Union Jack Oil (AIM:UJO) has agreed a secured £1m term loan from Egdon Resources U.K. to provide additional working capital for general corporate purposes.
Union Jack is a UK and USA-focused onshore hydrocarbon production, development and exploration company, and the lender, Egdon, is the operator of the Wressle oilfield where it holds a 30% interest and Union Jack holds a 40% interest in PEDL180 and PEDL182.
The loan term is 24 months from drawdown, interest is 5% per annum (8% on overdue amounts) and the facility is secured over Union Jack's interest in PEDL180 and PEDL182.
Repayment mechanics require the borrower to pay each month 60% of operating free cash flow from Wressle, with that cash applied first to unpaid interest and then to principal, while 40% of free cash flow may be retained by Union Jack.
If monthly free cash flow is insufficient, interest for that month is capitalised and added to the loan balance on which interest then accrues, and all outstanding principal and accrued interest must be repaid in full at the end of the 24-month term.
Covenants restrict the borrower from creating further security over the secured assets without lender consent, from taking on additional debt except unsecured convertible loans, and from paying dividends or returning capital (other than intra-group distributions) without consent, and require support for Egdon’s role as operator with rights to remove it except for gross misconduct.
If the borrower seeks to sell any interest in PEDL180, PEDL182 or the related joint operating agreements, Egdon has a first right of refusal and a matching right after a third-party offer, with the matching right persisting for 12 months after repayment.
The terms were disclosed in the company's RNS.
