ERIN ENERGY CORPORATION (NYSEMKT:ERN) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
Finance Facility
On February 6, 2017, Erin Energy Corporation (the Company) and its
subsidiary, Erin Petroleum Nigeria Limited (EPNL), entered into a
Pre-export Finance Facility Agreement (the Finance Facility) with
The Mauritius Commercial Bank Limited, as mandated lead arranger,
agent, security agent, original lender and issuing bank ( MCB). The
Finance Facility provides for a total commitment of $100.0 million
and is supported by a guarantee from The Standard Bank of South
Africa Limited (SBSA), as named guarantor, which guarantee is
facilitated by the Public Investment Corporation SOC Ltd. (PIC),
the Companys second largest shareholder. The PIC guarantee is made
with recourse to the Company to the Companys entry into the
Financing Support Agreement with PIC (as defined and described
below).
subsidiary, Erin Petroleum Nigeria Limited (EPNL), entered into a
Pre-export Finance Facility Agreement (the Finance Facility) with
The Mauritius Commercial Bank Limited, as mandated lead arranger,
agent, security agent, original lender and issuing bank ( MCB). The
Finance Facility provides for a total commitment of $100.0 million
and is supported by a guarantee from The Standard Bank of South
Africa Limited (SBSA), as named guarantor, which guarantee is
facilitated by the Public Investment Corporation SOC Ltd. (PIC),
the Companys second largest shareholder. The PIC guarantee is made
with recourse to the Company to the Companys entry into the
Financing Support Agreement with PIC (as defined and described
below).
In connection with the Finance Facility, and as a condition
precedent to the initial drawdown thereunder, EPNL entered into an
exclusive off-take contract with Glencore Energy UK Ltd. dated
January 18, 2017 (the Off-take Contract) for EPNLs entire volumes
of oil produced from Oil Mining Leases 120 and 121 located offshore
Nigeria (the OMLs). to the Finance Facility, EPNL is required to
comply with the terms of the Off-take Contract, ensure payments and
deliveries of oil and notify MCB of any failures under such
contract and ensure that it receives a fair market price for
delivered oil.
precedent to the initial drawdown thereunder, EPNL entered into an
exclusive off-take contract with Glencore Energy UK Ltd. dated
January 18, 2017 (the Off-take Contract) for EPNLs entire volumes
of oil produced from Oil Mining Leases 120 and 121 located offshore
Nigeria (the OMLs). to the Finance Facility, EPNL is required to
comply with the terms of the Off-take Contract, ensure payments and
deliveries of oil and notify MCB of any failures under such
contract and ensure that it receives a fair market price for
delivered oil.
The Finance Facility is supported by the SBSA guarantee as
facilitated by PIC, the assignment of the Off-take Contract and the
assignment by way of security of certain accounts, including a debt
service reserve account, as set forth in the Finance Facility. EPNL
is required to deposit $10.0 million at the closing of the Finance
Facility into the debt service reserve account with MCB and
maintain that balance for so long as borrowings are outstanding
under the Finance Facility. The aforementioned guarantee and
security agreements must be entered into by the parties thereto as
conditions precedent to the initial drawdown on the Finance
Facility.
facilitated by PIC, the assignment of the Off-take Contract and the
assignment by way of security of certain accounts, including a debt
service reserve account, as set forth in the Finance Facility. EPNL
is required to deposit $10.0 million at the closing of the Finance
Facility into the debt service reserve account with MCB and
maintain that balance for so long as borrowings are outstanding
under the Finance Facility. The aforementioned guarantee and
security agreements must be entered into by the parties thereto as
conditions precedent to the initial drawdown on the Finance
Facility.
EPNL may make drawdowns under the Finance Facility by way of loans
and/or letters of credit until June 30, 2017 after which the
remaining balance of MCB’s commitment may be deposited into a
capital expenditure reserve account for payment of invoices
expected to be payable within six months after June 30, 2017.
Borrowings under the Finance Facility bear interest at three-month
LIBOR plus a 6% margin. After a grace period that ends on June 30,
2017, the Finance Facility will be repaid in accordance with the
following repayment schedule:
and/or letters of credit until June 30, 2017 after which the
remaining balance of MCB’s commitment may be deposited into a
capital expenditure reserve account for payment of invoices
expected to be payable within six months after June 30, 2017.
