TIDMSTEL
RNS Number : 9174L
Stellar Diamonds PLC
06 October 2016
NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION
TO US NEWS WIRE SERVICES.
6 October 2016
AIM: STEL
Stellar Diamonds plc
("Stellar" or the "Company")
Issue of Convertible Loan Notes and Warrants
Repayment of existing Shareholder Loan Facility
Proposed conditional amendment to existing Convertible Loan Note
and Warrant Instrument
Stellar Diamonds plc, the London listed (AIM: STEL) diamond
development company focused on West Africa, announces that it has
entered into a convertible loan note agreement ("the CLN
Agreement") with existing shareholder Deutsche Balaton AG
("Deutsche Balaton"), non-executive Director and existing
shareholder Steven Poulton and a new investor Creditforce Limited
(together the "Noteholders") to provide funding to the Company of
US$1.24 million in aggregate (the "CLN"). The CLN will be used to
repay in full the outstanding aggregate amount of approximately
US$0.64 million owed under the existing shareholder loan facility
to Altus Strategies Limited ("Altus") and Deutsche Balaton, details
of which were announced on 13 June 2016 (the "Shareholder Loan
Facility"). Steven Poulton has since acquired the loan provided by
Altus at face value. The balance of US$0.60 million arising from
the issue of the CLN will be used for working capital purposes in
relation to the ongoing potential transaction to acquire the
Tonguma project in Sierra Leone, the terms of which were announced
on 22 August 2016 (the "Potential Transaction"). In connection with
the CLN Agreement, the Company has agreed to issue warrants to the
Noteholders ("CLN Warrants") to subscribe for new ordinary shares
in the Company ("Ordinary Shares") on the basis set out in this
announcement. Further details in respect of the CLN Agreement and
CLN Warrants are set out below.
In order to facilitate the Potential Transaction, the Company
has also entered into a conditional amendment agreement with
Deutsche Balaton (the "Amendment Agreement"), to restructure the
existing convertible loan notes and warrant instrument that were
entered into with Deutsche Balaton as announced on 2 November 2015
("Existing DB CLN" and "Existing DB Warrants"). In particular,
conditional on completion of the Potential Transaction
("Completion"), Deutsche Balaton, has agreed to waive certain of
its rights under the Existing DB CLN and Existing DB Warrant
instrument relating to its ability to convert and/or exercise the
Existing DB CLN and Existing DB Warrants into shares in a
subsidiary of the Company. In satisfaction of agreeing to this
Amendment Agreement and conditional on, inter alia, Completion, the
Company has agreed to issue to Deutsche Balaton, such number of
Ordinary Shares as is equal to US$1.0 million at the same price
that any equity fundraise is completed simultaneous with Completion
("Issue Price") ("DB New Shares") and to grant additional warrants
to Deutsche Balaton to subscribe for new Ordinary Shares at the
Issue Price for an aggregate subscription of approximately US$0.83
million ("DB New Warrants"). Further details of the Amendment
Agreement are set out below.
The maximum number of new Ordinary Shares which may be issued
pursuant to conversion of the CLN and Existing DB CLN, exercise of
the CLN Warrants, Existing DB Warrants and the DB New Warrants
depends on whether Completion occurs (of which there is no
guarantee) and in particular the Issue Price. Final details of such
number of Ordinary Shares and the shareholdings and potential
shareholdings of significant shareholders will be included in any
admission document that is published in connection with the
Potential Transaction. The issue of Ordinary Shares will be subject
to any restrictions imposed under the Takeover Code.
Key terms of the CLN Agreement and accompanying CLN Warrants
The CLN is an unsecured transferable convertible loan with a
nominal amount of US$1.24 million of which US$0.29 million is to be
provided by Deutsche Balaton, US$0.40 million by Creditforce and
US$0.55 million by non-executive Director Steven Poulton. The net
proceeds of the CLN of approximately US$0.6 million following
repayment of all amounts owed under the existing Shareholder Loan
Facility are expected to be received by the Company before the
close of business on 7 October 2016.
The maturity date of the CLN is 20 months after the issue of the
CLN ("Maturity Date"). The CLN may be converted into new Ordinary
Shares (at the election of the Noteholder) commencing on the later
of i) the date of Completion (or the date on which the Company
announces that the Potential Transaction will not proceed); and the
date of obtaining the necessary shareholder authorisations which
are needed to enable the Company to issue new Ordinary Shares
pursuant to conversion of the CLN. The CLN's are convertible into
Ordinary Shares at a price of 70 percent of the Issue Price per
Ordinary Share ("Subscription Price"). In the event that the
Potential Transaction does not complete, the conversion price will
be based on 70 percent of historical VWAP for a fixed period prior
to notice of exercise of the CLN Warrants ("Alternative
Subscription Price").
The Company may give notice of early repayment of the CLN at any
time, subject to giving 20 days' notice to the Noteholders ("Early
Repayment") at which point the Noteholders may elect to convert the
CLN into Ordinary Shares. Interest is payable on the CLN at 18
percent per annum for the first 10 months following issuance and 24
percent per annum thereafter payable monthly in arrears.
The CLN's are subject to standard anti-dilution provisions and
protections including, inter alia, in the event of a capital
reorganisation.
