Contango Holdings (LSE:CGO) shares soared on Wednesday, rising over 30% to 0.53p, after it confirmed details for a proposed £5 million subscription, a financing that would clear most of the coal project group’s debt but hand strategic investors majority voting control.
The company said Pacific Goal Investments Limited and Huo Investments Limited intend to subscribe for 450 million new shares priced at 1.11p each (represented a 39% premium to the mid-market closing price in February), the day before the potential investment was first announced.
Around £4.6 million of the gross proceeds will be used to repay outstanding loans, with the remaining £0.4 million set aside for general working capital over the next 12 months. Contango said repayment would leave it debt-free and able to distribute excess cash through dividends, subject to royalty performance.
A general meeting will be held on 29 July, with admission of the subscription shares expected the following morning if the resolutions pass. Contango warned that if they do not, the subscription will not proceed and the board would need to review the company’s ability to remain a going concern.
