Viridis Energy announced that its wholly owned subsidiary, Okanagan Pellet Company, entered into a loan facilities agreement providing for a $3.25 million secured loan with the Royal Bank of Canada RBC.

Proceeds will be primarily used to repay the company’s debt held by Cornwall Investments, which bears interest costs of 9% per year (prime plus 6%). In addition, RBC will provide the company with a $250,000 line of credit at Royal Bank’s prime rate plus 3% interest per annum, for general working capital purposes.

The loan bears interest at the annual rate of Royal Bank’s prime rate plus 3% (currently equates to approximately 6%), payable monthly over 48 months.

The loan is secured by a first ranking security interest in all present and after acquired personal property of Okanagan Pellet Company and equipment financed through the loan and has no prepayment or repayment penalties. The loan requires that OPC maintain a debt service coverage (the amount of cash-flow available to meet annual interest payments on the debt) of not less than 1.25 to 1, calculated over the last 12 months and a ratio of total liabilities to tangible net worth of not more than 2 to 1, calculated quarterly. No securities of the company are or will be issued in connection with the loan.

Robert Aaron, chairman of the Board of Viridis Energy, commented, “Viridis received the critical funding from Cornwall in its early development stage. The company has now entered an accelerated growth phase as its second plant, Scotia Atlantic Biomass, has begun shipping product, and its Merchants group has begun generating revenue. We intend to extend our commitment to Viridis by exercising warrants, as OPC repays the Cornwall loan. We will exercise warrants to purchase 15 million common shares, at $0.15, which will add $2.25 million to Viridis’ working capital, and thus strengthen its position in the market as an emerging leader in the global wood pellet market.”