GEN eyeing US$3M in debt financing from “multi-billion dollar US family office”

Today, our development stage African iron ore Investment Genmin (ASX:GEN) signed a non-binding termsheet with ID Advisors for a US$3M convertible loan.

ID Advisors is an entity associated with a multi-billion dollar family office in North America.

The family office has not been named by GEN, however we do know that it has deep ties to the North American iron ore and steel industry “with a history spanning 150 years" according to GEN’s announcement.

There is a ~2 year maturity on the note and the debt will convert into shares at $0.040 (a 25% premium to the current 30-day VWAP price).

GEN is looking to develop an initial 5mtpa iron ore mine in Gabon, with a view to scale to 10mtpa.

Since the start of the year, GEN has signed a number of smaller financing deals with key stakeholders including a $3M loan with major shareholder Tembo Capital and $2M loan with the Chairman Greg Lilleyman.

We see these financing deals as a precursor to the larger funding package for GEN.

This one is a little different (and a bit more complicated), but we think that the proposed terms of this deal are good, given GEN’s current share price and financing needs.

Ultimately, GEN needs to buy itself enough time to negotiate a bigger financing deal for the project, (roughly US$200M in CAPEX according to the latest feasibility study).

Earlier this year GEN secured the support of independent consultants Oval Advisory out of London to help pull together funding partners for the project.

This larger funding package could potentially come from a number of different places including trading houses, pre-paid offtake, downstream steel mills, private investors and institutional funds.

What are the proposed terms of the deal?

• First, the deal is a non-binding MoU, meaning that a termsheet will need to be signed in order for the deal to go through.
• GEN to raise up to US$3M in a convertible note from ID Advisors LLC.
• The debt will convert into shares at $0.040 (a 25% premium to the current 30-day VWAP price).
• The note will have a 12% coupon, paid quarterly in GEN shares (based on a 30-day VWAP.
• The maturity date is 30 June 2027.
• GEN will issue ~116M unlisted options with a 2 year expiry under the deal (58M $0.06 cent options and 58M $0.08 cent options)
• GEN could potentially raise a further ~A$8M from the exercise of these options.
• Interestingly, there is a clause that says the noteholder must exercise the shares if GEN’s 30-day VWAP price puts the options in the money. This essentially means that the Noteholders can’t just sit on the options forever, but must convert them if they stay in the money.

Given where GEN’s share price is today, we think that this deal is favourable to GEN, and it advances its goals to secure the bridging financing needed to negotiate a larger deal.