Confusion surrounds the proposed merger between Bendigo Mining and BCD Resources after a statement from Bendigo yesterday revealed a potential deal breaker.
Bendigo revealed in the statement to the ASX that it has threatened to terminate a proposed merger with BCD Resources over a potential loan default.
Bendigo says it will terminate its proposed merger with BCD, unless BCD remedies the default by 5 pm tomorrow.
The companies agreed in July to a potential merger which at the time was described as having a combined market value of $162 million.
Up until last Thursday there was nothing that was thought to be a problem until Bendigo asked for trading in its shares to be suspended until yesterday.
BCD also asked for a trading halt and for trading to be suspended until yesterday when an announcement would be made.
Yesterday Bendigo issued a statement around 10.50 am and trading in the shares recommenced.
No statement had sighted from BCD and trading in its shares was suspended by the ASX for failing to provide the promised update by yesterday.
Bendigo shares gained a cent to 22c yesterday.
In its statement, Bendigo said that as part of the proposed merger agreement, it had agreed to provide a pre-completion loan of up to $8 million to BCD and has advanced $5 million to date, taking a fixed and floating charge over the assets and undertakings of BCD and its subsidiaries.
"Bendigo has received information from BCD that on October 6, 2010 caused it to issue to BCD a notice of potential default under the loan agreement, as BCD did not satisfy the requirements of the loan agreement and the SIA (scheme implementation agreement)," Bendigo said in the statement yesterday.
"If the potential default under the loan agreement is not remedied by 5pm, Wednesday, October 13, 2010, Bendigo considers that there will be an event of default under the loan agreement.
"If this transpires, Bendigo’s current intention is to terminate the SIA on the basis of that default, in accordance with the terms of the SIA."
The lack of a statement from BCD is odd and would confirm what Bendigo says, unless rectified by more detail.
