Challenger Energy updates its financing arrangements

Challenger Energy Group updated the market on its financing arrangements on Friday, as it secured a short-term bridge loan of £0.35m to promptly redeem the entire drawn and unconverted balance of its previously disclosed convertible loan note funding facility.

The AIM-traded firm said that the funding facility would be permanently cancelled following the redemption.

At the same time, the holder of the convertible notes issued under the funding facility has issued a conversion notice for a portion of £55k.

Per the terms of the notes, this conversion would result in the creation of 100 million new shares of Challenger Energy.

The board said the net outcome of the financial manoeuvres was twofold, with the company first issuing the conversion shares and secondly receiving £346,500 from the bridge loan.

It said the sum would be instantly employed to fully redeem the remaining balance of convertible notes issued under the funding facility.

Key attributes of the bridge loan would include a 12% coupon per annum, accruing monthly, as well as a maximum term of six months with a provision for early repayment from proceeds obtained through the completion of the Cory Moruga asset sale transaction in Trinidad or a farm-out of its assets in Uruguay.

Notably, the board confirmed that the bridge loan is unsecured.

In addition, Challenger Energy said it would issue warrants to the bridge loan provider, valid for 36 months and granting the holder the right to subscribe for 250 million shares at an exercise price of 0.1p each.

That would represent a premium of about 100% relative to the current share price.

“Eight weeks ago, we secured a convertible note funding facility for up to £3.3m,” said chief executive officer Eytan Uliel.

“As we explained then, our immediate funding requirement was relatively minimal in that we were seeking to bridge a short period of time until receipt of expected cash inflows.

“We thus drew only a small portion of that facility, although we saw value in putting a much larger line of funding in place, in case it was needed it in the future.”

However, given the progress in seeing those expected cash inflows in the required timeframe, Uliel said the company had moved to refinance and cancel the facility and replace it with a more ‘traditional’ loan, with attached warrants.

“We will thus continue to have the funds needed to bridge us through the current period, although we will no longer have a bigger facility in place to support us beyond that.

“Today’s transaction will also mean that the item of most concern to our shareholders about the previous convertible facility - the potential for future dilution at unknown value from future conversions and any future facility draw-downs - is removed.”

At 1111 BST, shares in Challenger Energy Group were up 21.6% at 0.0608p.

Reporting by Josh White for Sharecast.com.