A lot of creativity was expected to generate US$700 million indebted and equity to complement regarding a potash mine in Saskatchewan.
Creativity was needed because Karnalyte Resources, the owner of the mine, lacked the balance sheet and the stock price to boost the necessary capital by itself. Last September, to help with that process, Karnalyte Resources retained Dundee Capital Markets becasue it is adviser. Philip Williams, a md, was charge banker across the file.
Given its situation, Karnalyte considered Gujarat State Fertilizers and Chemicals Limited (GSFC) – a publicly listed company in India whose major shareholder can be a unit in the state of Gujarat. GSFC is a shareholder (19.9 %) in Karnalyte since 2013 and possesses signed a 20-year agreement to buy 56 percent within the mines’ output when it’s operational.
Here would be the important elements within the financing package, the general objective of this ended up being to keep a 3:1 ratio between debt and equity:
US$500 million via 20-year senior secured debt: Credit, which will be backstopped by GSFC, will probably be syndicated among several banks, a number of that are necessary to be from India. SBI Capital Markets, one of the State Bank asia, is leading the syndication efforts.A seven-year offering of subordinated credit card debt: While investors are investing in a coupon-paying debt instrument, your debt will likely be considered equity by the project lenders for your reason for the debt-equity ratio. After seven years, Karnalyte is required to boost the funds necessary to repay your financial troubles by means of an equity financing. (It might also refinance your financial troubles after seven years.) If for reasons unknown, Karnalyte can’t raise the equity after seven years, GSFC is responsible for repaying the borrowing.An equity raise: Karnalyte will hire an underwriter then sell shares to investors. Plans demand the equity raise as well as the credit card debt being comparable size.
GSFC, that has chose to fund any cost overruns on constructing the mine, will quickly lots of conditions. An essential condition is the fact GSFC is required to conserve a 51 percent voting stake in Karnalyte while the secured debts are outstanding. (That voting interest rates aren’t necessarily GSFC’s economic interest.)
To ensure GSFC takes care of a 51 percent voting interest, the thought of a retractable special voting continues to be introduced. The SVS enables the Indian banks, that are area of the senior debt group, to syndicate and give loan to a Canadian project.
Once your debt is repaid, the SVS will likely be retracted.
