South African focused Universal Coal (ASX: UNV) has received a major vote of confidence in the company's operations after securing a A$12 million convertible note facility from one of the world's largest private financial institutions.
The agreement has been executed with Susquehanna International Group LLP (through its subsidiary Susquehanna Pacific Pty Ltd), with Universal able to draw down A$7 million of this facility in May 2012.
The funding will be used to advance phase two drilling at the Berenice-Cygnus coking coal project, along with finalising engineering work on the Kangala thermal project.
Tony Harwood, chairman of Universal, commented on the funding news:
"Universal is delighted to have Susquehanna on board with us. We believe the structure of the A$12m converting bond funding negotiated is in the interest of our shareholders, in terms of the conversion schedule and the general terms we have secured.
"For an emerging developer of coal assets and near term producer, Universal believes this facility is a new and innovative concept and is not typical of the terms junior companies are usually able to achieve in challenging equity capital markets."
Details of the facility
After the initial drawdown in May 2012, there is a balance drawdown option for the remaining A$5 million at 1 September 2012.
Universal said that the facility has been structured to ensure no immediate dilution to shareholders, which will be fully converted by the maturity date in seven years time - with the convert pricing set at a premium to the current share price.
A 9.5% fixed interest rate will be applied, which can be paid in shares at Universal's election for the first 18 months from drawdown (in line with the proposed first coal production from Kangala) at a 10% discount to the lower of the 5, 10 or 30 day VWAP, paid quarterly in arrears.