SeaDragon gets $2.5m loan from cornerstone shareholder to help fund refinery

SeaDragon [NZX: SEA], which manufactures fish oil for health supplements, has secured a $2.5 million loan from a cornerstone shareholder to help fund the development of its new Omega-3 fish oil refinery in Nelson.

BioScience Managers, which owns 22% of SeaDragon, has agreed to advance the company as much as $2.5 million in two tranches by September 30, the Nelson-based company said in a statement. The loan will convert to equity as part of a planned future capital raising, which will include a rights offer, it said.

SeaDragon has been reviewing its capital structure, including equity and debt raising options, as it faces a cost blowout for its new Nelson refinery being built to produce Omega-3 rich fish oils. The plant cost was revised to an estimated $9.2 million, from an original forecast of $6 million.

"The development of the new Omega-3 fish oil refinery in Nelson, due to be commissioned later this year, has required significant investments over and above those originally budgeted," chairman Colin Groves said. "As these investments have stretched SeaDragon's balance sheet, the board has moved quickly to secure additional funding, enabling SeaDragon to continue to pursue its strategic plan to transition to Omega-3 fish oil markets."

The loan will convert to equity at the same price as the issue of shares in the future rights offer, provided at least $5 million is raised in that offer and any related capital raising. Should the company raise less than $5 million, the loan will be converted to shares at a 20% discount to the volume weighted average price of the stock over the 20 business days before the closing of the rights offer, it said.

Interest on the outstanding loan balance is at 18% a year, reducing to 13% once shareholders approve the conversion to equity. Shareholders will vote on the loan's conversion rights in mid- to late-July.

Separately, SeaDragon named Richard Alderton as interim chief executive from July 27, replacing Ross Keeley who announced last month that he planned to step down. Mr Alderton was previously chief executive at DeLaval Oceania, the New Zealand and Australian division of the world's largest developer of dairy farming solutions, and will lead SeaDragon until it finds a permanent chief executive, the company said.

Shares in the company last traded at 1.7c, and have shed 23% so far this year.

(BusinessDesk)