Avner Oil - Annual Report 2011 - Delek Energy Systems

terms were signed between the Leviathan financing bank and Delek Drilling for a loan in thesame amount and for the same purposes.The loan is made available in two facilities, as follows:(1) Facility A amounting to USD 75 million, which will be available for withdrawal after thefulfillment of a number of preconditions (primarily, the approval of the Commissioner ofPetroleum Affairs to place a lien on the Partnership's rights in the Rachel and Amitlicenses ("the Rachel and Amit licenses").On February 27, 2012, the Commissioner's approval was received with regard toplacing a lien on the Rachel and Amit licenses. The Commissioner's foregoingapproval was granted subject to the terms and clarifications set out therein, includingthat after compliance with the terms for the first withdrawal of loan funds under thelong term non-recourse finance project to finance the Partnership's entire share in theTamar project development costs, no further funds will be withdrawn from theLeviathan financing agreement for investing in the Tamar project development, otherthan in the case of unexpected deviation from the Tamar project establishment budgetand after receiving the Commissioner's approval.The repayment date for Facility A is 24 months from the date of signing of theLeviathan financing agreement.(2) Facility B in the amount of USD 175 million, which will be available for withdrawalupon closing of the full finance project for the Tamar project and repayment of thebridging loan (granted to the Partnership with regard to the Tamar project), and nolater than June 24, 2012. The repayment date is 24 months after the first withdrawalfrom Facility B, and no later than June 24, 2014.The Partnership may repay the loan prematurely, subject to the terms set out in theLeviathan finance agreement, without early repayment fees.The loan is in dollars and bears annual interest calculated at Libor for three monthsplus a margin of between 3.5% and 4.5% (not including fees).To receive the Leviathan financing agreement, the Partnership established a specialpurpose company, Avner Exploration (Leviathan Finance) Ltd. (“the SPC”). Inaccordance with the Leviathan financing agreement, the loan provided to the SPC willbe a back-to-back loan to the Partnership.CollateralTo secure the repayment of loan, the Partnerships pledged its rights in the assetsrelated to the Leviathan project, the main ones being as follows: Its rights in the Amitand Rachel licenses ("the licenses"), its rights in the Leviathan project JOA, the SPCshares and assets and Leviathan project related agreements (such as insurancepolicies).The loan is a non-recourse loan and the Leviathan financing bank has no right to thePartnership's assets that were not pledged in their favor. These pledges are subject toroyalty rights of the state and other entities that are entitled to receive royalties fromthe Partnership (including interested parties).To establish legal certainty regarding priority of claim in the event of insolvency of thePartnership, the Leviathan financing agreement prescribe, based on the Leviathanfinancing bank's requirements, that the licensees will be pledged as collateral for theright to royalties in favor of the entities entitled to royalties for the term of the Leviathanfinancing agreement.Restrictions applicable to the PartnershipAs is standard in this type of financing, the Partnerships has undertaken standardcovenants, including the following: Restrictions on taking additional loans (suchrestrictions will not apply to non-recourse loans, and loans of up to USD 20 million);compliance with the reservoir to debt ratio; restrictions on the change in operations;restrictions on the transfer of control in the Partnership; restrictions on signingcontracts that may have a material adverse effect; maintaining the pledged assets andavoiding breach or change of conditions of the material agreements, includingagreements not to vote in accordance with the JOA in a way that may adversely affectthe ability of the Partnership to fulfill its material obligations in respect of the LeviathanA-142