RCF may get controlling Forbes stake

FORBES & Manhattan Coal Corp has closed the secured $6 million convertible loan facility from Resource Capital Fund that could result in RCF taking a more than 50% stake in Forbes.
RCF may get controlling Forbes stake RCF may get controlling Forbes stake RCF may get controlling Forbes stake RCF may get controlling Forbes stake RCF may get controlling Forbes stake

Image courtesy of Forbes Coal

Staff Reporter

The funds are to be used for general working capital in relation to Forbes Coal’s operations and exploration properties in Dundee, South Africa.

Subject to shareholder approval, the loan can be converted into common shares of Forbes Coal at a price of C36c (US34c) per share.

Its shares last sold for 25c.

Prior to receipt of shareholder approval the loan will bear interest at 10% per annum, payable on each calendar quarter.

Getting the shareholder approval for the conversion is important as the interest rate will drop to 8% per annum. Not getting it results in the interest rate jumping to 15% and the maturity date accelerating to June 30 2014.

If Forbes’ shareholders play ball the company will be up for about $1.4 million in interest under the loan and RCF will have the right to receive those interest payments in common shares.

Such shares will be priced and issued based on the 20-day volume weighted average price prior to the relevant interest payment date.

RCF will also get a 3% establishment fee that is payable in cash or, if it elects, in Forbes shares. Those shares issued in lieu of an establishment fee will be issued at 36c a share.

Forbes will seek the necessary shareholder approvals for the loan deal at a special meeting to be held on September 11.

Providing the loan is outstanding and RCF holds the rights to at least 15% of Forbes issued and outstanding common shares, RCF will have the right to nominate a representative to the Forbes board.

It will also have the right to participate in any future Forbes Coal financings on a pro rata basis to its partially diluted shareholding.

Forbes is also continuing to market its non-brokered private placement of common shares at 36c a share to raise gross proceeds of up to $2 million. RCF is not taking part in that placement.

However, if shareholder approval is received for conversion of the loan, concurrent with the closing of the private placement, RCF will convert up to $2 million of the loan into common shares at 36c a share.

The private placement is expected to close on or about September 18 and its closing remains subject to receipt of regulatory approval.

RCF owns 6.9 million shares, or 19.97% of Forbes Coal on a non-diluted basis.

Assuming an exchange rate of $C1 equalling $US1 and a 20-day VWAP of C32c – the 20-day VWAP as of August 9 – if RCF converts the entire amount of the loan, receives the establishment fee in shares and takes all of its interest payments in shares it will be given an aggregate of 21.4 million shares.

On a proportional basis that will give it about 62% of Forbes.

Should other shareholders not take part in the private placement it would result in RCF holding about 28.3 million Forbes shares, equivalent to about 50.1% of the issued and outstanding capital.

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