TIDMEQT
RNS Number : 7849D
EQTEC PLC
28 June 2019
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
THE MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THE
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION
IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
28 June 2019
EQTEC plc
("EQTEC", the "Company" or the "Group")
Debt Reduction, Placing, Commercial Leadership Addition
and Planned Reduction of Operating Costs
EQTEC plc (AIM: EQT), the technology solution company for waste
gasification to energy projects, today announces it has reached
agreement for a comprehensive restructuring of various payment
obligations with its lenders, resulting in a reduction in its
liabilities of, in aggregate, approximately GBP2.7 million (the
"Debt Restructuring") and that it has raised GBP750,000 (before
expenses) for general working capital by way of a placing of
227,272,727 new ordinary shares of EUR0.001 each in the capital of
the Company ("Ordinary Shares") (the "Placing Shares") at 0.33
pence per share (the "Placing Price") with new and existing
investors (the "Placing").
The Company also announces its intention to undertake a cost
reduction programme in relation to its operations in the UK and
Spain, along with certain senior management appointments (the
"Operational Restructuring").
Further information on the Placing
The Company has raised, in aggregate, GBP750,000 (before
expenses), from new and existing investors, including Altair Group
Investment Ltd ("Altair"), Riverfort Global Opportunities PCC Ltd
(formerly Cuart Investments Fund) and YA II PN, Ltd (collectively,
Riverfort Opportunities and YA II being the "Riverfort Lenders").
The net proceeds of the Placing will be used for working capital
purposes and for continuing the development of the Company's
portfolio of opportunities in the waste elimination and energy
recovery sectors. Global Investment Strategy UK Limited is acting
as the Company's sole agent in relation to the Placing.
The participants in the Placing (the "Placees") will, for each
Placing Share, be granted one warrant to subscribe for one new
Ordinary Share (the "Warrants") at an exercise price of 0.495 pence
per share (representing a premium of 50 per cent. to the Placing
Price). Altair will also be granted a further 60,606,060 Warrants
in connection with arrangements under the Debt Restructuring.
Accordingly, if exercised in full, the Warrants would result in the
issue of, in aggregate, 287,878,787 new Ordinary Shares to the
Placees, representing approximately 9.5 per cent. of the Company's
issued share capital (as enlarged by the New Ordinary Shares (as
defined below)), and proceeds to the Company of approximately
GBP1.45 million. The Warrants will be exercisable for a period of
nine months from the date of admission of the Placing Shares (the
"Exercise Period"). The Exercise Period may be extended in certain
circumstances but will in no event be longer than the second
anniversary of Admission (as defined below). No Warrants shall be
exercised if such exercise would trigger an obligation under Rule 9
of the Irish Takeover Rules to make a general offer for the balance
of issued shares in the capital of the Company.
In addition, pursuant to the Placing, the Company will issue
Altair 644,673,909 new Ordinary Shares (the "Altair Redemption
Shares") at the Placing Price, with the proceeds of the issue of
such shares being set off against the early redemption of the
majority of the outstanding Altair Facility (including payment of
an early redemption fee) as described below.
Pursuant to Altair's participation in the Placing, it will
receive 45,454,545 Placing Shares and 644,673,909 Altair Redemption
Shares. Following admission of such shares, Altair will hold
869,432,501 Ordinary Shares, representing approximately 28.25 per
cent. of the Company's then enlarged share capital and will be
issued with 106,060,605 Warrants.
The Placing is conditional on, inter alia, receipt of the
Placing proceeds by the Company (or GIS as its agent) on or before
Admission, the admission of the Placing Shares and the Altair
Redemption Shares to trading on AIM and completion of the Debt
Restructuring. The Placing Shares and the Altair Redemption Shares,
when issued, will rank pari passu with the existing Ordinary
Shares.
The Placing Price represents a discount of approximately 2.9 per
cent. to the closing middle market price of the Company's Ordinary
Shares of 0.34 pence per share on 27 June 2019 (being the latest
practicable date prior to the date of this announcement).
Further information on the Debt Restructuring
The Company currently has two major lenders, being Altair and
the Riverfort Lenders.