Borrowings under the Finance Facility bear interest at three-month
LIBOR plus a 6% margin. After a grace period that ends on June 30,
2017, the Finance Facility will be repaid in accordance with the
following repayment schedule:
|
Repayment Date
|
Repayment Installment (USD)
|
|
30 June 2017
|
500,000
|
|
30 September 2017
|
10,000,000
|
|
31 December 2017
|
10,000,000
|
|
31 March 2018
|
10,500,000
|
|
30 June 2018
|
10,500,000
|
|
30 September 2018
|
10,500,000
|
|
31 December 2018
|
10,500,000
|
|
31 March 2019
|
10,500,000
|
|
30 June 2019
|
10,500,000
|
|
30 September 2019
|
10,500,000
|
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31 October 2019
|
2,000,000
|
|
30 November 2019
|
2,000,000
|
|
31 December 2019
|
2,000,000
|
The Finance Facility includes customary fees, including a
commitment fee, structuring fee, underwriting fee, management fee,
fees payable in respect of utilization of the Finance Facility by
way of letter of credit and other fees. EPNL may only use the
drawdowns to pay fees and costs associated with the Finance
Facility, fund the debt service reserve account and fund capital
expenditures, or the capital expenditure reserve account, related
to the development of the OMLs.
commitment fee, structuring fee, underwriting fee, management fee,
fees payable in respect of utilization of the Finance Facility by
way of letter of credit and other fees. EPNL may only use the
drawdowns to pay fees and costs associated with the Finance
Facility, fund the debt service reserve account and fund capital
expenditures, or the capital expenditure reserve account, related
to the development of the OMLs.
EPNL is subject to certain covenants under the terms of the Finance
Facility that include, but are not limited to, the maintenance of
the following financial ratios:
Facility that include, but are not limited to, the maintenance of
the following financial ratios:
(1) a Debt Service Cover Ratio (as defined in the Finance Facility)
that is equal to or greater than 1.2 to 1. The Debt Service Cover
Ratio measures the ratio of EPNLs projected gross revenues less
projected gross expenditures for the stated period plus the amounts
held in certain of its bank accounts (including the Debt Service
Reserve Account (as defined in the Finance Facility)) to all
amounts due under the Finance Facility during each applicable
calculation period; and
that is equal to or greater than 1.2 to 1. The Debt Service Cover
Ratio measures the ratio of EPNLs projected gross revenues less
projected gross expenditures for the stated period plus the amounts
held in certain of its bank accounts (including the Debt Service
Reserve Account (as defined in the Finance Facility)) to all
amounts due under the Finance Facility during each applicable
calculation period; and
(2) a PXF Life Cover Ratio (as defined in the Finance Facility)
that is equal to or greater than 1.2 to 1. The PXF Life Cover Ratio
measures the ratio of EPNLs projected gross revenues less projected
gross expenditures for the stated period plus the amounts held in
certain of its bank accounts to all amounts outstanding under the
Finance Facility less amounts in the Debt Service Reserve Account.
that is equal to or greater than 1.2 to 1. The PXF Life Cover Ratio
measures the ratio of EPNLs projected gross revenues less projected
gross expenditures for the stated period plus the amounts held in
certain of its bank accounts to all amounts outstanding under the
Finance Facility less amounts in the Debt Service Reserve Account.
If at any date on which a loan is made or letter of credit is
issued or at the end of each quarter either of these ratios is less
than 1.2 to 1 but is more than 1.0 to 1, EPNL is required to
prepay, within ten business days, the relevant portion of the
loans.
issued or at the end of each quarter either of these ratios is less
than 1.2 to 1 but is more than 1.0 to 1, EPNL is required to
prepay, within ten business days, the relevant portion of the
loans.
The Finance Facility also places restrictions on the Company and
EPNL with respect to dispositions of assets or working interests,
the incurrence of security interests, indebtedness or guarantees of
obligations and other matters. The Finance Facility also requires
that the Company and EPNL maintain their assets in good working
order and condition and ensure that any unsecured
EPNL with respect to dispositions of assets or working interests,
the incurrence of security interests, indebtedness or guarantees of
obligations and other matters. The Finance Facility also requires
that the Company and EPNL maintain their assets in good working
order and condition and ensure that any unsecured
or unsubordinated claims of MCB rank at least pari passu>with
the claims of other unsecured and unsubordinated creditors.
the claims of other unsecured and unsubordinated creditors.
