To preserve available funds for the Ibhubesi gas project’s operational and development expenditure, ASX-listed Southern African gas explorer and developer Sunbird Energy has secured a variation in a loan facility that would enable the group to capitalise the interest on each monthly interest payment date before its maturity.

The successfully negotiated variation to the terms of the up to A$5-million loan facility, signed with White Swan in February, provided Sunbird with the capital to advance the Ibhubesi development and commercialisation activities offshore South Africa.

These activities include the progression of negotiations of the gas sales heads of agreement with South African State-owned power utility Eskom; the preparation of the field development plan; the start of the front-end engineering and design studies; and the assessment of further funding and partnership opportunities.

“The White Swan loan facility is varied by interest upon the money secured being capitalised at monthly intervals unless the company, at its election on or before each monthly interest payment date, decides to pay the accrued monthly interest at such times,” Sunbird explained in a statement on Thursday.

The loan facility would also give the lenders the right to convert part or all of the debt to equity during the term of the facility, at a conversion price of A$0.25 a share, allowing Sunbird to potentially avoid repaying the facility through alternate capital raisings or debt funding.

The original facility agreement and the deed of assignment and variation to that facility agreement continued to provide for the drawdown of the facility in tranches that reflected the company’s projected cash flow demands and was repayable within 12 months of the first drawdown of funds.

“If the lenders elect not to convert part or the whole of the loan to equity, the company expects to repay the loan within the period of 12 months by the application of funds procured from alternate debt or equity or debt/equity raising strategies that will be available to the company within that period,” Sunbird said.