Altair
On 14 July 2015, the Company issued GBP2.0 million of secured
convertible loan notes (the "CLNs") to Altair and entered into a
secured five year term loan agreement with Ecofinance (GLI) Limited
("Ecofinance") for GBP1.0 million (the "Ecofinance Loan"). On 19
January 2018, the Company announced that it had made an early
repayment of GBP378,882 along with GBP2,958 of accrued interest on
the Ecofinance Loan, leaving a remaining balance of GBP621,118,
which is repayable in July 2020. On 6 August 2018 the Company
entered into arrangements with Altair and Ecofinance to settle
interest due under the CLNs and the Ecofinance Loan until 30 June
2019 by way of the issue of an aggregate of 115,528,000 Ordinary
Shares. On 21 January 2019, EQTEC, Altair and Ecofinance agreed to
consolidate the CLNs and the Ecofinance Loan into one facility with
Altair as the lender (the "Altair Facility") and on 24 January
2019, the aggregate amount available for drawdown under the Altair
Facility was increased to GBP3.5 million. On 3 June 2019, the
Company announced that it had drawn down an additional GBP0.2
million under the increased Altair Facility.
Following the drawdown on 3 June 2019, the outstanding principal
owed by the Company under the Altair Facility is GBP2,821,118,
which is due to be repaid in full in July 2020. There is currently
no accrued and unpaid interest under the Altair Facility.
Riverfort Lenders
On 5 July 2018, the Company announced that it had agreed a
secured loan facility of up to US$3.2 million to be provided by the
Riverfort Lenders, as amended and announced on 3 October 2018
(increasing the amount available under the facility to up to US$10
million) and 11 January 2019 (amending certain repayment terms)
(the "Riverfort Facility"). The Riverfort Facility is being repaid
in varying monthly instalments, with the final balance due to be
repaid in June 2020.
Following the settlement of the monthly instalment in May 2019
through the issue of 33,767,588 Ordinary Shares, the current
outstanding principal and accrued interest owed under the Riverfort
Facility is US$2,382,993.
Summary of the Debt Restructuring
-- EQTEC will redeem GBP2,026,118 of the outstanding principal
owed by the Company under the Altair Facility and will also pay
Altair an early redemption fee of GBP101,306, being 5 per cent. of
the value of the debt redeemed, through the issue of the Altair
Redemption Shares (the "Redemption"). The remaining, unredeemed
amount of GBP795,000 under the Altair Facility will be governed by
an amended and restated secured loan facility (the "2019 Altair
Facility"). Following the Debt Restructuring, GBP1,083,882 remains
available for drawdown under the 2019 Altair Facility.
-- Altair has undertaken to the Company not to dispose of
584,067,849 Ordinary Shares for a period of six months from
Admission (save with the consent of the Company or in certain
limited circumstances) and that for a further six months it will
only dispose of an interest in such shares through the Company's
broker, in such manner as the Company's broker shall require in
order to maintain an orderly market in the Ordinary Shares.
-- Altair has been granted a right to nominate a director to the
board of directors of the Company ("Board") for such time as Altair
holds not less than 20 per cent. of the issued share capital of the
Company. The appointment of any individual nominated by Altair will
be subject, inter alia, to the approval of the Company's nominated
adviser. Altair has also undertaken that while it holds not less
than 20 per cent of the issued share capital of the Company, it
will refrain from exercising the voting rights attaching to its
Ordinary Shares in certain circumstances in order to ensure that
the Company can act independently from it.
-- The Riverfort Lenders, pursuant to a further amendment to the
Riverfort Facility, will convert US$800,000 (approximately
GBP632,000) of its debt into 191,515,152 new Ordinary Shares at the
Placing Price and will receive a debt conversion fee of GBP31,600,
being 5 per cent. of the value of the debt converted, to be
satisfied by the issue of 9,575,757 new Ordinary Shares (together,
the "Riverfort Conversion Shares") (the "Conversion"). Following
the Conversion, US$1,582,993 remains outstanding under the
Riverfort Facility (together with the 2019 Altair Facility, the
"Remaining Facilities").
