Africa-focused iron ore company Sundance Resources (ASX: SDL) has struck a transformational deal with its noteholders that will leave the Perth stock debt free and well placed to advance development of the high-grade Mbalam-Nabeba project. The binding term sheet governs the process under which noteholders owed $133 million will receive $58.2 million of Sundance stock and a capped production royalty. Sundance shareholder approval is required.
- Binding term sheet (subject to conditions) for transformational transaction that will leave Sundance debt free.
- Involves converting $133M of notes into $58.19M of shares and a capped production royalty.
- Turns an Enterprise Value comprising $133m of convertible note debt [1] plus a $33m market capitalisation at 0.4 cents per share (i.e. $166m Enterprise Value) [2], into an Enterprise Value comprising a $90.7m market capitalisation at 0.4 cents per share with no debt.
- Introduces 5 institutional shareholders to the Company’s Top 20 shareholders. Any noteholder holding 10% or more of the voting power in the Company (post restructure) may appoint a Board member. These shareholders will have escrow provisions around their shares.
- The elimination of debt and the introduction of new Executive skill sets will enable Sundance to focus on the development of the Mbalam-Nabeba Iron Ore Project which consists of 517mt grading 62.2% Fe[3] in Stage 1.
- This transformational transaction is a significant step forward for shareholders towards the commercialisation of the Project.
The Board of Sundance Resources Limited (ASX: SDL) (“Sundance” or “Company”) is pleased to announce that the Company has reached agreement to restructure its balance sheet and eliminate the Convertible Notes (“Notes”) that were due to mature in September 2019.
Completion of this agreement will ensure the Company is free of $133m of debt and is in a position where it can progress the process of securing partners to join Sundance to advance the Mbalam-Nabeba Iron Ore Project (“Project”).
Indicatively if all resolutions giving effect to the transaction are approved by shareholders Sundance will come to have approximately 22.67 billion shares on issue, which at a last sale price of 0.4 cents per share implies a market capitalisation of $90.7M[4], materially below the seethrough Enterprise Value.
On 29 July 2018 Sundance signed a legally binding term sheet with Senrigan Master Fund, Noble ResourcesInternational Pte Ltd, D. E. Shaw Composite HoldingsInternational, Ltd, Wafin Limited, BSOF Master Fund L.P. and David Porter (together the “Noteholders”) to, subject to certain conditions being satisfied or waived, cancel their Convertible Notes (“Notes”) in consideration for a combination of equity in Sundance and a capped production royalty (“Restructure”).
The redemption value of the Notes is $132.86 million. The Notes have a maturity date of 23 September 2019, by which time Sundance would have to repay them.
[1] Based on the redemption value of the notes of $132.86 million.
[2] As at close of trading on 27 July 2018.
[3] See the Company’s previous announcement dated 20 May 2015. The Company is not aware of any new information or data that materially effects this estimate. All material assumptions and technical parameters underpinning the estimate continue to apply and have not materially changed.
[4] As at close of trading on 27 July 2018.