Torchlight Energy Resources Inc. (NASDAQ: TRCH) entered an agreement for up to $40 million of senior secured debt funding from a group of institutional lenders, the company said Dec. 2.
Torchlight entered a securities purchase agreement to sell $40 million, in aggregate, of a series of notes. The initial draw upon closing will be about $10.4 million at minimum. This will reduce payables and provide working capital for wells in Oklahoma, Kansas and Texas.
The lenders deposited $5 million into escrow as part of the transaction, which will be released at closing, the company said.
Torchlight can sell additional notes if the lenders approve, the company added.
"We are excited about this transaction and the opportunity to have access to additional developmental capital," said John Brda, president of Torchlight. "These funds will allow us to unlock additional cash flow from new wells, reduce our payables and execute our planned drilling operations through the end of next year."
Currently, holders of the 12% Series A secured convertible promissory notes have a first lien security interest on all the company's assets, Torchlight said, noting that as a condition to the closing, the lenders are requiring a first lien security interest on all assets. Each series A noteholder may convert the note into stock, consent to subordinate the lien position and extend the note, and/or redeem it for cash.
Certain placement agents that advised Torchlight on the new facility will receive placement fees of up to 5% of gross proceeds received, plus certain warrants at the closing, the company said.
Plano, Texas-based Torchlight Energy Resources Inc. holds interests in Texas, Kansas and Oklahoma.
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