-- The Riverfort Lenders have each undertaken that they will not
dispose of any interest in the Riverfort Conversion Shares for a
period of six months from Admission (save with the consent of the
Company or in certain limited circumstances).
-- Pursuant to the amended Riverfort Facility, the Company has
agreed certain cost reduction measures with the Riverfort Lenders,
including undertaking to keep quarterly operating cash costs at an
agreed level. Should the Company's quarterly cash costs exceed the
agreed threshold, the Company will have 90 days to cure the breach
by way of bringing cash costs during that cure period under the
agreed threshold by at least an amount of the excess from the
previous quarter. Should the Company fail to remedy the breach, an
event of default will occur and the amount outstanding under the
Riverfort Facility will become immediately due and payable.
-- The Redemption and Conversion are inter-conditional and also
conditional on, inter alia, Admission becoming effect and the
Company entering into agreements relating to the issue of new
Ordinary Shares in respect of certain Directors and Senior
Management fees as detailed below, in each case by 12 July
2019.
-- Following the Redemption and Conversion, in aggregate,
approximately GBP2 million remains outstanding under the Remaining
Facilities. The Remaining Facilities will have a revised annual
interest rate of 12.5 per cent and all amounts outstanding are to
be repaid as a single payment of principal and accrued interest on
31 July 2020, together with a cash redemption fee of 8 per cent. on
the balances outstanding as at that date.
-- Altair and the Riverfort Lenders have been given the right,
at their sole discretion, to convert the outstanding principal and
interest under the 2019 Altair Facility and Riverfort Facility
respectively, in part or in full, at any time up to 31 July 2020
into new Ordinary Shares at a 100 per cent. premium to the Placing
Price, being 0.66 pence per share. The redemption fee of 8 per
cent. will not be payable on any debt converted in this manner.
However, Altair can only elect to convert if such exercise would
not trigger an obligation under Rule 9 of the Irish Takeover Rules
to make a general offer for the balance of issued shares in the
capital of the Company.
-- The 2019 Altair Facility and the Riverfort Facility will
remain secured by mortgage debentures, cross guarantees and share
pledges over EQTEC and its subsidiary companies.
Further information on the Operational Restructuring
Alongside the Debt Restructuring, the Company is mindful of its
need to preserve cash as it seeks to implement its strategy and has
conducted and completed a comprehensive review of its operations.
Accordingly, the Board has identified a series of cash cost
reduction initiatives, including certain salary reductions outlined
below, which it intends to put in place in the near term. Once
implemented, such initiatives should lead to cash cost reductions
of approximately GBP1 million across the Group through to July
2020. In addition, the Company is pleased to announce the senior
management appointments of Yoel Aleman, an existing employee of the
Group, and David Palumbo with immediate effect, as Chief Technical
Director and Commercial Director respectively, and a proposal to
put in a place a new share option plan.
Proposed cash cost reduction initiatives include:
-- It is intended that Thomas Quigley a, Non-Executive Director
of the Company, shall receive his remuneration in new Ordinary
Shares at the Placing Price until 31 July 2020.
-- It is intended that Ian Price and Gerry Madden, Executive
Directors of the Company, together with new senior management
appointees Yoel Aleman and David Palumbo, shall receive 40 per
cent. of their remuneration in new Ordinary Shares at the Placing
Price until 31 July 2020.
-- It is intended that any new Ordinary Shares issued in lieu of
fees and salary will be subject to lock-in arrangements.
-- The Company proposes to issue 15,151,515 new Ordinary Shares
to Thomas Quigley, trading as Cloudberry Corporate Advisers, in
lieu of corporate advisory fees in relation to the Debt
Restructuring.
Such cash cost reduction initiatives in relation to Thomas
Quigley, Ian Price, and Gerry Madden which will be related party
transactions pursuant to the AIM Rules, are still to be formally
agreed and further announcement(s) will be made in due course.
