The soap opera-like divorce between Bendigo Mining Ltd and BCD Resources NL has been completed, with red faces and losses all around.
BCD proposed merger with Bendigo has been scrapped, BCD has found a new friend, with deeper pockets, and with interests in Tasmania.
Bendigo confirmed it will not go ahead with a planned merger with BCD, after the companies fell out over a potential loan default.
Bendigo said on Thursday that BCD has agreed to repay a $5 million pre-completion loan and interest advanced under the terms of the merger.
And BCD said it had struck an agreement with Minemakers to provide a $15 million loan which, if shareholders approve, would convert to a 64% stake, with existing BCD shareholders retaining a 36% stake.
So BCD has a new love interest and Bendigo has its $5 million back and is probably wondering, what happened?
Trading in BCD shares resumed after the statement was released and the shares more than halved, falling by 70% or more to a low of 4.1c, from 14.5c before the suspension late last week.
They then recovered a little to close at 5.2c, a loss of more than 65%, or 9.8c, on the day. Ouch.
Bendigo shareholders were the winners, the shares rose 2c, or 8.7%, to 25c.
The sharp fall in the BCD share price seems to be a reaction to the enormous dilution involved in the loan.
If BCD shareholders approve, the $15 million loan from Minemakers will convert to equity at just 2c a share.
BCD shares were trading around 10.5c before the Bendigo deal was announced in July. Ouch!
But it seems BCD management are prepared to cop that. The Bendigo merger was to have been done at 15c a share, but that involved Bendigo shares, not cash.
As reported, Bendigo and BCD had agreed to the merger in July, but Bendigo on Monday threatened to terminate the tie-up, unless BCD remedied a potential default under a loan agreement (the loan was $5 million) between the parties by close of business on Wednesday.
"During the merger process, Bendigo received information from BCD which it believed did not satisfy the requirements of the loan agreement," Bendigo said in a statement on Thursday (that has not been explained in any more detail).
"The Board believes this negotiated outcome is in the best interests of the company and its shareholders."
BCD said in a statement on Wednesday it was able to repay its loan commitments to Bendigo Mining in full that same day using a new funding facility, and details would be released on Thursday.
Yesterday BCD said:
BCD Resources NL advises that the Company signed an agreement with Minemakers Limited on 13 October covering a $15 million funding facility. Minemakers is an Australian company with substantial mineral assets and projects in Australia and Namibia.
Earlier on 22 July 2010, BCD had announced that it had entered into a Scheme Implementation Agreement to effect a merger with Bendigo Mining Limited ("Bendigo") subject to shareholder approval. BCD also entered into a Loan Agreement under which Bendigo agreed to provide to BCD a pre-completion loan of up to $8 million to accelerate the development of BCD’s Tasmania Mine and for working capital purposes. $5 million was subsequently drawn down and a further $3 million was scheduled to be drawn down during October and November.
At 5:30pm on 10 October, Bendigo informed BCD that the Notice of Potential Default under the Bendigo Loan Agreement that it served on BCD on 6 October would stand, and that Bendigo declined to discuss or negotiate further on alternative arrangements.
Effectively, BCD was faced with the requirement to raise substantial funds within three days to avoid the prospect of receivership. Funds were required to pay back the $5 million drawn down, replace the $3 million balance of the Bendigo facility and to provide additional working capital. In the Company’s opinion, receivership was likely to have resulted in complete destruction of shareholder value. The severe time frame, and the limited number of potential funding providers, made raising funds virtually impossible.
Fortunately, it was possible to arrange the facility with Minemakers, albeit at a low price for debt: equity conversion, to ensure the corporate survival of BCD and the retention of considerable shareholder value. It also ensured operations at the Tasmania Mine would be able to continue as normal, whereas receivership may have resulted in closure of the mine and the sale of the asset at distressed prices.
The first drawdown of $8 million under the new funding facility with Minemakers gave BCD the capacity to repay the Bendigo loan in full and a settlement deed was signed with Bendigo late on 13 October.
The proposed merger with Bendigo is not proceeding.
Under the agreement with Minemakers, BCD shareholders will be asked to approve the conversion of the Minemakers debt to equity in BCD at 2.0 cents per share. Following the conversion, Minemakers would own 64% of BCD and existing BCD shareholders would retain a 36% interest, with BCD’s balance sheet improved by $15 million.
It is anticipated that a general meeting of BCD shareholders will be called to approve the debt to equity conversion within 30 days. If the conversion is not approved by BCD shareholders, the Minemakers debt would become repayable within 90 days of the meeting.
Minemakers has advised that after the debt to equity conversion, it is its genera
