A$1.5 Million Initial Drawdown Proposed at 9% Interest

Eastern Gas Corporation Limited (ASX:EGA) has put a potential A$10 million funding line on the table, but the money is not yet committed. The natural gas developer has signed a non-binding term sheet with RiverFort Global Capital for an R&D loan facility that could provide working capital ahead of tax incentive refunds.

Initial A$1.5 Million Drawdown Remains Conditional

The proposed facility would be available for three years, with an initial drawdown of up to A$1.5 million. That first advance depends on a review of Eastern Gas’s R&D tax incentive position, while any further borrowing up to the A$10 million ceiling would require mutual agreement between the company and the investor.

Each drawdown would carry a 12-month term. Eastern Gas intends to repay the relevant borrowing within five working days of receiving the associated R&D refund, but the loan would still be repayable in full at maturity if the refund is delayed or does not arrive on schedule.

Debt Cost Includes Fees, Options and Security

The headline interest rate is fixed at 9%, but the proposed financing cost extends well beyond that figure. RiverFort would deduct a 5% implementation fee from each drawdown, while Eastern Gas would pay A$10,000 in due diligence fees, A$12,500 in legal fees, and a 2% cash introducer fee to Spark Plus. The stated fees exclude VAT where applicable.

The investor would also receive unlisted options for each drawdown. The number would equal 30% of the drawdown amount divided by the five-day average volume-weighted share price before that drawdown, making the potential dilution impossible to quantify at this stage. The options would carry an exercise price set at a 40% premium to that reference price and expire on 30 September 2029.

R&D Refund Timing Creates Repayment Risk

Eastern Gas says it has received advice on its eligibility for R&D tax incentives, but any refund remains subject to registration, eligibility requirements and assessment by the relevant authorities. The company says refunds are generally paid within six weeks of lodging its tax return, while also acknowledging that both timing and amount remain uncertain.

The proposed facility would be secured by a first-ranking interest over the company’s R&D rebate receivables. The term sheet is non-binding apart from selected provisions, and definitive documentation, approvals and agreement on drawdowns are still required. Eastern Gas also expects customary covenants and a six-month right of first refusal for the investor over certain structured finance and equity-linked debt transactions, although straight equity placements would remain outside that restriction.

No options have been issued. Eastern Gas intends to use its available placement capacity for them, with shareholder approval required if that capacity is insufficient. The next material step is therefore not the headline A$10 million figure, but whether the parties convert the indicative terms into an executable facility and whether the underlying R&D claims support repayment on schedule.