BrazAlta, a Canadian international oil and gas firm with operations in Brazil, has jointly closed with its Brazilian partner W Washington, a US$50mn reserves based revolving line of credit via mandated lead arranger Standard Bank. The facility is to support the development of oil wells in the Bahia province of Brazil.
The notional size of the facility is US$50mm, and the initial availability is US$9mn, which has been fully drawn down as of August 8, 2007. The structure allows Standard Bank to increase the availability of funds from US$9mn to a maximum of US$50mn, depending on how much reserves and production the company will add as they spend the money already advanced to them.
Standard Bank is the only lender on the transaction, but it will be syndicated once availability of funds increases to US$15-20mn.
The borrower is required to make only interest payments for the next three years, with repayment of the principal due in full in August 2010. Interest of the facility will be 3.50% plus Libor.
BrazAlta is cross-guaranteeing the facility as a 47.5% joint-interest partner with W Washington. The corporation is also issuing 3.5mn share purchase warrants to Standard bank, with each whole warrant exercisable for a period of five years following the closing of the financing, and entitles the holder to purchase one common share of BrazAlta at a price of US$2 per common share.
In addition to this deal, Standard Bank has acted as MLA on a credit agreement for a senior secured medium term loan of US$30mn for BrazAlta’s wholly owned service company BCH. The borrower has completed the first drawdown of this facility, using US$13.69mn to fund the expanding operations of BCH in the Brazilian oilfields market.
This facility has a five-year tenor and carries an interest rate of 3.25% plus Libor. US$5mn is repayable by the end of this year, and the balance is repayable in quarterly instalments comprising of interest only in the first year of the facility. Then the remaining balance will be repaid in equal quarterly instalments of principal plus interest starting in August 2008, with final payment due in July 2012.
As part of this debt package, BCH also issued 250,000 share purchase warrants to Standard Bank, with each whole warrant exercisable for five years following the closing of the financing and entitles the holder to purchase one common share of BCH at a price of US$10 per common share.
BCH has entered into contracts to purchase four drilling rigs with four separate vendors in Canada for export to Brazil, required to support drilling services contracts with Petrobras. Purchases of the first two drilling rills have been completed, and both rigs will be arriving in Brazil in September, while the other two are under construction.
BrazAlta is a publicly trade corporation mainly focusing its activities on the exploration, development and production of oil and gas in the Reconcavo and Sergipe basins of Brazil. It is the largest Canadian independent onshore exploration corporation in Brazil.
W Washington Empreendimentos E Participacoes is also active in exploration, development, and production of hydrocarbons in Brazil, and it is BrazAlta’s partner on operations in the Reconcavo and Sergipe areas of Brazil.