1.
2.
We write to advise that the Borrower is unlikely to be able to repay the Outstanding Moneys in full by 15 December 2008 as required by the terms of the Facility Agreement. Accordingly we request that the Agent, on behalf of the Lenders, agree to amend:
the definition of “Expiry Date” shall be amended to be 31 January 2009 (or such later date as the Borrower and the Agent may agree).
fortnightly (or more frequently if required by the Agent in the event of any material variations from budget) updates of cashflows, in the form of the cashflow budget attached as Appendix 1, including commentary on any variations against budget; and
no later than each Monthly Reporting Date, monthly management accounts and cashflows, in the form of the cashflow budget attached as Appendix 1, including a detailed report of outgoings and other expenditure and any variations of expenditure against budget.”
Clause 18.1(j)(ii) of the Facility Agreement will be deleted and substituted with “Intentionally Deleted”.
clauses 19.3(c)(v), 19.3(d), 19.3(f)(iii) and 19.4(c) of the Facility Agreement are deleted and replaced with “Intentionally Deleted”.
All references to “Capex Account” will be amended to be references to “Contingency Account”.
Clause 19.5(b) is deleted and replaced with “Intentionally Deleted”.
meeting emergency response expenditures as may be required to be incurred by the Borrower in its role as operator; or
transferring to the Proceeds Account on a Monthly Sweep Date amounts agreed between the Borrower and the Agent as necessary to compensate for the impact on cash receipts from oil sales caused by movements in oil prices, lifting volumes and exchange rates to those assumed in the Corporate Plan; or
meeting capital expenditure previously approved by the Agent.
Prior to the Borrower making any such request for a withdrawal the Borrower must have first delivered to the Agent:
(iv)
detailed evidence of the expenditure in respect of which the amount withdrawn is to be applied;
(v)
evidence that such amount is due and payable; and
(vi)
in the case of any capital expenditure, a certificate from the Lenders’ Independent Engineer confirming that such expenditure has been properly incurred and is in accordance with the recommendations of the Lenders’ Independent Engineer.
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Subject to the Borrower providing the information referred to in paragraphs (iv) and (v) above, the Agent will approve any such request for a withdrawal for the purposes of paragraph (ii) above. Any withdrawals from the Contingency Account for any other purpose are at the sole discretion of the Agent.”
(4)
Clause 19.5(e) is deleted and replaced with:
“(e)Transfer of Balance: On the Expiry Date or upon the occurrence of an Event of Default the balance standing to the credit of the Contingency Account may be applied by the Agent in repayment of the Outstanding Money.”
(b)
the Borrower General Security Agreement with effect from 15 December 2008 by deleting from the definition of Secured Property the words “but excluding the Debtor’s interest in any Other Permits and Other Joint Ventures”.
3.
In consideration of the Agent on behalf of the Lenders agreeing to the amendments to the Financing Documents referred to above, the Obligors acknowledge and agree as follows:
(a)
Notwithstanding clause 19.5 of the Facility Agreement, on the date of this letter, the Agent on behalf of the Lenders is directed to:
(i)
debit the Capex Account and apply all funds then standing to the credit of the Capex Account in excess of US$742,067 to the Proceeds Account; and
(ii)
debit the Debt Service Reserve Account and apply all funds then standing to the credit of the Debt Service Reserve account in and towards repayment of the Principal Outstanding.
(b)
The Obligors have prepared and delivered to the Agent a cashflow budget for the period from the date of this letter to the Expiry Date, a copy of which is attached as Appendix 1 to this letter. The cashflow budget has been prepared on an “as normal” basis in the first instance. The cashflow budget will be the “Budget” for the purposes of this letter and will apply for the period from the date of this letter to the Expiry Date. The Budget will be deemed to be the current Corporate Plan for the purposes of clauses 18.1, 19.3(f), 19.5 and 22.3 of the Facility Agreement. The Budget shall be amended from time to time to include cost reduction initiatives recommended by the Lenders’ Technical Advisor or the Lenders’ Financial Advisor and agreed to by the Borrower and otherwise may only be amended by agreement between the Agent and the Borrower.
(c)
Notwithstanding the provisions of clause 19.3 of the Facility Agreement, the Agent may, on any day debit the Proceeds Account and apply all amounts then standing to the credit of the Proceeds Account in excess of the Budgeted Cash Requirement in and towards payment of the Outstanding Moneys. For the purposes of this clause, Budgeted Cash Requirement means on any date the amount determined by reference to the Budget as the amount of funding required by the Obligors to meet their approved budgeted expenditure during the period from that date to the Expiry Date (including, for the avoidance of doubt, amounts included in the Budget which are payable after the Expiry Date).
