Cloudbreak Regulatory News (CDL)

6 Nov 2007 16:03

Cardinal Resources plc06 November 2007 CARDINAL RESOURCES PLC POSTS EGM CIRCULAR TO SHAREHOLDERS LONDON - Tuesday, 6 November 2007 Cardinal Resources plc (AIM:CDL) ("Cardinal" or "the Company"), an independent oil and gas exploration and production company operating in Ukraine, today mailed a circular to shareholders to notify them of an extraordinary general meeting ("EGM") to be held at 10:00 am on the 30 November 2007 at the offices of Fox Williams LLP, Solicitors, Ten Dominion street, London EC2M 2EE. The circular addresses the following issues: -------------------------------------------- • Capital reorganisation and reduction of share capital • Increase in borrowing powers The directors of Cardinal (the "Directors") have been reviewing the existing capital structure and believe that it is in the best interests of the shareholders of the Company (the "Shareholders") and the Company as a whole to effect a reorganisation and reduction of the share capital of the Company. The Company confirms, following the announcement on 30 October 2007, that pursuant to the terms of a framework agreement for the potential sale of its Ukrainian assets (the "Transaction"), the Company is working toward signing a share purchase agreement ("SPA") to effect the Transaction by 9 November 2007. However, there is no guarantee that the SPA will be executed, or, if it is executed, that the Transaction will be approved by Shareholders at a further extraordinary general meeting to be convened for that purpose. The Directors believe that a reduction of share capital and an increase in the borrowing powers of the Directors would increase the number of options available to the Company, including providing for the flexibility to raise additional equity/debt financing as opportunities become available should the Transaction fail to complete and/or to successfully execute the post Transaction investing strategy of the Company. Capital reorganisation and reduction of share capital: ------------------------------------------------------ For the Company to have the flexibility to consider and conduct equity fund-raising initiatives at a price available in the market, without being restricted to a price of not less than 20p which is the current nominal value of the Company's ordinary shares (the "Ordinary Shares"), the Directors are of the opinion that the nominal value of the Ordinary Shares needs to be reduced below its market value, which at the time the Ordinary Shares were suspended from trading on AIM, was 7p. Although the capital reorganisation will have the result of creating a new distributable reserve, the purpose of the capital reorganisation is to reduce the nominal value of the Ordinary Shares to facilitate the possibility of equity fund-raising. Increase in borrowing powers: ----------------------------- The Directors believe that it is in the best interests of the Company to reduce the restrictions on the borrowing powers of the Directors currently imposed by the articles of association of the Company (the "Articles of Association") which, due to ongoing declines in the Company's adjusted capital and reserves, cap the borrowing powers of the Directors at £20 million. Given the Company's immediate need for liquidity, the Directors believe that it is in the best interests of the Shareholders and the Company as a whole to reduce the restrictions on the borrowing powers of the Directors and therefore propose an amendment to the Articles of Association to increase the Directors' borrowing powers to the greater of £40 million and 4.5 times the Company's adjusted capital and reserves. The Directors also believe that this change will facilitate any future negotiations with the Company's chief creditor Silver Point Capital ("SPC"), failing completion of the Transaction, to restructure SPC's outstanding financing to the Company and the Company's efforts to attract new equity funding for the business through a rights offering, open offer or private placement. The recommendation: ------------------- The circular contains a recommendation by the Directors to Shareholders to vote in favour of the resolutions to be proposed at the EGM as the Directors have irrevocably undertaken to do in respect of their aggregate shareholding of 2,066,924 Ordinary Shares, representing 1.8 per cent of the issued ordinary share capital of the Company at the date of this document. A copy of the EGM Circular sent to shareholders is available on the Company's web site: www.cardinal-uk.com in accordance with the AIM rules. For further information please contact: Cardinal Resources Conduit PR Ltd Charles Green / Natalia Egorova Jonathan Charles +44 (0) 20 7936 5250 +44 (0) 20 7429 6666 investor.relations@cardinal-uk.com Jonathan@conduitpr.com Notes to Editor Cardinal Resources plc is an independent oil and gas company engaged in the acquisition, development, production and exploration of oil and natural gas properties in Ukraine. Cardinal is an experienced operator in the country focused on expanding its existing operations through the farm-in or acquisition of additional upstream oil and gas assets that can be further developed through the application of modern technology and expertise. This information is provided by RNS The company news service from the London Stock Exchange