TIDMKBT
RNS Number : 3219I
K3 Business Technology Group PLC
01 April 2020
AIM: KBT
K3 Business Technology Group plc
("K3" or "the Group")
Loan Funding Secured
and
Update on UK Dynamics Subsidiary
Further to the announcement released on 24 March 2020, K3 is
pleased to announce that it has secured additional cash funding of
GBP6.0m by way of loans from two major shareholders and Barclays
Bank Plc ("Barclays"), and also provides an update on its UK
Dynamics subsidiary.
As reported in the announcement of 24 March, the announcement of
K3's preliminary results for the year ended 30 November 2019, has
been delayed. A further announcement regarding the date will be
made in due course.
Loan Funding
K3 has secured GBP6.0m of loans from Barclays and its two major
shareholders, Kestrel Partners LLP ("Kestrel") and Johan Claesson,
also a non-executive director. The cash funding will strengthen the
Group's liquidity position during this period of unprecedented
disruption caused by the Coronavirus pandemic.
Barclays is extending its existing loan facilities to K3 by
GBP3.0m to a maximum of GBP13.0m in total. The terms of the loan
facilities, including their duration, are similar to existing
facilities, which expire on 31 March 2021.
Kestrel (which has appointed Oliver Scott to the Board as its
non-executive director representative) and Johan Claesson (together
"the Lenders") are providing an unsecured term loan of GBP3.0m
until 30 June 2021 ("Shareholder Loan"). The Shareholder Loan is
split equally between the two Lenders. Mr Claesson will provide his
part of the loan via his associated company, CA Fastigheter AB and
Kestrel's loan is provided via its discretionary clients.
The main terms of the Shareholder Loan are as follows:
- unsecured and subordinated to all indebtedness with Barclays;
- 8.0% annual coupon, with interest rolling up on a quarterly basis; and
- 1 warrant issued for every GBP2.50 of Shareholder Loan.
Warrants are over ordinary shares of 25p each ("Ordinary Shares"),
are transferrable, have a 10 year duration and a strike price of
25p (the "Warrants").
In addition, K3 will pay the underlying clients of Kestrel an
arrangement fee of 2.0% of the value of their portion of the
Shareholder Loan, and will pay Kestrel the associated costs
incurred by it, up to GBP30,000.
It is intended that other major institutional shareholders of K3
will be offered the opportunity to participate in further lending
of up to GBP2.0m on substantially the same terms as the Shareholder
Loan, including the issue of further Warrants ("Top-up Facility").
Participation will be at the absolute discretion of the Board.
Shareholders so participating will be required to enter into a loan
agreement with K3 and become a party to the inter-creditor
agreement with the Lenders. The Shareholder Loan is also subject to
a subordination agreement between the Lenders (and any other
shareholders who elect to participate in the Top-up Facility) and
Barclays.
The dilutive impact of the Warrants issued to the Lenders would
be to increase K3's issued share capital by 1.2m new Ordinary
Shares, representing 2.8% of K3's current issued share capital.
This dilution would increase to a maximum of 2.0m new Ordinary
Shares, representing 4.7% of the Group's current issued share
capital, in the event that the Top-up Facility is subscribed in
full.
The Directors believe that the potential dilution arising from
the issue of the Warrants is significantly lower than the dilution
that would have arisen had K3 attempted to secure this additional
financing wholly via an issue of new equity.
Update on UK Dynamics Subsidiary
The Group's UK Dynamics subsidiary, K3 Business Technologies
Limited, which is a reseller of Microsoft Dynamics, generated an
operating loss of in excess of GBP3.0m on turnover of GBP21.0m for
the 12 months to 30 November 2019. Given the current uncertainties
created by the coronavirus crisis, this UK subsidiary is expected
to generate further significant negative EBITDA and cash outflows
in the year to 30 November 2020.
As a result, and following independent advice, the Board of the
subsidiary has taken the very difficult decision that it will be
filing a Notice of Intention for administration. At the same time,
it will seek interest in the sale of the business and/or its
assets.
It should be noted that this decision has no effect on the
Group's Microsoft Dynamics practices outside the UK.
As previously reported on 24 March, the Board will focus on
growing the Group's core profitable business units and accelerating
the transition towards its own IP, in particular the new flagship
Imagine product.
Related Party Transactions
The entering into of the Shareholder Loan by K3 (and the payment
of the associated arrangement fee and costs) with Kestrel (and its
underlying clients) and Mr Claesson constitutes a related party
transaction under the AIM Rules, by virtue of Kestrel and Mr
Claesson each being substantial shareholders in K3 (as defined in
the AIM Rules) and Mr Claesson being a non-executive director of
the Group.
The Independent Directors (being the K3 board, excluding Mr
Claesson and Mr Scott) consider, having consulted with finnCap (as
K3's nominated adviser), that the terms of the related party
transaction are fair and reasonable insofar as K3's Shareholders
are concerned. If and to the extent that any other related parties
elect to participate in the Top-up Facility, the Independent
Directors will further consult with finnCap, as appropriate.
Further announcements will be made accordingly.
Further Terms of the Shareholder Loan
The Shareholder Loan is not subject to any financial covenants
though each of the Lenders consent will be required in the event
that K3 wishes to:
-- issue further equity; or
-- make any acquisitions; or
-- enter into any additional loan facilities.
In the event that K3 fails to repay the Shareholder Loans
(including any accrued interest) by 30 June 2021, the principal
amount of the Shareholder Loans then outstanding will increase by
20% and the annual coupon on all outstanding Shareholder Loan
amounts from the date of such failure will increase from 8.0% to
16.0%.
Adalsteinn Valdimarsson, CEO of K3 Technology Group plc,
commented:
"The securing of this additional finance from Barclays and our
two major shareholders demonstrates their commitment to K3 and
belief in our growth strategy and prospects. The additional
liquidity puts us in a much stronger financial position and gives
us the headroom to undertake any required restructuring as well as
further investment to support our growth strategy."
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
Enquiries:
K3 Business Technology Adalsteinn Valdimarsson, T: 0161 876 4498
Group plc CEO
Rob Price, CFO
finnCap Limited (NOMAD Julian Blunt/James Thompson T: 020 7220 0500
& Broker) (Corporate Finance)
Camille Gochez (Corporate
Broking)
KTZ Communications Katie Tzouliadis/Dan T: 020 3178 6378
Mahoney
1. Details of Persons Discharging Managerial Responsibilities
"PDMR" / person closely associated with them ('PCA')
a) Name Johan Claesson
2. Reason for notification
b) Position / status Non-executive director
c) Initial notification Initial Notification
/ amendment
3. Details of the issuer, emission allowance market participant,
auction platform, auctioneer or auction monitor
b) Name K3 Business Technology Group plc
c) LEI 213800QOJ9OF2AV81748
4. Details of the transaction(s): section to be repeated for
(i) each type of instrument; (ii) each type of transaction;
(iii) each date; and (iv) each place where transactions
have been conducted
a) Description of the Warrants over ordinary shares of 25p each, exerciseable at nominal value
financial instrument n/a
Identification code
b) Nature of the transaction Grant of warrants in connection with loan funding arrangement
c) Price(s) and volume(s) 600,000 warrants
d) Aggregated information n/a
Aggregated volume
Price
e) Date of the transaction 30 January 2020
f) Place of the transaction Outside a trading venue
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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