Highlights

  • Eastern Gas signs a non-binding term sheet with RiverFort Global Capital for a proposed A$10 million R&D Loan facility
  • The Facility structure links drawdowns and repayments to Eastern Gas's R&D tax incentive refunds
  • Proposed terms include a 9% fixed interest rate, security over R&D rebate receivables, and attaching options
  • The arrangement remains subject to definitive documentation and mutual agreement on individual drawdowns

Eastern Gas Corporation Limited (ASX:EGA) has entered into a non-binding indicative term sheet with RiverFort Global Capital Ltd for a proposed Research and Development loan facility of up to A$10 million. The facility is designed around Eastern Gas's eligibility for R&D tax incentive refunds, with drawdowns and repayments structured to align with the timing of those refunds. While the term sheet sets out detailed proposed terms, it remains non-binding and subject to the negotiation and execution of definitive documentation, as well as mutual agreement between the parties on individual drawdowns.

Under the proposed structure, the facility would be available for a three-year period, with an initial drawdown of up to A$1.5 million. Each drawdown under the facility would carry its own 12-month term, with repayment due within five working days of Eastern Gas receiving the corresponding R&D tax incentive refund, and a maximum Maturity of 12 months applying to each individual drawdown. The facility carries a fixed Interest Rate of 9%, together with an implementation fee equal to 5% of each drawdown amount, alongside separate Due Diligence and legal costs associated with establishing the arrangement.

Facility Structure and R&D Refund Linkage

The proposed loan facility is built around the mechanics of Australia's R&D tax incentive scheme, under which eligible companies can receive a cash refund from the government in respect of qualifying research and development expenditure. By tying repayment obligations to the receipt of these refunds, the facility is structured so that Eastern Gas would draw funds against expected future refund receipts and then repay each drawdown once the corresponding refund is received, rather than following a fixed periodic repayment schedule unrelated to the timing of those refunds. This refund-linked design is intended to align the company's cash outflows under the facility with a predictable, government-administered source of incoming cash.

Each drawdown under the facility carries its own 12-month term and is repayable within five working days of the relevant R&D tax incentive refund being received, with an overall maximum maturity of 12 months applying to that drawdown. The facility's total availability of up to A$10 million is spread across a three-year period, with the initial Tranche capped at up to A$1.5 million, giving Eastern Gas the ability to scale its drawdowns over time as further R&D expenditure is incurred and corresponding refunds become claimable. The fixed interest rate of 9% applies to amounts drawn, with an implementation fee of 5% of each drawdown charged in addition, alongside one-off due diligence fees of A$10,000 and legal fees of A$12,500 associated with establishing the facility.

Security and Option Arrangements

The proposed arrangement includes first-ranking security over Eastern Gas's R&D rebate receivables, giving RiverFort Global Capital a secured interest in the company's future R&D tax incentive refunds as Collateral for amounts drawn under the facility. Security over specific, identifiable receivables of this nature is a common feature of R&D-linked lending facilities, since it gives the lender a direct claim over the very cash flows the facility is designed to be repaid from, reducing reliance on the borrower's broader Balance Sheet as the primary source of repayment.

As part of the proposed terms, RiverFort Global Capital would also receive unlisted Options equal to 30% of each drawdown amount divided by a reference share price, with those options exercisable at a 40% premium to that reference price and expiring on 30 September 2029. Option components of this kind are often included in specialised lending facilities as additional compensation to the lender for the risk taken on, supplementing the interest and fee income earned on the loan itself. Eastern Gas has indicated it intends to issue these options within its existing Placement capacity under ASX Listing Rule 7.1, which allows listed companies to issue a limited number of securities without Shareholder approval, and would seek shareholder approval separately if that capacity proves insufficient.

Conditions and Next Steps

The term sheet signed with RiverFort Global Capital remains non-binding at this stage and is subject to the negotiation and execution of definitive documentation covering the full facility. It is also subject to mutual agreement between Eastern Gas and RiverFort Global Capital on the specific terms of individual drawdowns as they are requested, meaning the parties retain flexibility to finalise the details of each tranche as the facility is put to use. Indicative term sheets of this nature are a common first step in structured financing arrangements, allowing both parties to agree on a framework of key commercial terms before committing the time and cost involved in preparing binding legal documentation.

Eastern Gas has flagged that, should the facility proceed to definitive documentation, it intends to issue the associated unlisted options within its existing placement capacity under ASX Listing Rule 7.1 in the first instance, reserving shareholder approval as a fallback only if that capacity is not sufficient to cover the options ultimately required. The proposed R&D loan facility, if finalised, would provide Eastern Gas with an additional funding source linked directly to its R&D tax incentive entitlements, complementing other means by which the company funds its research and development activities.

Key Insights

The indicative term sheet between Eastern Gas Corporation and RiverFort Global Capital sets out a proposed funding structure specifically designed around the company's R&D tax incentive refund cycle, offering a facility of up to A$10 million over three years with repayment tied to the timing of those refunds. Key commercial terms have already been outlined, including the fixed 9% interest rate, implementation fees, first-ranking security over R&D rebate receivables, and an attaching options package for RiverFort Global Capital, giving the market visibility over the likely shape of the arrangement well before it is finalised. However, the facility remains non-binding, and its ultimate availability to Eastern Gas depends on both parties agreeing definitive documentation and the specific terms of each drawdown as they are requested. The proposed use of existing placement capacity under ASX Listing Rule 7.1 to issue the associated options, with shareholder approval held in reserve if needed, indicates the company's intent to progress the facility with minimal procedural friction, subject to the conditions still to be satisfied.