(d)
The Obligors request the Lenders’ acknowledgement that notwithstanding clause 19.3(f) of the Facility Agreement, amounts provided for in the Budget may be paid from the Proceeds Account on days other than the Monthly Sweep Date provided that such amounts do not exceed the amounts included in the Budget in respect of the relevant expenditure and are paid on or about the dates provided for in the Budget.
(e)
The Obligors confirm their undertaking in clause 18.1(n) of the Facility Agreement.
(f)
The Borrower hereby instructs Investec Bank (Australia) Limited in its capacity as counterparty under the oil put contracts dated on or about 26 May 2008 between the Borrower and Investec Bank (Australia) Limited, to immediately close out the oil put contracts. All amounts payable by Investec Bank (Australia) Limited in respect of such close out of the oil put contracts will be paid to the credit of the Proceeds Account and may be applied in accordance with paragraph 3(c) above.
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(g)
Each of the Obligors will and will procure that their respective Subsidiaries will permit the Agent, the Lenders and any advisors of the Agent or the Lenders to communicate directly with:
(i)
the directors and managers of the Obligors or any of their subsidiaries;
(ii)
any potential purchaser of any assets of any of the Obligors or any of their Subsidiaries;
(iii)
any shareholders of Austral Pacific Energy Limited;
(iv)
any potential new financial investors in the Obligors; and
(v)
potential debt financiers of the Obligors,
and will provide all reasonable assistance to the Agent, the Lenders and their advisors to facilitate such communication.
(h)
Each Obligor will in good faith consider the implementation of any recommendations made from time to time by the Lender’s Financial Advisor or the Lender’s Independent Engineer relating to the reduction of costs.
(i)
In relation to the asset sale and capital raising process currently being undertaken by the Obligors, the Obligors will provide to the Agent:
(i)
weekly (or more regularly as required by the Agent) updates on the status of ongoing discussions with potential bidders and financial investors together with copies of any bids or proposals received; and
(ii)
any reports, financial models and/or marketing documents that are prepared from time to time by the advisors to the Obligors and their subsidiaries; and
(iii)
full contact details of all those parties set out in paragraph 3(g).
(j)
Without prejudice to its obligations under clause 18.1(e) of the Facility Agreement, each of the Obligors covenants in favour of the Agent and the Lenders that they will provide not less than 10 Business Days’ prior written notice to the Agent of any intention by any Obligor to take any action or omit to take any action which would result in the appointment of a liquidator, administrator or receiver.
4.
Each Obligor acknowledges that any breach of any of the undertakings referred to in paragraphs 3(a) – (j) above will be an Event of Default.
5.
The Obligors undertake not to disclose or otherwise announce the existence of or any details relating to the terms of this letter to any person except:
(i)
with the prior written consent of the Agent; or
(ii)
as required by law or the rules of any applicable stock exchange.
The Obligors will provide the Agent with a draft of any release, announcement or disclosure not less than 1 Business Day before such release, announcement or disclosure is made public.
6.
The Obligors request that the Agent and the Lenders confirm to the Obligors that they will, in good faith, consider any reasonable restructuring proposals submitted by the Obligors in relation to the sale of assets or raising of capital by the Obligors and where genuine progress is being made with such proposals, will in good faith consider any request to extend the Expiry Date necessary to achieve a reasonable outcome with any such proposals. The Obligors acknowledge that it is the intention of all parties that the result of such restructuring or other transactions will be that the Outstanding Moneys will be repaid within such period as the Agent and the Lenders may agree.
7.
The Obligors request that the Agent on behalf of the Lenders confirms that, subject to no new Event of Default occurring, the Lenders agree to waive any Event of Default, Potential Event of Default or Event of Review that exists at the date of this letter for the period from the date of this letter to the Expiry Date.
8.
Except as specifically modified by the terms of this letter, the Facility Agreement and each of the other Financing Documents remain in full force and effect. We acknowledge that the Finance Parties reserve all of their rights, remedies and powers under the Financing Documents and otherwise at law, whether currently existing or arising at any time in the future, and, in particular, that, except as contemplated by paragraph 7, nothing in this letter shall be deemed to be a waiver of any existing Event of Default, Potential Event of Default or event of review which has occurred under the Transaction Documents prior to the date of this letter.
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9.
This letter shall be a Financing Document.
Please indicate your agreement to the terms of this letter by signing where indicated below. Yours sincerely
Austral Pacific Energy (NZ) Limited
_________________________
Director
We acknowledge and agree to the matters set out in the above letter.
| | |
Austral Pacific Energy Ltd.
| | ___________________________________
Director |
Source Rock Holdings Limited | | ___________________________________
Director |
Totara Energy Limited | | ___________________________________
Director |
Investec Bank (Australia) Limited as Agent for and on behalf of the Lenders agrees to the matters set out in the above letter.
_________________________________
Authorised Signatory
Investec Bank (Australia) Limited
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