Echo Energy plc, the Latin American focused Energy company, is pleased to announce a proposed comprehensive debt restructuring together with a placing of new Ordinary Shares ("Placing Shares") which will be conducted by way of an accelerated bookbuild (the "Bookbuild") to raise not less than £450,000, before expenses, at a fixed price of 0.25 pence per share (the "Placing Price") to investors (the "Placing"). The Placing Shares will rank pari-passu with the Company's existing Ordinary Shares.
The Company announces a proposed restructuring of its existing debts, pursuant to which the Company has entered into a conditional agreement with Lombard Odier Asset Management (Europe) Limited* ("LO") to, inter alia, convert in full the Company's existing EUR 5.0m 8.0% secured convertible debt facility with LO (the "LO Facility") into new Ordinary Shares at a price of 0.45p per share representing a substantial premium of 75.1% to the closing mid-market price per Ordinary Share of 0.257p on 11 August 2022 (the "LO Agreement").
• Proposed conversion of an aggregate of €15.0 million of existing debt principal, together with accrued interest thereon, excluding the LO Interest Conversion shares, into new Ordinary Shares at a price of 0.45p representing a 75.1% premium to the closing share price on 11 August 2022.
• Proposed reduction of remaining Note coupon from 8% to 2% with suspension of further cash interest payments for two years. Remaining Note maturity extended to 2032
• If completed the Proposed Debt Restructuring will comprehensively restructure and strengthen the Company's balance sheet, transforming the balance of value in favour of equity over debt, enabling the Company to seek to accelerate its growth strategy
• The Company intends to conduct a Bookbuild to raise not less than £450,000 (before expenses) by way of a Placing of the Placing Shares at the Placing Price.
• The Placing is to be conducted by way of an accelerated bookbuild process which will commence immediately following this Announcement and will be subject to the terms and conditions set out in Appendix II to this Announcement.
• The net proceeds of the Placing will provide the Group with additional resources to:
- Fund working capital including expenses related to the Proposed Debt Restructuring; and
- Enable operating cashflows in Argentina to be focused on activities in country in the near term, including the plan to increase production by c. 40% over approximately the next 6 months.
Under the LO Agreement, LO has conditionally agreed to the conversion of accrued interest on the LO Facility into new Ordinary Shares for the periods Q3 2021 to 31 October 2022 inclusive, at a conversion price of 0.25 pence per new Ordinary Share ("LO Interest Conversion"). Accordingly, the Company has agreed to issue to LO 213,949,943 new Ordinary Shares (the "LO Interest Conversion Shares"). The LO Interest Conversion Shares will rank pari-passu with the Company's existing Ordinary Shares.
The Company also proposes to seek the approval of the holders of the Company's Luxembourg listed EUR 20.0m 8.0% secured notes (the "Notes") for, inter alia, the conversion of 50% of the Notes and all accrued interest thereon into new Ordinary Shares, an extension of the term of the remaining Notes to 2032 and a significant reduction in coupon for the remainder of the term (the "Note Restructuring" and, together with the LO Agreement, the "Proposed Debt Restructuring"). Further details of the Proposed Debt Restructuring are set out in Appendix I below.
In connection with the Placing, the Company will also grant investors in the Placing 1.07 warrants for every one Placing Share subscribed for ("Warrants"). No fractional part of a Warrant will be issued and fractional entitlements will be rounded down to the nearest whole number. Each Warrant gives the holder the right to subscribe for one new Ordinary Share at a price of 0.25 pence per Ordinary Share (the "Strike Price") at any time until the second anniversary of issue (the "Warrant Exercise Period").
The Company currently has the authority to issue up to 290,498,000 equity securities for cash without the need for shareholder approval. The grant of the Warrants will be conditional on shareholder approval, which will be sought at the general meeting which the Company will convene for the purposes of laying the Company's annual report and financial statements for the financial year ended 31 December 2021 before shareholders. The Company will publish the relevant circular convening the meeting in due course.
Arden Partners plc ("Arden" or "Broker") is acting as the sole bookrunner in relation to the Placing.
The Placing is not conditional upon the Proposed Debt Restructuring becoming effective. As such, the Placing will complete before the Proposed Debt Restructuring and there can be no guarantee that the Proposed Debt Restructuring will become effective.
The Bookbuild will open with immediate effect following release of this Announcement. The timing of the closing of the Bookbuild, the number of Placing Shares and allocations are at the discretion of the Company and Arden and a further announcement confirming these details is expected to be made in due course. Arden reserves the right to close the Bookbuild without further notice. There can be no certainty that the Placing will complete.
The Placing of the Placing Shares will utilise the Company's existing shareholder authorities to issue new shares on a non-pre-emptive basis for cash. New shareholder authorities to grant the Warrants will be sought at a general meeting to be convened in due course.
The Placing Price of 0.25 pence per Placing Share represents a discount of approximately 3% per cent. to the closing mid-market price of an Ordinary Share on 11 August 2022 (being the latest practicable date prior to this Announcement).
This Announcement should be read in its entirety. In particular, your attention is drawn to the detailed terms and conditions of the Placing in Appendix II to this Announcement. Further information relating to the Placing and use of proceeds is set out in Appendix I to this Announcement.
The Placing is subject to the terms and conditions set out in Appendix II to this announcement (which forms part of this announcement, such announcement and the Appendices to this Announcement together being this "Announcement"). By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety, and to be making such offer on the terms and subject to the conditions of the Placing contained herein, and to be providing the representations, warranties and acknowledgements contained in Appendix II.
*acting in its capacity as discretionary investment manager of certain funds and accounts managed by it, not as principal.
Martin Hull, CEO of Echo Energy, commented:
"This is an important milestone for Echo, which if completed will fundamentally change the outlook for the company for the positive. By comprehensively restructuring and strengthening the balance sheet, we establish firm foundations for the business financially, from which we will be able to pursue the many opportunities that exist within our portfolio. The conditional conversion of debt into equity at a large premium by our largest single debt holder represents a vote of confidence in the Company's future. This transaction combined with the recently announced near term production enhancement plans and in the context of the highly supportive commodity price environment have transformed the prospects for Echo. We look forward to updating investors on our progress and thank them and our debt holders for their continuing support."