The Finance Facility is subject to conditions to closing as is
customary with such facilities and customary events of default. If
an event of default occurs and is continuing, MCB may accelerate
amounts due under the Finance Facility, demand payment under the
SBSA guarantee and exercise other remedies. In the event of a
change of control, which includes PIC ceasing to be a direct
shareholder of the Company and the sale of all or substantially all
of the assets of either the Company or EPNL, MCB is not obligated
to make further loans and may accelerate any amounts due under the
Finance Facility.
customary with such facilities and customary events of default. If
an event of default occurs and is continuing, MCB may accelerate
amounts due under the Finance Facility, demand payment under the
SBSA guarantee and exercise other remedies. In the event of a
change of control, which includes PIC ceasing to be a direct
shareholder of the Company and the sale of all or substantially all
of the assets of either the Company or EPNL, MCB is not obligated
to make further loans and may accelerate any amounts due under the
Finance Facility.
The foregoing description of the Finance Facility is not complete
and is qualified by reference to the full text of the Finance
Facility, which is attached hereto as Exhibit 10.1 and incorporated
herein by reference.
and is qualified by reference to the full text of the Finance
Facility, which is attached hereto as Exhibit 10.1 and incorporated
herein by reference.
Financing Support Agreement
In connection with the Finance Facility, the Company and PIC also
entered into the Financing Support Agreement on February 6, 2017
(the Financing Support Agreement). to the Financing Support
Agreement, PIC agrees to apply for, request and authorize SBSA, or
any other reputable commercial bank acceptable to MCB, to issue a
bank guarantee in favor of MCB in the amount of $100.0 million. The
issuance of a guarantee in favor of MCB by SBSA or another
reputable commercial bank is a condition precedent to the closing
of the Finance Facility.
entered into the Financing Support Agreement on February 6, 2017
(the Financing Support Agreement). to the Financing Support
Agreement, PIC agrees to apply for, request and authorize SBSA, or
any other reputable commercial bank acceptable to MCB, to issue a
bank guarantee in favor of MCB in the amount of $100.0 million. The
issuance of a guarantee in favor of MCB by SBSA or another
reputable commercial bank is a condition precedent to the closing
of the Finance Facility.
In consideration for this undertaking, the Company has agreed to
pay PIC an upfront fee equal to 250 basis points on the guarantee
amount and issue to PIC warrants to purchase a number of shares of
the Companys common stock in an amount equal to the guarantee
amount multiplied by 20% divided by the closing market price of the
Companys common stock on the day that EPNL receives funds under the
Finance Facility, with an exercise price equal to such closing
market price. The Company also has agreed to indemnify PIC from and
against certain claims and losses. The amount of any and all
indemnifiable losses suffered by PIC agreed or otherwise required
to be paid by the Company will be paid in cash or, at the option of
PIC, may be paid in newly issued shares of the Companys common
stock.
pay PIC an upfront fee equal to 250 basis points on the guarantee
amount and issue to PIC warrants to purchase a number of shares of
the Companys common stock in an amount equal to the guarantee
amount multiplied by 20% divided by the closing market price of the
Companys common stock on the day that EPNL receives funds under the
Finance Facility, with an exercise price equal to such closing
market price. The Company also has agreed to indemnify PIC from and
against certain claims and losses. The amount of any and all
indemnifiable losses suffered by PIC agreed or otherwise required
to be paid by the Company will be paid in cash or, at the option of
PIC, may be paid in newly issued shares of the Companys common
stock.
The foregoing description of the Financing Support Agreement is not
complete and is qualified by reference to the full text of the
Financing Support Agreement, which is attached hereto as Exhibit
10.2 and incorporated herein by reference.
complete and is qualified by reference to the full text of the
Financing Support Agreement, which is attached hereto as Exhibit
10.2 and incorporated herein by reference.
Override Deed
In connection with the Finance Facility, the Company, EPNL, MCB and
the Companys existing secured lender Zenith Bank PLC (Zenith) also
entered into the Override Deed on February 8, 2017 (the Override
Deed). The Override Deed establishes, inter alia, pro-rata rights
of MCB and Zenith in respect of the proceeds from the Off-take
Contract, governs the mechanics of any enforcement action by the
creditors and sets out pro-rata sharing of enforcement proceeds
between
the Companys existing secured lender Zenith Bank PLC (Zenith) also
entered into the Override Deed on February 8, 2017 (the Override
Deed). The Override Deed establishes, inter alia, pro-rata rights
of MCB and Zenith in respect of the proceeds from the Off-take
Contract, governs the mechanics of any enforcement action by the
creditors and sets out pro-rata sharing of enforcement proceeds
between
MCB and Zenith. The Override Deed also grants the necessary
consents to EPNLs entry into the Finance Facility and related
documents.
consents to EPNLs entry into the Finance Facility and related
documents.
