Under the terms of the Chimaera will be issued with Convertible Notes to a total amount of up to $2,250,000 (with a minimum being $1,500,000). The notes will have a maturity date of 12 months, and an interest rate of 0%. The notes are convertible, at Chimaera’s discretion, into fully paid shares in Redbank at either 130% of the 15 day VWAP before the date of execution of the Agreement; or 90% of the 15 day WVAP. Chimaera will also receive, for nil consideration 45,000,000 options, exercisable at 1.5 cents within 36 months and a fee equal to $120,000 payable in shares upon shareholder approval.
Redbank has also entered into a Committed Equity Facility Agreement with Chimaera. The total commitment under the facility is $10 million over 3 years.
The shares issued under the Facility will be issued at a price equal to 90% of the 15 day VWAP of the Company’s shares. A fee of 4% of the total commitment is payable to Empire Equity Limited (Empire) upon execution of the formal documentation. The fee is payable in cash or shares, at the discretion of Empire. A further 65,000,000 options exercisable at 1.5 cents within 36 months will be payable upon execution of the formal documentation. ___________________
So, some of our small companies find it hard to raise money. $10m over 3 years is quite a bit of money. The lender gets shares, sells them at a premium, gets options, and gets a fee. The company does ok out of these arrangements- they get to have enough cash for Director fees, and enough cash to do whatever the company is doing- all good so far. Who pays the price for these arrangements? The shareholders. If these companies were private, there is no way they could get such an arrangement because no money would be coming in, because many of the companies dealt with by LJC, SpringTree, and other "US-based institutional investors" (not even named- what is with that?) are having severe cash flow problems.
Which company wouldn't take $10m over 3 years? Cash cow right there. I'll be interested to see where this share price is in 3 years. The new investor will be paid (in spades), and the Directors will be paid. The shareholders will pay and pay and pay, just like it seems they have been doing under the other pay day lender.
If companies didn't have access to these La Jolla-type companies, they'd have to work out ways to be profitable, and shareholders would be supportive. The share price won't look so bad when the inevitable consolidation comes. Consolidations are only used to raise capital- nothing else, even though companies roll out the usual consolidation propaganda.
I personally think that the day is coming when any company that uses the LJ-type lender, will have retail investors fleeing the building- one can already see it occurring. RCP is not alone in this. Another company on the ASX- can't remember the code, but I was reading about it last night-just voted "no" to more LJC or SpringTree funding, and got a retail raising as a reward for having ended the relationship. No worries there: companies wanting to raise money may have to have some strings attached- such as SP performance, to get the cash. It seems these other lenders don't require anything re performance, because they just get riches whatever happens. Banks have expectations (meet outcomes or breach covenants), and shareholders have expectations, but these lenders just hope to ensnare companies for years.
It's not good! If anyone knows of any company that is doing well from these arrangements, I'd be interested to know. Structurally, the lender always wins: they always get 130% of the SP- terrific! Someone has to pay, though- there's always a bag man.
RCP Price at posting:
0.5¢ Sentiment: None Disclosure: Not Held
