Re Agreement on Refinancing & Restructuring of the Group
30 January 2008 - 6:00PM
UK Regulatory
30 January 2008
Neville Porter plc (the "Company")
1 Introduction
The Company announces that it has entered into various agreements with two of its directors, Mr Porter and Mr Morton,
concerning a proposed refinancing and restructuring of the Company and its subsidiaries' (together "Group's")
businesses.
Under the AIM Rules the arrangements are regarded as related-party transactions (under AIM Rule 13). In addition,
certain of the arrangements with Mr Porter require shareholder approval as they amount to substantial property
transactions between the Company and a director pursuant to section 190 to 196 of the Companies Act 2006 and may result
in a fundamental change of business under AIM Rule 15.
The requisite resolution will be proposed at an Extraordinary General Meeting ("EGM") which is expected to be convened
within the next few days and held by mid February 2008.
2 Background to Refinancing
The Group operates in a sector where results can vary from favourable to unfavourable in a short space of time, and
where bets on one sport can be positive at the same time as losses are incurred on another sport. With this in mind, the
directors take steps to limit the Group's liabilities by hedging bets with other bookmakers where appropriate, and by
broadening the spread of bets between different sports.
Furthermore, the Group's traditional operations, on-course betting at UK (and now Irish) racecourses - which have been
the successful core of the predecessor business for nearly 30 years - have been supplemented since flotation by
off-course betting at the newly-formed Birtley telephone call centre and via internet betting.
The significant stakes taken by phone and on the internet have generated far poorer returns than had been projected,
partly as a result of the generous odds offered to attract a new clientele and build up client loyalty while these
operations were in their infancy, and partly because of the generally greater level of success for clients that the
industry as a whole has witnessed. There have been various recent announcements by well-known national bookmaking firms
setting out details of significant losses, which seem to have affected the industry as a whole.
With the continued run of poor results that affected the 30th June 2007 accounts, as announced on 27th December 2007,
having continued into 2008, the Group has taken steps to reduce its cost base, and has taken steps to limit its
potential exposure on certain races, and the board is hopeful of better performance as 2008 progresses. To raise funds,
the board has agreed to sell its UK pitches and the independent directors accepted an offer from Mr Neville Porter after
obtaining an independent valuation from an industry expert. Approximately �5,763,000 of bets were taken at the UK
pitches in the financial period ended 30th June 2007, resulting in a gross profit of �173,000. After deducting on-course
expenses, the Company made a net profit of �25,000 in relation to the UK pitches.
In addition Brian Morton is advancing the Company �80,000.
These overall arrangements replace Mr Morton's commitment to the Company to provide funding of up to �300,000
(previously stated in the report and accounts for the period ended 30th June 2007) which will be released upon the
resolution being passed at the EGM. In the period prior to the EGM, and after the EGM in the event that the resolution
is not passed, Mr Morton's commitment is agreed to be reduced by the aggregate amount of the funds advanced by Mr Morton
and Mr Porter pursuant to their respective facilities.
3 Details of Refinancing
Financing to be provided by Mr David Neville Porter.
Mr Porter has agreed to make available to the Company a facility of up to �270,000. Of this sum, notice has been given
to draw down the initial �50,000 and of the balance:
(i) �170,000 may be drawn down by the Company conditional upon the passing of the resolution to be proposed at the EGM;
and
(ii) (subject to earlier exercise of the option as detailed below) �50,000 may be drawn down by the Company one month
following the EGM, conditional upon the passing of the resolution approving the option.
Mr Porter has previously advanced �79,197 by way of loan to D. N. Porter Racing Limited ("DNPR"). On the assumption that
the full amount of Mr Porter's new facility is drawn down, the aggregate principal amount due to Mr Porter from the
Group will be �349,197.
None of the loans will carry interest.
The amounts owed to Mr Porter by DNPR have been guaranteed by the Company. The amounts owed to Mr Porter by DNPR and the
Company have also been guaranteed by Neville Porter Racing Limited ("NPR").