New Share Option Plan
The Company also announces the intention to put in place a new
unapproved management share option plan to incentivise Directors
and senior management personnel across the Group (the "New Share
Option Plan"). The terms and conditions of the New Share Option
Plan are still to be agreed and ratified by the Board. However, the
intention is for options over up to 10 per cent. of the Company's
issued share capital from time to time to be granted to certain
senior management personnel and/or Directors in accordance with the
terms and conditions of the New Share Option Plan, to be determined
and announced in due course.
In addition, it is intended that an additional 30,773,543
warrants to subscribe for new Ordinary Shares will be issued to
Strand Hanson Limited, exercisable at the Placing Price for a
period of five years from the date of grant.
North Fork Community Power LLC
The Company announced on 4 June 2019 that further to an
investment agreement being entered into with North Fork Community
Power LLC, the Company expected the related sales contract to be
completed and signed by the end of June 2019. The Company now
believes that the contract will not be signed by the end of June
2019 and we will keep shareholders updated in this regard.
Director changes
The Company also announces that it has received notice from
Oscar Leiva, a Non-executive Director of the Company, of his
resignation from the Board, with immediate effect, to focus on his
commitments to the EBIOSS Energy SE Group.
Admission and total voting rights
Application will be made to the London Stock Exchange for
admission of the Placing Shares, the Altair Redemption Shares and
the Riverfort Conversion Shares (together, the "New Ordinary
Shares") to trading on AIM ("Admission"). It is expected that
Admission will become effective and dealings in the New Ordinary
Shares will commence on or around 5 July 2019.
Following Admission, the Company will have a total of
3,077,354,292 Ordinary Shares in issue carrying voting rights. The
Company does not hold any Ordinary Shares in treasury. Therefore,
with effect from Admission, this figure may be used by shareholders
as the denominator for the calculations by which they will
determine if they are required to notify their interest in, or a
change to their interest in the Company, under the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules.
Following Admission, the significant shareholders of EQTEC,
insofar as the Company is aware, will be as follows.
No. of Ordinary % of issued share
Shares capital following
Shareholder Admission
Altair 869,432,501 28.25%
EBIOSS Energy SE 510,595,678 16.59%
Riverfort Lenders 307,151,515 9.98%
Inava Ingenieria de Análisis
SL 243,810,360 7.92%
The Company anticipates that its results for the year ended 31
December 2018, will be announced later today.
Ian Pearson, Chairman of EQTEC plc, commented: "We are pleased
to have significantly reduced our payment obligations with both
Altair and Riverfort and to have secured an extension of repayment
until July 2020 with regard to the remaining balances outstanding
under the facilities. This is an important step for the Group in
optimising its balance sheet.
"This debt reduction, coupled with the Placing proceeds and the
planned cash cost reduction measures we are undertaking, will
ensure the Group is better positioned for future growth. We believe
the market opportunity for EQTEC remains significant and the Group
is now much better placed to be able to deliver on its strategy to
create shareholder value.
"I would like to thank our lenders and our shareholders for
their continued support during this process and I look forward to
EQTEC's future with renewed confidence."
Enquiries
EQTEC plc +353 (0)21 2409 056
Ian Price - Chief Executive Officer
Gerry Madden - Finance Director
Strand Hanson - Nomad, Financial Adviser
& Broker +44 (0) 20 7409 3494
James Harris / Richard Tulloch / Jack
Botros
IFC Advisory - Financial PR & IR +44 (0) 20 3934 6630
Tim Metcalfe / Miles Nolan / Zach Cohen
Notes to Editors
About EQTEC plc
EQTEC's business model involves sourcing and providing
assistance in developing waste elimination projects to which it
will ultimately sell its EQTEC Gasifier Technology ("EGT") and
O&M services. EGT enables project developers to construct waste
elimination plants and recover electrical and thermal energy from
the waste streams.
EQTEC sources projects that have a local supply of waste in need
of elimination and conversion. It builds relationships and brings
together the developers, the waste owners, the building contractors
and funders. It then supplies the energy recovery technology and
provides engineering services to the projects. Furthermore, EQTEC
will provide O&M services to the operating projects generating
recurring revenues over the life of the projects.
The Company is quoted on AIM and trades as EQT. Further
information on the Company can be found at www.eqtecplc.com.
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END
IOEEALKPASPNEEF
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