News: Continental Coal raising up to $35.1M through rights issue

Continental Coal (ASX:CCC, AIM:COOL) is raising up to $35.1 million through a nine for one rights issue to repay debt and provide funds towards development of its advanced coal mining projects.

With this raising, the Company's shares could resume trading on both the ASX and AIM markets by the end of September 2014 following completion of the underwritten rights issue.

The offer of shares priced at $0.005 each will be fully underwritten with an underwriting agreement.

It has already received strong support from institutional and sophisticated investors in Australia, Europe and South Africa as well as a number of commodity trading groups and specialist coal mining investment funds.

A priority sub-underwriting agreement in respect of $25 million of any shortfall under the offer has been executed and general sub-underwriting agreements for an additional $10.1 million of the shortfall also having been executed.

Proceeds from the Offer will be primarily used by the Company to:

-    Repay unsecured convertible noteholders, loans and royalty holders;
-    Repay bridging finance;
-    Reduce the Group’s other borrowings;
-    Provide funds towards the development of the Company’s advanced coal mining projects; and
-    Provide working capital.

The fund raising will also allow the company to complete its planned recapitalisation and restructure of the company’s balance sheet, substantially reducing the total indebtedness of the company and its subsidiaries

The offer is being completed after reaching standstill agreements with key unsecured convertible note and royalty holders and advanced negotiations of its Coal Supply Agreement with EDF Trading and with ABSA Bank.

Continental Coal expects its securities to resume trading on both the ASX and AIM markets by the end of September 2014.

Analysis

The underwritten rights offer of $35 million is a very strong endorsement of the company’s projects and upside in any market let alone the current challenging one.

Underlying the rights issue and demand from institutions is the underlying value of the company’s thermal coal mining operations and development assets in South Africa.