Friday 09 October 2015 by Alen Golubovic Company updates

Antares Energy Convertible Notes – additional update

THIS CONTENT IS SUITABLE FOR WHOLESALE INVESTORS ONLY

Company announcements since previous update on 9 September 2015

Oil rig sunset

Following last week’s update, Antares Energy has made the following announcements to the market:

  • Thursday 10th September - Antares Energy provided a clarification update on the terms of the sale and purchase agreement, including that the proposed transaction would be all-cash and that there were no conditions precedent to be effected prior to settlement. Download PDFExternal link - opens in a new window 
  • Friday 11th September - Antares requested an immediate trading halt following a request for further information from ASIC and ASX in relation to the purchase and sale agreements for the Northern Star and Big Star projects. Download PDFExternal link - opens in a new window
  • Friday 11th September – Antares released its half-yearly financial report to 30 June 2015. Download PDFExternal link - opens in a new window.  A key section for note holders in the section under ‘Going Concern’ on Page 7, where the following is stated:

For the half-year ended 30 June 2015, the Group generated a consolidated loss of $18.333 million and incurred operating cash outflows of $3.601 million. As at 30 June 2015 the Group has cash and cash equivalents of $6.998 million, net current liabilities of $16.384 million and net liabilities of $13.065 million. Current liabilities includes convertible notes amounting to $47.188 million at 30 June 2015 with a reset date of 31 October 2015.

The Group cash balance at 31 August 2015 was $4.5 million and the market value of the available for sale financial asset was $17.2 million representing a reduction in the two current assets of $11.9 million from 30 June 2015.

Should the convertible noteholders elect to redeem their notes the Group does not currently have sufficient cash reserves to fund the redemption and continue as a going concern.

Notwithstanding the above the Directors consider it appropriate to prepare the financial statements on a going concern basis after having regard to the following pertinent matter. It is the opinion of the directors that either:

  1. The notes will, once again, be rolled over and therefore the cash required to redeem the notes will not be required, or;
  2. The announced sale of Northern Star and Big Star assets (refer note 10) will provide the cash required to redeem the notes via either the closure of one of these sales prior to 31 October 2015 or, alternatively, the Group being able to secure short term financing to repay the notes in advance of one of the announced asset sales settling.

Should the directors not be able to achieve the matters set out above, there is significant uncertainty as to whether the Group will be able to continue as a going concern unless alternative working capital to repay the convertible notes can be secured.

In summary, the company notes the potential risk for a funding shortfall if noteholders do not roll over their notes or the asset sale does not proceed (also highlighted in last week’s update), however it remains of the opinion that either a sufficient proportion of noteholders will either roll over their notes and/or the transactions will proceed and therefore it has prepared the accounts on a going concern basis. We also highlight that the potential asset sale places the value of the remaining Northern Star and Big Star interests at US$250m or roughly 7.4 times coverage of the convertible note principal outstanding at current exchange rates.

  • Tuesday 15th September – Antares has been suspended from official quotation by ASX, citing a failure to meet the ASX disclosure requirements by not naming the asset buyer. In response to the suspension, the company has provided a letter explaining the rationale for not disclosing the buyer’s nameDownload PDFExternal link - opens in a new window. In the letter the company provided the following statement justifying its decision not to disclose:

“Antares is of the very strong view that disclosure of the identity of the Purchaser would dramatically increase closing risks and jeopardise our ability to complete these transactions. Antares believes it is in the best interest of all our stakeholders not to take any action which will jeopardise the potential for these two transactions to be completed.”

Conclusion 

We refer to the previous update on 8th September in terms of options available to investors and will provide further updates as required. The key change for noteholders from last week’s update is that secondary trading of the Antares Energy Convertible Notes on the ASX is now no longer an available option while the suspension remains in place.

Further information on Antares, including equity analyst reports are available on the company websiteExternal link - opens in a new window.

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