China Natural Gas, Inc. (CHNGQ)

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China Natural Gas Announces $40 Million Financing


- $20 Million Guaranteed Senior Notes Closed + Incremental $20 Million Arranged - - $40 Million in Total Anticipated for Working Capital and LNG/CNG Build Out -


NEW YORK, Jan. 30 /PRNewswire-FirstCall/ -- China Natural Gas, Inc. (OTC Bulletin Board: CHNG), one of the leading providers of pipeline natural gas for industrial, commercial and residential use and compressed natural gas (CNG) for vehicular fuel in Xi'an, China, today announced the closing of the first round of a $40 million debt financing with Abax Lotus, an affiliated entity of Abax Global Capital ("AGC").

Qinan Ji, Chief Executive Officer and Chairman of the Board of the Company, stated "We are very pleased to have entered into the financing agreement with Abax Lotus. This capital will allow us to strengthen our leadership position in China in-line with our strategic growth initiatives, especially our LNG plans. We are also pleased to have Abax Global Capital's support and look forward to the contribution the firm will make as an experienced investor."

The net proceeds from the offering will be used for the construction of the Company's previously announced LNG processing facility in the Shaanxi Province and for the construction and acquisition of additional CNG filling stations throughout Xi'an and other regions of China.

Donald Yang, President of AGC, stated, "We are confident our investment in China Natural Gas will allow the Company to implement its business initiatives and maintain its robust growth trajectory. We look forward to continuing our working relationship with the Company."

Pursuant to the terms of purchase agreement, the Company issued to AGC 5% Guaranteed Senior Notes due 2014 in the principal amount of RMB 145 million (approximately $20 million) and seven-year warrants exercisable for up to 2.9 million shares of the Company's common stock at an initial exercise price of US$ 7.3652 per share, which represents a 20% premium to the volume weighted average price for the 15 consecutive trading days ending January 28, 2008. In addition, the Company will issue to AGC an additional 5% Guaranteed Senior Notes due 2014 in the principal amount of RMB 145 million (approximately $20 million) on or before March 3, 2008 subject to the Company meeting certain closing conditions. The Company has also granted AGC an option to purchase up to RMB 73 million (approximately $10 million) in principal amount of its 5% Guaranteed Senior Notes due 2014.

In connection with the sale of the Senior Notes, the Company will enter into an indenture agreement, which requires the Company to pay additional interest at the rate of 3.0% per annum if the Company has not obtained a listing of its common stock on the Nasdaq Global Market, the Nasdaq Capital Market or the New York Stock Exchange one year from the date of issuance and maintained such listing continuously thereafter as long as the Senior Notes are outstanding.

The Company will also enter into an investor rights agreement, a registration rights agreement covering the shares of common stock issuable upon exercise of the warrants and a share pledge agreement. More information can be obtained from the Company's recently filed Form 8-K.