The foregoing description of the Override Deed is not complete and
is qualified by reference to the full text of the Override Deed,
which is attached hereto as Exhibit 10.3 and incorporated herein by
reference.
is qualified by reference to the full text of the Override Deed,
which is attached hereto as Exhibit 10.3 and incorporated herein by
reference.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On February 6, 2017, the Company entered into the Finance Facility
as described under Item 1.01 above. The description of the Finance
Facility under Item 1.01 is hereby incorporated into this Item 2.03
by reference.
as described under Item 1.01 above. The description of the Finance
Facility under Item 1.01 is hereby incorporated into this Item 2.03
by reference.
Item 3.02. Unregistered Sales of Equity Securities.
to the Financing Support Agreement and upon the closing of the
Finance Facility, the Company will issue to PIC warrants to
purchase a number of shares of the Companys common stock. The
information set forth under Item 2.03 regarding the issuances of
the warrants to PIC is hereby incorporated into this Item 3.02 by
reference.
Finance Facility, the Company will issue to PIC warrants to
purchase a number of shares of the Companys common stock. The
information set forth under Item 2.03 regarding the issuances of
the warrants to PIC is hereby incorporated into this Item 3.02 by
reference.
The warrants issued to PIC are exempt from the registration
requirements of the Securities Act of 1933 (the Securities Act) to
Section 4(a)(2) of the Securities Act for the offer and sale of
securities not involving a public offering and Rule 506 of
Regulation D promulgated thereunder and to Regulation S for
offshore transactions involving non-U.S. persons. The warrants
described above will not be registered under the Securities Act or
the securities laws of any other jurisdiction. Unless they are
registered, the securities may be offered and sold only in
transactions that are exempt from registration under the Securities
Act and the securities laws of any other applicable jurisdiction.
This exemption is based on certain representations made by PIC to
the Company.
requirements of the Securities Act of 1933 (the Securities Act) to
Section 4(a)(2) of the Securities Act for the offer and sale of
securities not involving a public offering and Rule 506 of
Regulation D promulgated thereunder and to Regulation S for
offshore transactions involving non-U.S. persons. The warrants
described above will not be registered under the Securities Act or
the securities laws of any other jurisdiction. Unless they are
registered, the securities may be offered and sold only in
transactions that are exempt from registration under the Securities
Act and the securities laws of any other applicable jurisdiction.
This exemption is based on certain representations made by PIC to
the Company.
Item 8.01 Other Events.
On February 9, 2017, the Company issued a press release announcing
that it had entered into the Finance Facility and the Financing
Support Agreement. A copy of the press release is filed as Exhibit
99.1 to this report, which is incorporated by reference into this
Item 8.01.
that it had entered into the Finance Facility and the Financing
Support Agreement. A copy of the press release is filed as Exhibit
99.1 to this report, which is incorporated by reference into this
Item 8.01.
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Item 9.01
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Financial Statements and Exhibits.
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10.1
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Pre-export Finance Facility Agreement between Erin Energy
Corporation, Erin Petroleum Nigeria Limited and The Mauritius Commercial Bank Limited, dated February 6, 2017. |
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10.2
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Financing Support Agreement between Erin Energy
Corporation and the Public Investment Corporation SOC Ltd., dated February 6, 2017. |
|
10.3
|
Override Deed between Erin Energy Corporation, Erin
Petroleum Nigeria Limited, Zenith Bank PLC and The Mauritius Commercial Bank Limited, dated February 8, 2017. |
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99.1
|
Press release issued by Erin Energy Corporation, dated
February 9, 2017. |
About ERIN ENERGY CORPORATION (NYSEMKT:ERN)
Erin Energy Corporation, formerly Camac Energy Inc., is an independent oil and gas exploration and production company. The Company is focused on energy resources in Africa. The Company’s asset portfolio consists of approximately nine licenses in over four countries covering an area of approximately 40,000 square kilometers (over 10 million acres). The Company’s geographical segments include Nigeria, Kenya, The Gambia and Ghana. The Company owns producing properties and conducts exploration activities offshore Nigeria, conducts exploration activities offshore Ghana and The Gambia, and conducts exploration activities offshore both offshore and onshore Kenya. The Company’s subsidiaries include CAMAC Energy Kenya Limited, Erin Petroleum Nigeria Limited, Erin Energy Gambia Ltd. and Erin Energy Ghana Limited. ERIN ENERGY CORPORATION (NYSEMKT:ERN) Recent Trading Information
ERIN ENERGY CORPORATION (NYSEMKT:ERN) closed its last trading session up +0.05 at 3.80 with 40,767 shares trading hands.