LONDON (Alliance News) - Range Resources Ltd Tuesday said it has signed a binding memorandum of understanding for up to USD35 million of funding with Beijing Sibo Investment Management LP.
The deal will result in Range and Beijing Sibo entering a definitive share subscription agreement, leading to Beijing Sibo providing a minimum of USD20 million and a maximum of USD35 million in cash to subscribe for new Range shares at a price of GBP0.008 per share.
Beijing Sibo is a new investment vehicle headquartered in the Chinese capital. It was set up for the purposes of investing into Range. The investors in Sibo are composed of a number of "high net worth individual investors with strong interests in the global energy sector", Range Resources said.
Range said the subscription price is the same as the previously proposed USD60 million funding deal with Core Capital Management Co Ltd which fell through on May 14 after being snagged by delays. The price also represents a premium of approximately 48% to the last traded share price of the company prior to the suspension of the company's shares from trading on AIM on December 11.
"Following the company's announcement on May 14, 2015, relating to termination of the previously proposed funding with Core Capital, the board and management have been focused on executing a new financing to replace the Core Capital investment. The board believes that the proposed financing presents an attractive replacement funding, at a premium to the last traded share price, which allows the company to embark on its growth ambitions," it added.
Range has started its drilling campaign in Trinidad, which is being initially funded by the extended 12 month credit facility with Range's strategic partner LandOcean Energy Services Co Ltd. Range is also exploring the St Mary's and Guayaguayare blocks in Trinidad. The new equity funding from Beijing Sibo "will help to ensure that the company has access to adequate funding to ramp up these extensive operational activities, as well as provide working capital", it said.
The funding also will be used to repay the outstanding debt facility with Lind Asset Management LLC. In February, Lind demanded the repayment of USD7.2 million that Lind claimed was due under the USD15 million loan facility provided to Range.
Range and Beijing Sibo will proceed by entering into a definitive share subscription agreement, which is expected to be executed by May 31, subject to Beijing Sibo securing governmental approval.
"Range has been advised by Sibo that applications for some of these approvals have already been made, and Sibo will endeavour to expedite the process as quickly as possible," said Range.
The company had a six-month period to satisfy the Australian Securities Exchange and AIM about its financial position, meaning that it has until June 11 to resolve its funding issues or its shares will be cancelled.
Once the subscription agreement has been signed, Range will issue an initial tranche of around 550 million new shares at the GBP0.008 per share price, representing a value of around GBP4.4 million. The company said it does not need shareholder approval to issue the first tranche of shares, but said the remaining shares issued to Beijing Sibo will require shareholder approval. Range plans to hold a meeting before November 30 to seek approval for the issue of the remaining shares.
Once the initial tranche of shares has been issued, Beijing Sibo will hold 9.7% of the enlarged share capital of the company. Range said if the maximum USD35 million is provided, Beijing Sibo will hold around a 36% stake in the company, but the final amount provided under the deal and the amount of shares issued will be determined when the deal is signed.
"The final investment amount will be agreed between Sibo and Range upon finalisation of the subscription agreement and will depend on the agreed use of proceeds and the necessary cash needs to satisfy the required guarantees and performance bonds that Range is required to provide to the Ministry of Energy and Energy Affairs on the new St Mary's and Guayaguayare blocks," said Range in a statement.
"To demonstrate their commitment to the company, the board and management from Range are also considering an investment, in individual capacities, by subscribing for shares of the company on the same terms as the Sibo memorandum of understanding, subject to approval by Range shareholders," it added.
Once the full proceeds have been received, Beijing Sibo may nominate two persons to be appointed as non-executive directors of the company.
An update on the company's share suspension will be provided "in the coming days", following consultation with the Australian Securities Exchange and the company's nominated adviser.
In addition, Range is continuing talks with China-based Sinosure and LandOcean about a previously announced USD50 million trade financing package.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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