, resulting in an aggregate US$29.0 million convertible loan facility with RCF (the "Convertible Loan"). The Convertible Loan will have the same terms and conditions as the Existing Convertible Loan, except for the following changes to the interest rate, conversion price and the increased amount available under the loan. The Existing Convertible Loan bears interest at a rate of 12% per annum and is convertible into Common Shares at a price of C$0.1446. Subject to receipt of the Approvals, the interest rate on the Convertible Loan will be increased to 15% per annum and the conversion price will be decreased to C$0.0469, a 25% discount to the 5-day VWAP as at the date prior to the date of release of this announcement.
The Approvals
The issuance of Common Shares to RCF in satisfaction of interest obligations under the Bridge Loan, the conversion of the Bridge Loan, and the adjustment of the interest rate and conversion price on the Existing Convertible Facility are subject to regulatory and shareholder approvals. Buffalo intends to seek approval of its shareholders for these matters at the Annual General Meeting to be held no later than June 30, 2015. As these transactions are related party transactions under Multilateral Instrument 61-101, RCF and its affiliates holding Buffalo Common Shares will not vote on these matters at this meeting.
Other Transaction Terms
The Term Sheet provides that if Buffalo terminates the Bridge Loan or is unable to proceed with the Bridge Loan (other than in instances where Buffalo or any of its subsidiaries are unable to proceed with the Bridge Loan because of the failure to obtain regulatory approvals on the terms set out therein, including, but not limited to, any exchange control approvals or approval by the TSX), Buffalo shall promptly pay to RCF a termination fee of 5.0% of the Bridge Loan amount if the Bridge Loan is not advanced, payable in cash.
The Term Sheet provides that the Bridge Loan will be subject to a number of usual and customary conditions precedent for a transaction of this nature, including the execution of definitive transaction documents and will close on February 28, 2015 or such earlier date as the parties may agree