Sound Energy Regulatory News (SOU)

10 May 2016

Sound Energy plc

("Sound Energy" or the "Company")

Heads of Terms in respect of Bond Programme and Refinancing

Sound Energy, the European / Mediterranean focused upstream gas company, is pleased to announce the signature of Heads of Terms ("Heads") with Greenberry PLC ("Greenberry") for Greenberry and other investors (together the "Bond Subscribers") to subscribe for bonds to be issued by the Company to provide additional funding for the Company's growth strategy whilst also simplifying the Company's corporate debt structure. 

The bonds will involve the Bond Subscribers acquiring, subject to contract, privately placed 5 year non-amortising bonds with an aggregate par value of at least Euro 28.8 million and a 5% coupon (the "Bonds"). The Bonds will be issued at a 32% discount to par, will attract a total cash fee of Euro 1.1 Million (3.8% of par value) and will be secured upon the shares of the Company's subsidiary that holds its Italian assets, Sound Energy Holdings Italy Limited. Alongside the Bonds, and as part of the debt package, the Company also intends to issue Greenberry with an aggregate total of 70,312,500 warrants to subscribe for new ordinary shares in the Company, issued pro rata alongside the Bonds, at an exercise price of 30 pence per ordinary share and with an exercise period of approximately 5 years from the date of issue, concurrent with the term of the Bonds. The issue of 3,335,214 of the warrants will require shareholder approval.

On completion of the Bond programme, the net proceeds will be utilised to:

· provide the Company with additional cash resources of Euro 6 million with which to pursue its growth strategy,

· repay in full (at a 50% discount to par) the Euro 7 million Nervesa reserve based lending facility falling due for maturity in November 2016, and

· repay in full (at par) the existing £7 million corporate loan from Greenberry falling due for maturity in July 2017.

The £1 million loan originally provided to Sound Energy in January 2014 by Simon Davies, the Company's Chairman, will remain in place until its expiry in July 2017. The issue of the Bonds will require Mr Davies to agree to release his current security and replace it with security over the shares of Sound Energy Morocco South Limited.

Related Party Transaction

Greenberry has been advised by Continental Investment Partners S.A. ("Continental"), which is directly and indirectly interested in 12.98% of Sound Energy's share capital. Greenberry is an affiliate of Continental by virtue of its common ownership and Marco Fumagalli, a director of the Company, is Managing Partner of, and a 25% shareholder in, Continental.

Under the AIM Rules for Companies (the "AIM Rules") therefore, Continental is deemed to be a related party of the Company. As a result, the entry by the Company into binding agreements with Greenberry, as a Bond Subscriber and existing creditor of the Company, relating to the Bonds will constitute related party transactions pursuant to Rule 13 of the AIM Rules and accordingly a further announcement will be made at the time such agreements are entered into.

James Parsons, Sound Energy's Chief Executive Officer, commented:

"I am pleased to announce these Heads of Terms ahead of the results of our first strategic play at Tendrara, onshore Morocco, and in spite of the difficult sector backdrop.

The Bond demonstrates both the growing maturity of our portfolio and our proactive approach to financial management. The Bond will deliver multiple benefits to the Company, including: (i) providing additional funding to execute our growth strategy; (ii) simplifying our capital structure in preparation for success at our strategic plays; and (iii) extending the debt term until 2021."

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