Western Cdn Coal lines up $40M financing

Vancouver – Moving on its urgent need to raise dollars, Western Canadian Coal (WTN-T, WTN-L) plans a $40 million financing to avert a cash crunch following the recent quarterly loss of almost $44 million.

The northeastern B.C. coal producer has inked an agreement with Audley European Opportunities Fund to issue up to $40 million in senior convertible debentures.

Proceeds are earmarked for the company’s growing working capital needs at its Wolverine coal mine and to pay down some of the existing bank debt.

Convertible debentures will bear an 8.5% interest rate per year and be payable semi-annually starting May 31, 2008. They mature three years from the closing date and are convertible into shares at a price of 75 per share.

For leading the financing, Audley will get warrants for the purchase of up to 4.24 million Western Canadian Coal shares at 75 apiece for three years.

As many as 57.5 million shares could be issued as a result of the financing – assuming full conversion of $40 million in debentures and exercise of Audley’s warrants – with Audley owning up to 25.5% of Western Canadian Coal following the transaction.

Audley is an investment fund advised by Audley Capital Partners, which holds about 29% of Western Canadian Coal’s largest shareholder Cambrian Mining (CBM-L).

Cambrian holds about 48.4 million shares, or 41.7%, of Western Canadian Coal.

Shares of the junior coal producer have bounced off the multi-year low of 47, following its recent quarterly loss figures, to trade in the 60-70 range. Based on its current 116-million shares outstanding, it posts about a $75-million market capitalization.