CGX Energy and Frontera Energy Corporation have sealed a US$35 million loan agreement that will see CGX Energy continue plugging more funds in the Corentyne Block and the Berbice Deepwater Port along with other costs associated with the deal.
The US$35 million loan will be secured by all of the assets of CGX, in a move that could see Frontera expanding its ownership of CGX’s shares.
Per the terms set out, the loan will be available for drawdown in tranches on a non-revolving basis until September 10, 2023, or the date that CGX has drawn down the maximum amount of the loan. It was explained that the loan shall be due and payable on September 10, 2023, or a later date as mandated by Frontera, together with all the interest accrued.
The interest rate has been set at 9.7 percent per annum and would be paid each month in cash, with an interest on overdue interest. And should the loan be extended by Frontera past the September 10, 2023, deadline, the interest rate would then move to 15 percent per annum.
Further, a standby fee of 2 percent per annum multiplied by the daily average amount of unused commitment under the loan in excess of US$19 million shall be payable quarterly in arrears by CGX, on the last business day of each fiscal quarter, during the drawdown period.
Added to that, once approved by the TSX Venture Exchange, Frontera, in its sole discretion, can any time after July 31, 2022 up to and including September 10, 2023, choose to convert all or a portion of the principal amount of the loan outstanding, into common shares of CGX.
This would be done at a conversion price equal to U $2.42 per common share (equivalent of Cdn. $3.10 per common share), provided Frontera provides CGX with 15 business days notice of such conversion.
CGX also has the right to prepay all or any portion of the loan, including any unpaid interest, on 15 business days notice to Frontera before September 10, 2023. The Corentyne Block operator is also required to repay all of the loan that is outstanding in the event that without the consent of Frontera, it issues any security that would dilute Frontera’s current ownership of CGX, or any of its subsidiaries enters into any transaction the proceeds of which are used by CGX to pay its part of the authorized costs of Wei-1.
The maximum number of common shares of CGX which may be acquired by Frontera upon the conversion of the principal amount of the loan is 14,462,809 million common shares of CGX. If the loan principal is converted in full, Frontera will hold approximately 77.93 percent of the currently issued and outstanding common shares of CGX (compared to its current ownership of 76.97 percent).
The loan remains subject to customary conditions, including obtaining all required regulatory final approvals.
CGX operates both Corentyne and Demerara with 66.67% stakes and Frontera holds the remaining 33.33%.