KALGOORLIE (miningweekly.com) – Copper developer Straits Resources has inked a binding agreement with lender Standard Chartered Bank (SCB) and Asian investment firm PAG subsidiary PAG SPV to restructure its debt.
Under the terms of the agreement, Straits’ $111-million outstanding debt with SCB would be reduced by more than 50% to $50-million through a new senior debt facility with SCB.
The new seven-year facility would include a two-year up-front cash interest holiday.
As part of the restructuring, SCB would be issued with redeemable convertible preference shares equivalent to 60% of Straits’ post-restructuring fully diluted equity.
These preference shares would have a notional valuation of $40-million and could be redeemed by Straits in the first four years after issue or within 33 business days of the preference share holder, which could be SCB or related parties, notifying Straits of its intentions to transfer the shares to a nonrelated party.
The shares could be converted into ordinary shares by SCB at any time within five years from issue or would otherwise be mandatorily converted on the fifth anniversary of issue.
SCB and Straits also agreed a price participation structure whereby SCB will receive a small percentage of incremental revenue above a copper price of A$8 000/t.
Meanwhile, as part of the restructuring, PAG SPV would provide $25-million in a three-year revolving priority debt facility for working capital and growth projects at Straits’ Tritton copper operations, in New South Wales.
PAG SPV would also be issued with convertible preference shares with a five-year term, convertible to ordinary shares in Straits equivalent to 15% of the company’s post-restructuring fully diluted equity.
As part of the restructuring, SCB and PAG SPV required the senior management team of Straits to commit to the business for the next five years to deliver on the operating plans, which underpin the restructuring.
As a result, four members of the management team have been offered options, which, if all vesting conditions were met over the next five years, would allow them to earn up to 10% of the post-restructuring equity of Straits.
The existing equity incentive plan for senior management would be bought out by Straits and the shares would be cancelled.
Straits executive chairperson Andre Labuschagne said the restructuring removed the significant uncertainty hanging over the company and would allow the true value of assets to be reflected in the equity price.
“Additionally, unlike other recent corporate restructures, the ability to redeem the SCB convertible preference shares may provide opportunity in the future to minimise dilution on current shareholders.”
Labuschagne said the company would continue to improve its operational performance by focusing on funding growth projects at Tritton, resuming near-mine exploration and seeking value enhancing opportunities.
The refinancing remained subject to both shareholder, regulatory and government approvals.