Wednesday, May 25, 2022

Lenders agree to re-profile Discovery Metals’ debt

Discovery Metals, the troubled copper mining outfit said on Monday it will now put more energy on its Botswana project after its financiers passed a vote of confidence by agreeing to re-profile debt.?The Australian company said it has executed a legally binding term sheet with its lenders for the debt re-profile with the term sheet subject to the parties entering into definitive, long form documents which reflect the terms of the term sheet in all material respects by 11 July 2014. Under the deal, which will cheer the company investors, DML revealed that it has agreed with its lenders to reduce the existing interest bearing debt by US$59 million (10.5 cents per share) and re-profile repayments of outstanding debt.

This means a reduction in gross interest bearing debt (including capitalized interest) from US$159 million (outstanding balance) to US$100 million (new balance); a 12 month standstill on principal and interest payments and together with all covenant testing other than a minimum cash balance and an extension to the term of the loan, with scheduled repayments commencing in September 2018 and ending in June 2023. The parties also agreed on an incentive payment to the lenders of no more than US$20 million, from 30 percent of net cash flows, after the new?balance is fully repaid. Discovery Metals’ Chairman, Jeremy Read said the debt re-profile with the lenders brings certainty to the company–which last year announced it was laying off some employees to save the Boseto project.??

“With the significant reduction in overall debt and an effective 12?month standstill in place, Discovery Metals can now focus exclusively on its operating strategy to transition the Boseto project to underground mining and in doing so supply the processing plant with consistent higher grade, higher recovery sulphide copper ore and commence the Zeta Underground Mine,” said Read.??”The company thanks the lenders for their continued support over the past 18 months, and for their commitment to the future of Discovery Metals,” he added.

The company assured its investors that there is no issue of equity to the lenders as part of the debt re-profile. However, DML will be undertaking a placement and a rights issue later this year.?”The commitment shown from the lenders has resulted in a very positive outcome for shareholders. Unlike other investment and structuring proposals, the debt re-profile of itself will not dilute existing shareholders,” Discovery Metals’ CEO, Bob Fulker said.

He added that the debt reduction will secure and stabilize the Company as it looks to secure funding for the Zeta Underground Mine. However, the deal is subject to conditions being met; and there is a risk that the conditions will not be satisfied by the due date. Further, there is a risk that once the transaction documents are executed further conditions will not be satisfied.


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