Private placement announcedhere's a little bedtime reading for us
gotta run
later
Arapahoe Energy Corporation Announces Brokered Private Placement
CALGARY, ALBERTA, Mar 12, 2007 (CCNMatthews via COMTEX News Network) --
Arapahoe Energy Corporation (the "Corporation") (TSX VENTURE:AAO) is pleased to announce that it intends to complete a private placement of units ("Debenture Units") of the Corporation for maximum proceeds of $10.5 million and minimum proceeds of $8.5 million. D & D Securities Company has agreed to act as the Corporation's agent in connection with this Offering. D & D Securities Company has received verbal expressions of interest for $9 million of this Offering. This Offering is anticipated to be completed on or about March 30, 2007.
For every $1.00 invested under this Offering, a subscriber for Debenture Units will be issued (i) a convertible secured debenture ("Debenture") in the amount of $1.50 (the "Repayment Amount") and (ii) four (4) purchase warrants ("Warrants"). The Debentures will be issued under an industry standard trust indenture. Each Warrant will entitle the holder thereof to purchase one common share ("Common Share") of the Corporation during the period expiring on 24 month anniversary of the date of closing ("Closing") of the Offering at an exercise price of $0.125.
The sum of the Repayment Amount and all accrued and unpaid interest (collectively, the "Debt Amount") shall be due and payable in cash on the second anniversary of the Closing (the "Maturity Date"). The Corporation has the right to pre-pay the Debt Amount, in whole, at any time prior to August 30, 2007. The Corporation shall be deemed to have elected to exercise its pre-payment right if the shareholders of the Corporation do not approve the conversion feature of the Debentures at a meeting of shareholders held on or before July 31, 2007.
Should the shareholders of the Corporation approve the conversion feature of the Debentures at a meeting of shareholders held on or before July 31, 2007, the holders of Debentures shall be entitled to convert each $1.00 invested under this Offering (the "Invested Amount") into 12 Common Shares at any time prior to the Maturity Date. Should the shareholders of the Corporation approve the conversion feature of the Debentures at a meeting of shareholders held on or before July 31, 2007, the Corporation shall be entitled to convert each $1.00 of Invested Amount into 12 Common Shares at any time prior to the Maturity Date following the date on which the trading price of the Common Shares has not been less than $0.65 per share for a period of 20 trading days (days during which the exchange or market on which the Common Shares are listed for trading is open for business).
Holders of Debentures shall be given the opportunity to (i) convert each $1.00 of Invested Amount into 12 Common Shares in advance of the completion by the Corporation of a "Business Combination Transaction" or (ii) directly exchange their Debentures for consideration offered by the other party to the "Business Combination Transaction". The approval of holders of not less than two-thirds of the outstanding is required in order for the Corporation to complete a "Business Combination Transaction".
Commencing on the first anniversary of the Closing, interest ("Interest") shall accrue on the outstanding Invested Amount at the rate of 20% per annum calculated annually not in advance. Interest shall be due and payable in cash on the Maturity Date and monthly thereafter until all amounts owing under the Debentures are repaid in full. In the event of the conversion of the Debentures into Common Shares, the accrued and unpaid Interest associated with the converted Debentures shall be due and paid, at the option of the Corporation (i) in cash or (ii) by the issue of such number of Common Shares equal to the amount of Interest due and payable divided by the greater of (y) the volume weighted average trading price of the Common Shares for the period of 20 trading days (days during which the exchange or market on which the Common Shares are listed for trading is open for business) ending on the fifth business day prior to the date of the conversion and (z) $0.10.
The payment of the Debt Amount shall be secured by a security interest granted by the Corporation in favour of the holders of the Debentures in respect of (i) all present and after-acquired rights and interest of the Corporation in and to real property and (ii) all present and after acquired personal property of the Corporation. Such security shall be subordinate only the security interest granted by the Corporation to its principal lender.
Among other industry standard events of default, the failure of the Corporation to complete a "Business Combination Transaction" by December 31, 2007 will be considered a default under the Debentures, unless such date is extended or waived by the holders of Debentures. Upon an event of default, the Debt Amount shall be immediately due and payable.
The Corporation intends to expend the net proceeds of the Offering for the following purposes: $6,000,000 to pay trade payables with the balance to be used to fund capital expenditures and general working capital obligations. There may be circumstances where, for sound business reasons, a reallocation of funds may be necessary for the Corporation to achieve its business objectives.
The Corporation will seek shareholder approval of the conversion feature of the Debentures at a meeting of shareholders which is anticipated to be held prior to June 30, 2007. The Debentures offered under this Offering will not be convertible until such time as shareholder approval is obtained.
It is expected that existing management, officers, directors, insiders and future directors, officers and insiders will participate in this Offering for approximately $750,000.
The closing of this Offering is subject to receipt of normal course regulatory approvals.
Financial Update
As previously announced the Corporation has a working capital deficit of approximately $11,500,000 As a result of this deficit, the Corporation is in breach of certain of its covenants to its principal lender. As previously announced the principal lender has extended the forbearance period the Corporation is under until March 31, 2007. If the Corporation should not be successful in completing the Offering for proceeds of not less than $6.5 million, it is not certain that the Corporation's principal lender will continue to forbear on making demand for the payment of amounts due to it by the Corporation.
Upon completion of this Offering and upon the Corporation remedying its default position under the existing credit facility the Corporations principal lender has conditionally agreed to provide a new credit facility to the Corporation in the amount of $5,300,000.00. The new credit facility will have a requirement for an inter-creditor agreement relating to this Offering, which inter-creditor agreement will include standard terms and conditions. It is expected that the net proceeds of this Offering will be sufficient for the Corporation to rectify its default under its credit facility and allow the Corporation to deal with its trade payable creditors in an effective and expeditious manner.
Go Forward Plan
Upon completion of this Offering the Corporation will continue to develop and exploit its core asset areas in Campbell and Sarcee, Alberta as well as Freemont, Senlac and Poundmaker in Saskatchewan. In addition the Corporation will continue to evaluate strategic corporate amalgamations or business combinations.
Arapahoe Energy Corporation is a publicly traded junior oil and gas exploration, development and production company with operations in Western Canada. Arapahoe's shares trade on the TSX Venture Exchange under the symbol "AAO".
SOURCE: ARAPAHOE ENERGY CORPORATION