Friday, October 19, 2012 / TheAnalyst

1. Who are the other parties involved in the Convertible Note Purchase Agreement?
The Convertible Note was executed with Ocean & Oil Development Partners Ltd (“OODP” or “the Noteholder”).

2. Let us have further information on the structure of the investment.
It consist s of a N16 Billion investment by the Noteholder, which is convertible to ordinary shares of Oando Plc. The coupon/interest rate is MPR +7.75%.

3. Why is the coupon rate on the Note higher than your banking facility interest rates?
The convertible is unsecured unlike our bank facilities. The N16 Billion facility was secured by OODP at short notice (48 hour period) and this lead to the high coupon.

4. When will the convertible loan issues mature?
The convertible note has a tenor of 180 days from the effective date of 10th September, 2012.

5. What is the rationale/basis of Oando issuing a convertible note?
In line with our growth strategy, we are in a major bidding process for Upstream Assets that are being divested by an international Oil Company. We executed the N16Bn convertible note to meet the financing necessary to qualify for this bid process. Most E&P transactions are financed by a combination of Equity & Debt, but in most cases only a portion of the acquisition can be supported by debt, so we embarked on a convertible to give our financing activity some level of flexibility.

6. Can you elaborate further on the mechanics of the conversion process?
Upon delivery by the Noteholder to Oando Plc of a Conversion Notice, the Company shall issue to the Noteholder a number of shares of Common Stock equal to the Aggregate Principal Amount divided by the Conversion Price. The Conversion Price is the lower of N12.00 per share or the Company’s proposed capital raise price per share.

7. Why was this Convertible Note executed with Ocean & Oil Development Partners Ltd, given Oando’s relationship with Ocean & Oil Investments Ltd?
As mentioned above, the Company is striving to improve funding capacity to drive our Exploration and Production growth strategy. On this basis, Ocean & Oil had to come in to provide the required funds to drive this growth in the near term at a short notice period to ensure the company could meet its immediate financing plan for its E&P bid. The initial plan was fund this growth via the announced rights issue, but this was hindered by a delayed SEC approval. It is important for shareholders to note that the investment by Ocean & Oil is not attempt to dilute shareholders’ holdings in the Company. The Rights Issue, when executed, will ensure that shareholders maintain their stake in the Company.
 

8. Why didn’t Oando wait for the Extra-Ordinary General Meeting (EGM) to get shareholders’ approval for the Convertible Note?
Oando secured a N200 Billion capital raising special resolution from shareholders at its 2009 AGM. Please find below the stated resolution:

“Pursuant to Article 84 of the Company’s Articles of Association, the Directors be and are hereby authorized to raise, whether by way of a public offering or other methods, additional capital of up to N200,000,000. (Two Hundred Billion Naira) through the issuance of shares, convertible or non-convertible loans medium term notes, notes, bonds and or any other instruments, in such tranches, series or proportions, at such coupon or interest rates, within maturity period and such other terms and conditions; including through a book building process or other process all of which shall be as determined by the Directors; subject to obtaining the approvals of relevant regulatory authorities”

For further information, send an e-mail to :analyst@proshareng.com