Kenmare Resources restructures $160m debt

Shares in mining firm Kenmare Resources shot up by over 6% yesterday on the back of the company completing the refinancing of an overhanging debt mountain of $160m (€117m), originally due for repayment next year.

The successful restructuring of project financing for Kenmare’s Moma titanium mine in Mozambique removes the need for the Dublin-based company to pay all deferred subordinated debt to its lenders by August 1, 2015 and reschedules such debt which is unpaid as of the end of July next year.

As of the end of 2013, Kenmare’s total subordinated debt amounted to $247.3m, with total senior debt standing at $94.6m.

However, the most pressing part of the total debt was the $143m in deferred subordinated debt, which amounted to $160m (as of the end of 2013) when accrued interest is included.

Kenmare has agreed with its consortium of six lenders — which includes the European Investment Bank — to defer payment of this tranche in two parts. Half of the money is now due by August 1, 2019, five years later than originally required. The other 50% will be paid by the company in nine equal semi-annual instalments between the start of August 2015 and 2019. Depending on cash flows, the payments may be accelerated, but there is no obligation on Kenmare’s part to do so.

The issue was touched upon during Kenmare’s last trading update in January. Management formally announced the agreement yesterday.

Chief financial officer Tony McCluskey said it was the best option and “an excellent deal for shareholders”. Chief executive Michael Carvill called it “a milestone restructuring”.

“This restructuring better aligns the terms of the project financing with the projected cash flows of the Moma mine and offers a sustainable solution for both the company and our lenders,” he said.

Analysts suggested the new debt agreement effectively nullifies any need for additional equity at Kenmare.

The news boosted Kenmare’s shares in London by around 6% to nearly 17p and they closed up by a similar percentage in Dublin.


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