Antares Energy Raises $19.5m in Convertible Notes through FIIG Securities

Summary

• Antares Energy Limited (‘Antares’) is an ASX listed company (ASX code: AZZ) focused on oil and gas exploration, production and development in the Permian Basin of West Texas in the United States.
• Antares has successfully raised A$19.5m in convertible notes to fund the further development of its three Permian Basin projects as well as any value-accretive opportunities. The convertible notes are direct, unsecured, unsubordinated obligations of Antares and rank equally with other ordinary unsecured creditors and above ordinary shares prior to their conversion into equity.
• The convertible notes were issued at a $2.00 face value, pay a 10% coupon payable quarterly in arrears and are scheduled to mature in 2023.
• Reset provisions on the notes are first available in October 2015. At the reset date, Antares has the option of resetting the interest payments of the note or the ratio at which it would convert into equity. At each reset date, noteholders will also have the option of redeeming the note at the face value of $2.00 per note. Thereafter, reset dates will be set at the discretion of Antares. We understand from Antares that reset dates are intended to be scheduled for 2018 and 2021.
• The notes can be converted at any time into ordinary shares at a ratio of 1 note to 3 ordinary shares. The existing notes are publicly listed on the ASX (ASX code: AZZG) with limited trading volumes in the secondary market to date.
• Based on a face value of $2.00 per convertible note, and a 1:3 conversion ratio, the notes effectively include an implied call option at a strike price of $0.67. If AZZ’s shares are trading at more than $0.67, note holders could potentially achieve capital gains by converting the notes into ordinary shares and subsequently selling.
• There are currently 255 million ordinary shares on issue. Based on a share price of $0.62 as at the close of business on 8 July 2014, Antares has a market capitalisation of A$158.1m. Following the convertible note issuance, there are 29.75 million convertible notes outstanding in total with a face value of A$59.5m
• These newly issued convertible notes are initially listed on the ASX under the code AZZGA and following the next interest payment on the convertible notes due 31 July 2014, the ASX code will change from AZZGA to AZZG.
• The Antares Energy convertible notes currently offer a high yielding coupon of 10% per annum, payable quarterly in arrears maturing in nine years, with early redemption options at each reset date, plus potential equity exposure through an equity call option which can be exercised at any time through converting the notes into ordinary shares of Antares.
• FIIG Securities acted as Sole Manager in relation to this issue of Antares Energy convertible notes. This is FIIG Securities’ first placement of convertible notes. It received significant interest and was oversubscribed.
• A convertible note is a type of ‘hybrid’ instrument with both fixed income and equity characteristics. Convertible notes are typically issued as a fixed income instrument, with the ability to convert the notes into the ordinary shares of the issuing company. As such, convertible notes typically carry a different risk and return profile to a standard fixed income instrument.

Please contact your FIIG dealer for a copy of the FIIG research report in relation to the Antares Energy Convertible Notes.

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