Whilst the loans due to be repaid to Mr Porter are expressed to be repayable on demand, Mr Porter has agreed not to
demand repayment of any amount due to him by the Company or DNPR until the earlier of the date upon which the Company
has sufficient cash reserves to make this repayment and the date upon which notice is served to exercise the Option
Agreement detailed below (save in the case of certain standard events of default).
The Company guarantee is also secured by way of a first fixed charge over the entire issued share capital from time to
time of NPR ("DNP Share Charge").
The Option Agreement has been entered into by the Company, NPR and Mr Porter and is conditional upon the passing of the
resolution to be proposed at the EGM. Under the terms of the Option Agreement NPR and Mr Porter have entered into put
and call options whereby Mr Porter has the right to acquire from NPR its entire interest in the UK Pitches for a total
consideration of �350,000 and NPR has the right to compel Mr Porter to acquire the UK Pitches for �350,000. Details of
the UK Pitches are set out below. The put and call options contained in the Option Agreement will lapse 12 months after
the resolution to be proposed at the EGM is approved.
If the Option is exercised by either Mr Porter or NPR, the �350,000 consideration payable to NPR will be set off against
the sums owing to Mr Porter under the facilities made to the Group. The net effect will be that the UK pitches will be
acquired by Mr Porter and the principal amount of the loans due to be repaid to Mr Porter will be cleared.
In the event that the Option is exercised within one month of the EGM, Mr Porter will not have loaned the final �50,000
under Mr Porter's loan facility. Accordingly this amount will be payable as a cash sum on completion of the option
exercise, but payment may be deferred by Mr Porter until the date one month after the EGM (being the date on which draw
down of this amount would otherwise have occurred).
The Company is currently reviewing its activities and, as part of this review, is in discussions with Mr Porter about a
possible lease-back to the Company of the UK pitches and/or a partial release of Mr Porter's service agreement, to trade
from the pitches on his own account. Discussions are at a preliminary stage and no agreement has been reached with Mr
Porter. Any such agreement will be conditional upon further shareholder approval at a further general meeting and an
announcement will be made as soon as reasonably practicable before the latest time for receipt of signed and completed
Forms of Proxy and in any event prior to the Extraordinary General Meeting.
A summary of the principal terms of Mr Porter's facility, the Company guarantee, the NPR guarantee and the Option
Agreement are set out below.
Facility from Mr Brian Morton
Under Mr Morton's facility, Mr Morton has agreed to advance up to �80,000 to the Company.
This amount is guaranteed by NPR and secured by way of a first fixed charge over the Irish pitches held by NPR, details
of which are set out below.
Full details of Mr Morton's facility and a deed of guarantee and charge pursuant to which NPR will guarantee the
repayments under both Mr Morton's facility and his existing loans to DNPR secured by a first fixed charge over those
betting pitches held in the Republic of Ireland (the "BM Security") are set out below.
Mr Morton has agreed not to demand repayment of any amount due to him until the earliest of the date upon which the
Company has sufficient cash reserves to make this repayment, the six month anniversary of the making of the loan or any
sale of the Irish pitches (save in the case of certain standard events of default).
4 Working Capital
Shareholders should be aware that the Company requires additional working capital and the Directors believe that the
proposals described are the best way of achieving this. All the funds received by the Company will be used for general
working capital purposes.
5 Extraordinary General Meeting
The Option Agreement and the Share Charge in favour of Mr Porter are conditional upon the passing of a resolution to be
proposed at the EGM expected to be held mid February and further information will be set out in the circular which it is
anticipated will be sent to shareholders within the next week.
Mr Porter has undertaken to abstain from voting at the EGM and, accordingly, the resolution will require a simple
majority of votes cast in favour by the independent shareholders at the EGM.
6 Board Approval
The Directors, excluding Mr Porter and Mr Morton who did not take part in your Board's deliberations because of their
respective interests in the arrangements outlined above, concluded that the arrangements, having consulted with its
nominated adviser, Blomfield Corporate Finance Limited, were fair and reasonable insofar as its shareholders were
concerned.
