Avner Oil - Annual Report 2011 - Delek Energy Systems

AVNER OIL EXPLORATION (LIMITED PARTNERSHIP)NOTES TO THE FINANCIAL STATEMENTSNote 9 – Banks (Continued):Common for financing transactions of this type, the financing agreement established various default events, and whichif they transpire (subject to grace periods available for correcting the breach, as provided by the financing agreement)the financing bank was given the right to call the loan for immediate repayment. Breach events, as stated, include, interalia, the following - nonpayment of funds due the lenders, breach of covenants, breach of presentations, insolvency,occurrence of events which could have a material adverse effect on the Limited Partnership's ability to comply with itsprimary commitments vis à vis the financing agreement or the signed natural gas agreements that have been liened,events that could have a material adverse effect on the Limited Partnership’s primary assets, transactions or financialposition.The partnership has submitted a request to the tax authorities for an exemption of tax to be deducted at source vis à visthe foreign lenders. If the exemption request will not be approved, the partnership will gross up the tax deduction atsource, according to the makeup of foreign lenders on the date of interest payments. The approval was received on June1, 2011, allowing the partnership to accept the loan.The actual bank loan was split into two tranches - $26 million for the first withdrawal and $83 million for the secondwithdrawal, with each withdrawal conditioned upon compliance with certain terms. One of the terms of the secondwithdrawal is confirmation that said liens were recorded. During September 2011, approval by the Supervisor to recordthe liens was given, and accordingly the second tranche of the loan was received. During September 2011, NIS 40million was repaid.D. Loan Agreement with HSBC for an Investment in the "Leviathan" Project, Developemnt of the "Tamar" Project andInvestments in other Oil and Gas Properties:1. On December 25, 2011, the partnership announced that on December 22, 2011 a loan agreement ("loan agreement")was signed between the partnership and HSBC Bank PLC ("financing bank"), and based on said, the partnership willreceive a nonrecourse loan of $250 million ("loan"). The loan funds will serve to finance investments in the "Leviathan"project, the "Tamar" development, and the "Yam Tethys" project, and for the payment of various expense vis à vis theloan ( loan objectives). Concurrently with signing the financing agreement by the partnership, other financingagreements under the same terms were signed between the financing bank and Delek Drillings - Limited Partnership,for receipt of a loan in a similar amount and for the same purposes.The loan is made available in two facilities, as follows:Facility A totaling $75 million, which will be available for withdrawal upon compliance with a number of preliminaryterms (primarily - approval by the Supervisor for a lien on licenses, as defined below, (this approval was received onFebruary 27, 2012 (after reporting date), see paragraph 2)and repayment 24 months after agreement signing date.During March 2012 (after reporting date) and after complying with the terms noted above, the first withdrawal wasapproved. Tranche funds were paid out partially during March 2012 and partially during April 2012.Facility B totaling $175 million, which will be available for withdrawal upon closing the entire "Tamar" projectfinancing, and repayment of a bridge loan (provided to the partnership in respect of the "Tamar" project) by June 24,2012, with repayment 24 months after the initial withdrawal from Facility B, and not later than June 24, 2014. Thepartnership has the right of early repayment of the loan, subject to terms provided by the financing agreement withoutany early repayment commission.The loan is US Dollars, and bears a variable interest rate based on the 3-month LIBOR, plus a graduated margin rangingfrom 3.5% to 4.5% (not including commissions).-11-