In conjunction with the CLN and subject to obtaining shareholder
authorities in relation to the Company's ability to issue new
Ordinary Shares at a general meeting, the Company shall issue the
Noteholders with warrants which are equivalent to three times the
principal amount of the CLN (i.e. warrants with a total
subscription price of US$3.72 million) exercisable at a premium of
5 percent to the Issue Price (per Ordinary Share) in the event of
Completion occurring. The premium will increase at a rate of 1
percentage point per month from Completion up to a maximum premium
of 17 percent to the Issue Price. In the event that the Potential
Transaction does not complete, the exercise price in respect of the
CLN Warrants will be based on historical VWAP. The warrants are
exercisable for a period of 18 months following Completion (or
announcement that the Potential Transaction will not occur or 31
March 2017 if earlier). Should the warrants be exercised then the
resulting Ordinary Shares issued to the warrant holder shall be
subject to a lock-in period of six months from the date of
exercise.
In the event of Early Repayment and the Noteholders not electing
to convert the outstanding CLN into Ordinary Shares, the Company
agrees to issue the Noteholders additional warrants ("Repayment
Warrants") with an aggregate subscription price of US$1.24 million,
such warrants to be exerciseable at the Subscription Price (or the
Alternative Subscription Price in the event that the Potential
Transaction does not complete). The Repayment Warrants are
exercisable for a period of 18 months following Completion (or
announcement that the Potential Transaction will not occur or 31
March 2017 if earlier).
Amendment to the existing Convertible Loan Note and Warrant
Instrument with Deutsche Balaton
On the 2 November 2015 the Company announced that it had entered
into agreements relating to the Existing DB CLN and Existing DB
Warrants ("DB CLN Announcement"), being a convertible loan note
with Deutsche Balaton to raise US$1.65 million ("Existing DB CLN")
and an associated warrant instrument to subscribe for Ordinary
Shares for an aggregate subscription price of US$1.65 million
("Existing DB Warrants"). The Existing DB CLN and Warrants may be
converted (or "exercised" in respect of the warrants) into new
Ordinary Shares in Stellar or into one or more subsidiaries of the
Company (or a mixture of the two) as described in the DB CLN
Announcement.
Considering the importance to the Company and its shareholders
of being able to fund the Potential Transaction, the Company and
Deutsche Balaton have agreed, conditional on inter alia Completion,
to waive Deutsche Balaton's option to convert the Existing DB CLN
and/or exercise the Existing DB Warrant at the subsidiary company
level in return for issuing Deutsche Balaton US$1.0 million of new
Ordinary Shares at the Issue Price ("DB New Shares"). Save in
certain limited circumstances, Deutsche Balaton has agreed not to
dispose of the DB New Shares for a period of six months following
Completion.
Other key terms of the Amendment Agreement are as follows (all
amendments being conditional on, inter alia, Completion occurring
and the Company having sufficient share authorities to fulfil its
obligations under the agreement in respect of the issue of Ordinary
Shares):
-- The maturity date of the Existing DB Warrants shall be
extended to 31 October 2018 ("Maturity Date") (such date may be
extended by a maximum of six months in the event that conversion or
exercise is not possible at that date as a result of, inter alia,
Deutsche Balaton being in possession of unpublished price sensitive
information);
-- The exercise price of the Existing DB Warrants shall be
amended to the Issue Price (or 15 pence in the event of the
fundraise for the Potential Transaction taking the form of debt
funding);
-- Issue of additional new warrants to subscribe for such number
of Ordinary Shares at the Issue Price for a total subscription
amount of US$0.83 million, exercisable until 31 October 2018;
and
-- No interest on the Existing DB CLN will be payable by Stellar to Deutsche Balaton.
In the event that Completion does not occur by 28 February 2017
or such later date as the Company and Deutsche Balaton may agree,
the Amendment Agreement will be null and void and the original
terms of the Existing DB CLN and Existing DB Warrants will remain,
save that the Maturity date shall become 31 March 2017.
By virtue of Deutsche Balaton being a substantial shareholder of
the Company, the Amendment Agreement and its terms constitute a
related party transactions under the AIM Rules for Companies. The
Directors who are independent of the Amendment Agreement consider,
having consulted with the Company's Nominated Adviser, that the
terms of the Amendment Agreement are fair and reasonable in so far
as the Company's shareholders are concerned.
By virtue of Deutsche Balaton being a substantial shareholder of
the Company and Steven Poulton being a Director of the Company,
agreements relating to the CLN and the CLN Warrants constitute
related party transactions under the AIM Rules for Companies. The
Directors who are independent of the CLN and the CLN Warrants
consider, having consulted with the Company's Nominated Adviser,
that the terms of the Loan are fair and reasonable in so far as the
Company's shareholders are concerned.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
About Stellar Diamonds plc
Stellar is an AIM quoted (AIM: STEL) West African focused
diamond company with projects at the trial mining and mine
development stages in Guinea and Sierra Leone.
** ENDS **
For further information contact the following or visit the
Company's website at www.stellar-diamonds.com.
Karl Smithson, Stellar Diamonds plc Tel: +44 (0)
CEO Stellar Diamonds plc 20 7010 7686
Philip Knowles, Tel: +44 (0)
CFO 20 7010 7686
Jon Belliss Beaufort Securities Tel: +44 (0)
Limited (Broker) 20 7382 8300
Emma Earl Cairn Financial Advisers Tel: +44 (0)
Sandy Jamieson (Nominated Adviser) 20 7148 7900
Lottie Brocklehurst St Brides Partners Tel: +44 (0)
Ltd 20 7236 1177
This information is provided by RNS
The company news service from the London Stock Exchange
END
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