Baron Oil plc has signed a Convertible Loan Agreement with InfraStrata plc with respect to the Islandmagee gas storage project in Northern Ireland. The loan will specifically provide bridge financing for the imminent drilling of the Islandmagee gas storage project salt appraisal well.
Under the terms of the Agreement, Baron will provide a secured loan of €1.8 million to InfraStrata with an option to convert the loan balance into an equity participation of 15% in Islandmagee Storage Limited, a subsidiary of InfraStrata. The loan has an 8% interest coupon and is repayable by 1 May 2016. Baron has an option to extend the loan until 31 December 2016.
The loan will be used as working capital to bridge the receipt of the agreed European Commission grant, 70% of which or approximately €1.75 million, will be received on completion of the 2015 work programme. The work programme includes drilling a well to obtain salt cores and completing the subsequent testing and engineering design work. The salt appraisal well Islandmagee#1 is expected to commence drilling in May 2015.