Kulcyzk Receives EBRD Loan for Ukranian Projects
Kulczyk Oil Ventures has announced that the Company's indirectly held 70% subsidiary KUB-Gas LLC has signed a USD 40 million Loan Agreement with the European Bank for Reconstruction and Development (the "EBRD").
The Loan will fund ongoing development of KUB-Gas' Vergunskoye, Olgovskoye, Makeevskoye and Krutogorovskoyenatural gas and condensate fields in the Lugansk region of Ukraine including the purchase of servicing equipment and production facility upgrades. The activities undertaken with the Loan proceeds willenable KUB-Gas to consolidate its position as one of Ukraine's largest private sector hydrocarbon producers. Additionally, the funds may be used to repay existing shareholder loans to KUB-Gas of up to USD 7 million that were advanced for the same purposes as the intended use of the EBRD funds.
The Loan consists of two tranches which must be drawn within a commitment period of two years from the date of signing the Loan Agreement. Repayment of the Loan is to be by way of 13 equal semi-annual installments starting July 15, 2012. Loan advances are subject to satisfaction of a customary set of conditions precedent.
The First Tranche of the Loan will be for USD 23 million. Interest expense on Tranche 1 debt will include a fixed element and a variable element designed to simulate an 'equity kicker' for the EBRD to allow it to share in any success resulting from the further exploration, development and production of KUB-Gas' assets activities funded by the Loan.
The Second Tranche of the Loan will be for USD 17 million. Before KUB-Gas can drawdown Tranche 2, a number of additional conditions must be satisfied, including the complete drawdown of Tranche 1 and the conversion of at least 2 of KUB-Gas' existing licenses (including Olgovskoye) into production licenses (with durations exceeding the maturity of the Loan).
As part of the security package for the Loan, the Company will provide a parent company guarantee to the EBRD in respect of monies owed by KUB-Gas under the Loan Agreement. Other security will include a mortgage over the K200 drilling rig, together with pledges over the charter capital of KUB-Gas and its future moveable property.
Source: Kulczyk Oil Ventures