Further information:
David Soley
Chairman
Neville Porter plc
Tel: 08000 223388
Nick Harriss
Nominated Adviser
Blomfield Corporate Finance Limited
Tel: +44 20 7512 0191
Appendix
1 Arrangements with Mr Porter
(a) Mr Porter's Loan Facility
Mr Porter's Loan Facility is created by a Loan Facility Agreement dated 29th January 2008. This provides for drawdown of
the following amounts:
(i) Tranche A, being �50,000 in respect of which notice to draw down was served by the Company on 29th January 2008;
(ii) Tranche B, being �170,000 to be drawn by the Company at any time after the passing of the Resolution; and
(iii) Tranche C, being �50,000 which may be drawn by the Company at any time on or after the date falling one calendar
month from the date upon which the Resolution is passed.
Tranche C will not be drawn if before the date upon which it is properly requested either Mr Porter or the Company have
served notice to exercise the Option, as detailed below.
Subject to the terms of the undertaking (see below) the entire loan created by the this facility is repayable upon
written demand by Mr Porter. It may be repaid in full or part at any time by the Company, but is not available for
redrawing following repayment. Payments due under the loan must be made in full without set-off (provided that any
set-off or reduction required by law must be compensated by an increase in the amount being paid so that the net payment
equals the full amount which Mr Porter would otherwise have received).
The Loan is secured by the guarantee and share charge summarised below.
The facility contains standard events of default including a default in repayment of any indebtedness owed by the
Company to any other person, the Company being deemed insolvent or subject to any insolvency proceeding or analogous
proceedings in any jurisdiction.
The Company has indemnified Mr Porter for any loss caused by the Company's failure to repay sums when due or arising out
of an event of default.
(b) Company Guarantee
A deed of guarantee and indemnity was entered into on 29th January 2008 between Mr Porter and the Company (as
guarantor).
Under this guarantee the Company irrevocably and unconditionally guarantees the repayment of sums due to Mr Porter by
DNPR (to include the �79,197 previously advanced to DNPR). The Company further irrevocably and unconditionally agrees to
indemnify Mr Porter in relation to costs, expenses, damages and losses incurred arising out of or in connection with
DNPR's failure to perform or discharge its obligations to Mr Porter. Each of these obligations are given separately by
the Company as primary obligor.
No interest is payable by the Company in respect of any late payment, before or after judgment.
(c) DNP NPR Guarantee
A deed of guarantee and indemnity was entered into on 28 January 2008 between Mr Porter and NPR (as guarantor).
Under this guarantee NPR irrevocably and unconditionally guarantees the repayment of sums due to Mr Porter by the
Company (to include amounts advanced or due under the Company Guarantee and Mr Porter's loan facility). NPR further
irrevocably and unconditionally agrees to indemnify Mr Porter in relation to costs, expenses, damages and losses
incurred arising out of or in connection with the Company's failure to perform or discharge its obligations to Mr
Porter. Each of these obligations are given separately by NPR as primary obligor.
No interest is payable by NPR in respect of any late payment, before or after judgment.
The DNP NPR Guarantee contains provisions normal to a document of this nature as to interpretation and enforcement.
(d) DNP Share Charge
A share charge was entered into on 29th January 2008 between Mr Porter and the Company, conditional upon the passing of
the resolution to be proposed at the EGM.
This share charge provides security to Mr Porter in relation to all amounts outstanding to him from the Company from
time to time (and will therefore include any amounts due under the above facility and the above guarantee). The Company
covenants to pay all amounts when due to Mr Porter with interest only at the rates provided by the underlying agreements
and with no deduction or set-off save as provided by the underlying agreement.
Upon the occurrence of an enforcement event Mr Porter shall have the right to sell the shares (pursuant to Section 101
of the Law of Property Act 1925) and shall be under no further commitment to the Company regarding the shares.
The security shall remain in place notwithstanding any insolvency of the Company or repayment of the secured liabilities
until they are discharged in full.
