Aurora Oil & Gas says it will push on with its a takeover of Eureka Energy, despite its concerns over a $US15 million debt facility the target has signed with Macquarie Bank, which Aurora described as “exorbitant”.
Aurora said today it maintained serious concerns over the terms of the debt facility, which it said involves “significant and penalising” costs to Eureka.
“These terms are potentially dilutive to shareholders and for which scant detail has been released,” Aurora said in a statement.
The $US15 million facility, the first tranche of a larger $US50 million capital raising for Eureka, features two “make-whole” payments, payable on drawdown of the funds, equivalent to a fee of 25 per cent, prompting the criticism from Aurora.
Aurora said it was also concerned about the potential dilutive nature of the debt facility.
The suitor had discussed the possibility of backing out of its takeover bid with its lawyers earlier this week over its concerns, but today announced it would go ahead with its 45 cents per share offer.
Aurora is looking to consolidate the companies’ landholdings in the highly prospective Sugarloaf area of the Eagle Ford shale gas region in Texas.
Eureka launched the capital raising to underpin drilling and exploration at its Sugarloaf prospect at Eagle Ford.
“While the addition of Eureka’s 6.25 interest in the Sugarloaf AMI makes sense for Aurora’s stated strategy and growth plans, Aurora is alarmed by the Eureka board’s handling and disclosure of Eureka’s funding arrangements as well as Eureka’s near-term ability to fund ongoing operations,” Aurora said.
“Given the exorbitant cost of this debt facility to fund development of Eureka’s share in the Sugarload AMI, Eureka shareholders should consider the potential dilution that will arise from further funding requirements for the evaluation of the balance of Eureka’s Eagle Ford acreage portfolio.”
At 11:30AM, WST, Aurora stocks were up 4 cents, trading at $3.29, while Eureka’s were up 1.5 cents, at 47 cents.
