Cloudbreak Regulatory News (CDL)

23 Dec 2005 07:00

Cardinal Resources plc23 December 2005 CARDINAL RESOURCES PLC ANNOUNCES US$38 MILLION FINANCING LONDON - Friday, 23rd December 2005 Cardinal Resources plc (Cardinal) (AIM:CDL), an independent oil and gasproduction and exploration company, today announces that it has secured a US$38million bridge financing facility from Silver Point Finance (Silver Point). The bridge facility will be used to: • refinance the US$8 million in PIK Notes issued on 1st December 2005 by Cardinal to Silver Point; • enable Cardinal to reinstate its net profit interest in the Rudivsko-Chernovozavodske (RC) Field back up to 45% by settling the capital expenditure account of Cardinal's Joint Activity Agreement (JAA) with JSC Ukrnafta (Ukrnafta); • reinstate Cardinal's rights to a 45% net profit interest in and reimburse Ukrnafta for costs related to the current drilling of four new development wells within the RC Field; and • settle fees and expenses relating to the transaction and provide for general corporate and capital expenditure purposes. Cardinal has a contractual right to increase its net profit interest in the RCField - held through a JAA with Ukrnafta - from 14.9% back up to 45% by settlingits outstanding balance in the JAA capital account. Since Cardinal's position inthe JAA was diluted down to 14.9%, Ukrnafta has, with Cardinal's approval,commenced the drilling of the new four development wells in the RC Field. With sufficient funds in place, Cardinal will resume negotiations in the NewYear with Ukrnafta to reinstate its net profit interest in the RC Field and inthe four development wells, on terms to be agreed by Cardinal and Ukrnafta. Commenting on today's announcement, Robert J. Bensh, Cardinal's Chairman andChief Executive Officer said, "This financing enables Cardinal to move into anew phase of development. Reinstating our interest in the RC Field wouldgenerate a substantial increase in reserves and production and value forCardinal stakeholders. In addition, this creates a significant opportunity forCardinal in Ukraine to substantially increase reserves and production throughadditional farm-ins or acquisitions, moving the Company closer to its goal ofaggregating reserves in the range of 100-200 million barrels of oil equivalent(MMBOE)." Summary Terms of Financing Agreement Cardinal has issued US$38 million in two-year Bridge Payment-in-Kind (PIK) Notesto Silver Point. The Bridge PIK Notes will carry a coupon of 15% with quarterlyinterest payable in cash or by issue of further PIK Notes (on the same terms) atCardinal's option. As part of this financing, a recently-formed, UK intermediate holding companyowned by Cardinal, under which Cardinal's assets are held - Cardinal ResourcesFinance Limited (Cardinal Finance) - has issued to Silver Point warrants tosubscribe for approximately 32.2% of Cardinal Finance, before adjustment to takeaccount of inter-company balances, (at a price equivalent to 27.5p if suchshares had been issued at the parent company level) for a period of five years.The holders of the warrants will have pre-emption rights over new share issuesby Cardinal Finance and tag along rights in the event of any sale of CardinalFinance. The warrants will also have a put option to sell the warrants toCardinal in the event of a change of control of Cardinal. Issuance of the Bridge PIK Notes provides the note holders (Silver Point) withthe right to appoint two Directors to the Board of Cardinal and Cardinal Financefor as long as the Notes are outstanding. Silver Point has not yet exercised itsright to appoint such Directors. Cardinal has the right to redeem the notes in full after one year, subject to anearly redemption fee, unless refinanced by Silver Point or its affiliates.Subject to shareholder and regulatory approval, it is intended that the US$38million Bridge PIK Notes will be refinanced with Silver Point by an issue offive-year Senior PIK Notes before expiry of the two-year term and that theCardinal Finance warrants will be cancelled and reissued as warrants in CardinalResources plc upon issuance of the Senior Notes. If the Senior PIK Notes are notissued within six months from today, interest payments on the Bridge PIK Noteswill rise from 15% to 20% per annum and then another 1% per annum for everyquarter thereafter until maturity. The US$8 million PIK Notes, issued on 1st December 2005, were refinanced in thisnew two-year facility but Silver Point retained the 4,389,875 Cardinal warrantsalready issued. Cardinal Resources plc Cardinal Resources plc is an independent oil and gas production and explorationcompany with assets in Ukraine. Cardinal is an experienced operator in thecountry focused on expanding its existing operations through the farm-in oracquisition of additional upstream oil and gas assets that can be furtherdeveloped through the application of modern technology and expertise. Silver Point Finance Silver Point Finance structures and provides custom financing for large andmiddle market companies across all industries. ### This release may contain certain forward-looking statements. These statementsrelate to future events or future performance and reflect management'sexpectations regarding Cardinal's growth, results of operations, performance andbusiness prospects and opportunities. Such forward-looking statements reflectmanagement's current beliefs, are based on information currently available tomanagement and are based on reasonable assumptions as of this date. Noassurance, however, can be given that the expectations will be achieved. Anumber of factors could cause actual results to differ materially from theprojections, anticipated results or other expectations expressed in thisrelease. While Cardinal makes these forward-looking statements in good faith,neither Cardinal, nor its directors and management, can guarantee that theanticipated future results will be achieved. Contact:Kate SpiroDirector, Investor Relationskspiro@cardinal-uk.com+44 (0) 20 7936 5258 This information is provided by RNS The company news service from the London Stock Exchange