Capital Management Update
- AUD 1 million loan by ECTF to repay wholesale loan to ECT
- Proceeds to be used by ECT to fund operating expenses and commercialisation of Indian and Victorian projects
- Evidence of utility of the ELF book in financing future budget requirements of ECT
- Project bond for India project to be finalised after signing of RCA
In July 2017, ECTF successfully executed the equity lending facility, facilitating the conversion of options to fully paid ordinary shares via the issue of limited recourse loans secured against the shares. This facility was again applied to a subsequent options series in June 2018 (see announcement 27 June 2018).
The ELF loan book within ECTF has a current security value of ~AUD 15.62M, against a wholesale loan from ECT of ~AUD 15.54M.
ECT Finance Chairman, Jim Blackburn commented, "We have been looking at ways that the current loan book can be securitised ahead of individual repayments and with an existing wholesale loan balance of ~AUD 15.54M and a current security value of ~AUD 15.62M, this represents a great opportunity to bring forward repayment of the loans via this method."
Proceeds from the loan to ECTF will be used to repay part of the wholesale loan from ECT, which in turn will be used to fund operating expenses and capital works to support the Company's commercialisation strategy in Victoria and India.
Mr Blackburn added, "This type of lending structure may also be appropriate when it comes time to fund the cash component of the AUD 3.5 million project bond for our India project, the timing for which will be following the signing of the Research Collaboration Agreement (RCA) and prior to the initial funding by our project partners, expected in coming months.
"This approach to financing helps minimise the need to raise fresh equity capital from the market and successful implementation of this current loan underpins the utility and flexibility of maintaining the ELF loan and security book. We want to be clear with our shareholders that there are a good number of options for the Company to furnish the needs of the project bond and that equity capital raisings are furthest from our minds at this stage."
With the securitisation loan fully drawdown, the wholesale loan balance to ECT will be ~AUD 14.54M with an estimated security backing (at 1.25c per share) of ~AUD 15.45M.
The interest rate applied to this securitisation loan is ~16.6% with the lender's own ELF loan position set-off against the interest payment in lieu of cash.
Background - India Project Bond
Timing: The project bond is required to be established following the signing of the RCA and ahead of NMDC and NLCIL's financial contribution to the project account, and thus ahead of construction.
Duration: The duration of the bond will be from commencement of construction to completion of commissioning.
Conclusion: The bond will expire undrawn at the completion of commissioning so long as ECT does not withdraw from the project before this time.
Purpose: The purpose of the bond is to align ECT's financial interest with our project partners over the period in which NLCIL and NMDC will be expending circa AUD 30M in capital funding.
Notwithstanding the above, the bond must be realisable to its value in the unlikely event ECT does not proceed with the project. The Company is exploring funding options, including, but not limited to, further securitisation of the ELF loan book, as outlined above, and strategic partner investment and government funding.
About Environmental Clean Technologies Ltd
Environmental Clean Technologies Limited (ASX:ECT) is in the business of commercialising leading-edge coal and iron making technologies, which are capable of delivering financial and environmental benefits.
We are focused on advancing a portfolio of technologies, which have significant market potential globally.
ECT's business plan is to pragmatically commercialise these technologies and secure sustainable, profitable income streams through licencing and other commercial mechanisms.
Environmental Clean Technologies Ltd