(e) Option Agreement
An option agreement was entered into between Mr Porter, the Company and NPR on 29th January 2008.
The agreement grants a put and call option over the Pitches held by NPR in the United Kingdom (details of which are set
out below).
NPR has irrevocably agreed to sell to Mr Porter and Mr Porter has irrevocably agreed to buy these Pitches for
consideration of a total of �350,000, conditional upon the passing of the Resolution and the exercise of the Option
within the option period upon the terms of the Option Agreement.
The Option must be exercised by either party within the period of 12 months following the passing of the resolution to
be proposed at the EGM. It may be exercised by either NPR or Mr Porter giving to the other an exercise notice stating
the date on which it is given, that the Option is being exercised, a date (within 2 to 10 business days after the notice
date) on which completion of the Option exercise is to take place and which must be signed. Once given an Option
exercise notice is irrevocable without the consent of the other party. Completion will then take place subject only to
the National Joint Pitch Council or its successor body confirming by the transfer date the mechanics for transfer of the
Pitches and upon Mr Porter complying with any requirements or restrictions which they may place on transfer. The
completion may be deferred in the event that these requirements cannot immediately be satisfied. A party in default of
their completion obligations may also be required to complete on such later date as a non-defaulting party shall
specify.
The consideration payable shall be made up of first, such amount up to �350,000 as shall be outstanding from the Company
to Mr Porter and secondly, (as to any shortfall) in cash.
It is the intention that the entire amount outstanding from DNPR, the Company and NPRL will be called under DNP NPR
Guarantee and therefore that �350,000 will be owing and set-off against the Option price. In the event that the Option
is exercised within one month of the passing of the resolution to be proposed at the EGM then Mr Porter would not have
advanced the final �50,000 of his loan (see above). In this case the �50,000 cash balance will be satisfied on the day
being one calendar month following the passing of the resolution (the date upon which he would have been obliged to lend
this amount to the Company in any event). In any other circumstances any cash balance would be required to be paid in
cleared funds on completion of the Option exercise.
NPR has undertaken that it will not dispose of any of these Pitches and will transfer them with full title guarantee and
free from any fees due to the National Joint Pitch Council or any successor body.
The Company has agreed to guarantee, as primary obligor, all liabilities of NPR pursuant to the Option Agreement as if
it were NPR and irrespective of any legal limitation incapacity or disability on behalf of NPR.
2 Arrangements with Mr Morton
(a) BM Facility Agreement
Mr Morton's loan facility is created by a Loan Facility Agreement dated 29th January 2008. This provides for drawdown of
�80,000 on two business days' notice.
Subject to the terms of the undertaking (see below) the entire loan created by the BM Loan Facility is repayable upon
written demand by Mr Morton. It may be repaid in full or part at any time by the Company, but is not available for
redrawing following repayment. Payments due under the loan must be made in full without set-off (provided that any
set-off or reduction required by law must be compensated by an increase in the amount being paid so that the net payment
equals the full amount which Mr Morton would otherwise have received).
The Loan is secured by the guarantee and the charge, summarise below.
Mr Morton's facility contain standard events of default including a default in repayment of any indebtedness owed by the
Company to any other person, the Company being deemed insolvent or subject to any insolvency proceeding and analogous
proceedings in any jurisdiction.
(b) BM Security
Mr Morton's security consists of a guarantee provided by NPR in respect of sums due from the Company (the "BM NPR
Company Guarantee"), a guarantee provided by NPR in respect of sums due from DNRP (the "BM NPR DNRP Guarantee") and a
charge over Irish Pitches securing each of the BM NPR Company Guarantee and BM NPR DNRP Guarantee (the "BM Charge").
(i) BM NPR Company Guarantee
The BM NPR Company Guarantee, a deed of guarantee and indemnity was entered into on 29th January 2008 between Mr Morton
and NPR (as guarantor).
