Chagala Group is looking at all possible sources of financing but needs a minimum of $5.9 million of new financing before the beginning of December, it said today.
The group issued an update on its financial position following the lapse and termination of its placing and open offer of new ordinary shares and potential placing of additional placing shares announced last week.
The company had intended to use the proceeds from the capital raise towards the redemption of the Kazakh Tenge denominated bonds issued by Caspi Limited LLP, a wholly-owned subsidiary of the Company, which bonds mature on 1 December.
As a result of the termination of the Capital Raise, another source of financing is required to provide funds for such redemption.
As of 30 September 2016, the amount of outstanding indebtedness under the KZT Bonds was equivalent to approximately US$6.7 million.
Based on the current cash balances of the company and its subsidiaries and the Company's cash flow projections, if the group meets it budget targets the Group will be US$5.9 million short of being able to repay the KZT Bonds when they fall due on 1 December 2016.
As a result, the company estimates that the Group requires a minimum amount of US$5.9 million of new financing prior to 1 December 2016.
Caspi has been informed by Al Hilal Bank that Al Hilal considers that the legal proceedings to which the Company is a party in the British Virgin Islands could negatively affect Caspi's ability to fulfil its obligations under the master Murabaha credit facility agreement between Caspi and Al Hilal.
Al Hilal has indicated that it intends to accelerate payment of the outstanding loans under the Al Hilal agreement unless Caspi takes remedial measures. The Al Hilal Agreement includes as an acceleration event Caspi being or becoming unable to pay its debts as they fall due, suspending the making of payments on any of its debts or, by reason of actual or anticipated financial difficulties, commencing negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
As of 30 September, the outstanding amount of Caspi's loans under the Al Hilal agreement was approximately US$6.5 million, and the maturity date of the loans is in November 2019.
As of 30 June, Caspi's obligations under the Al Hilal agreement were secured by a pledge of immovable properties with a carrying value of US$6.25 million and a guarantee issued by Chagala International Holding B.V. Caspi is in continuing discussions with Al Hilal regarding the potential acceleration and possible remedial actions that may be taken to avoid it.
The company says it continues to be engaged in legal proceedings in the British Virgin Islands with TIPP Investments PCC.
On 5 September, the Company and the individual members of the Board filed an application seeking to strike out TIPP's claim, to enter summary judgment against TIPP and to discharge the temporary injunction that was granted on 29 July.
A hearing is currently scheduled to take place on this application on 27 October. Whilst these legal proceedings and/or the suspension of rights of TIPP and certain other shareholders are continuing, it may be difficult for the Group to obtain financing which is needed to redeem the KZT Bonds.
The company says that in light of the termination of the capital raise, the Group is currently exploring all possible sources of financing which may include equity financing, debt financing or disposals of assets.
To date the Group has not identified any financing option that would provide funds sufficient to enable the redemption of the KZT Bonds at their maturity. There can be no assurance that any of the foregoing possible sources of financing will be available to the group.
At 1:30pm: (LON:CGLO) Chagala Group Limited Ord Usd0.40 Di share price was 0p at 1.25p