Under the BM NPR Company Guarantee NPR irrevocably and unconditionally guarantees the repayment of sums due to Mr Morton
by the Company (to include amounts advanced under the BM Loan Facility).
No interest is payable by NPR in respect of any late payment, before or after judgment.
(ii) BM NPR DNRP Guarantee
The BM NPR DNRP Guarantee, a deed of guarantee and indemnity was entered into on 28 January 2008 between Mr Morton and
NPR (as guarantor).
Under the BM NPR DNRP Guarantee NPR irrevocably and unconditionally guarantees the repayment of sums due to Mr Morton by
DNRP (to include the �50,000 previously advanced by Mr Morton to DNRP).
No interest is payable by NPR in respect of any late payment, before or after judgment.
(iii) BM Charge
NPR has by a Charge dated 29th January 2008 between Mr Morton and NPR agreed to charge its entire interest in the
Pitches held by it in the Republic of Ireland to Mr Morton as continuing security pursuant to BM NPR Company Guarantee
and the BM NPR DNRP Guarantee.
Under the BM Charge NRP undertakes to Mr Morton to remain owner of the Irish Pitches, not to sell those Pitches, and to
satisfy all costs and liabilities outstanding in relation to them from time to time, and to procure that the provisions
of the BM Charge remain enforceable against NRP, having regard to its capacity, power, rights of pre-emption and
transfer and conflicts with other agreements.
Upon the occurrence of an enforcement event Mr Morton shall have both the right to sell the Pitches (pursuant to Section
101 of the Law of Property Act 1925) (and then shall be under no further commitment to NRP regarding the Pitches) or to
appoint a Receiver, which provisions are noted below. The enforcement events are standard for an agreement of this type
including failure to pay liabilities when due, breach of a material term of the BM Charge or illegality or
unenforceability of the BM Charge.
The security shall remain in place notwithstanding any insolvency of NRP or repayment of the secured liabilities until
they are discharged in full.
The BM Charge is expressed to survive any insolvency event or bankruptcy or similar insolvency legislation in any
jurisdiction and other than England and Wales which could otherwise lead to it being avoided or adjusted. The security
shall also endure for 25 months following payment in full of the secured liabilities or their release, at Mr Morton's
discretion.
Pitches
Part 1 - UK Pitches
Racecourse Ring List Position
Ascot Royal Rails 12
Ascot Royal Tattersalls 13
Ayr Flat Tattersalls 1
Ayr Flat Tattersalls 5
Beverley Course 18
Carlisle Flat Tattersalls 2
Catterick Flat Rails 16
Catterick NH Rails 6
Cheltenham Festival Rails 31
Cheltenham Festival Lower Tattersalls 3
Cheltenham Off Lower Tattersalls 1
Cheltenham Off Lower Tattersalls 2
Chepstow NW Tatterstalls 78
Chepstow Flat Tatterstalls 67
Doncaster Flat Tattersalls 18
Epsom Derby Lower Tatterstalls 55
Exeter Tattersalls 57
Fontwell Lower Tattersalls 28
Hamilton Rails 15
Hamilton Rails 4
Haydock Flat Rails 9
Haydock NH Rails 8
Haydock NH Rails 13
Kelso Rails 3
Kempton NH Tattersalls 48
Kempton AW Tattersalls 67
Kempton AW Tattersalls 109
Kempton AW Silver 43
Kempton AW Silver 17
Leicester Flat Rails 5
Leicester NH Rails 5
Leicester NH Rails 18
Leicester NH Rails 3
Ludlow Tattersalls 42
Musselburgh Flat Tattersalls 1
Newcastle NH Rails 18
Newcastle NH Tattersalls 5
Newcastle Flat Rails 6
Newcastle Flat Tattersalls 5
Newcastle Flat Tattersalls 11
Newmarket Rowley Rails 10
Newmarket Rowley Rails 22
Ripon Rails 6
York Rails 15
York Tattersalls 120
Part 2 - Irish Pitches
Racecourse Ring List Position
Leopardstown Tattersalls 7
Galway Tote Line 27
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