TIDMSGI
RNS Number : 7534F
Stanley Gibbons Group PLC
23 February 2018
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014
THE STANLEY GIBBONS GROUP PLC
Proposed subscription for new Ordinary Shares by Phoenix UK Fund
Ltd, waiver of obligations under Rule 9 of the Takeover Code and
Debt Restructuring
The Stanley Gibbons Group Plc is pleased to announce that it has
entered into various agreements to give effect to an investment of
up to GBP19.45 million by Phoenix UK Fund which will result in the
Company's total external bank debt finance being reduced to GBP10.0
million and cash resources increasing by approximately GBP5.4
million (net of the expenses of the Proposed Transaction). As part
of the investment, Phoenix UK Fund will subscribe for new Ordinary
Shares in the Company equating to approximately 58.09 per cent. of
the Enlarged Issued Share Capital.
Summary
- Proposed total investment of up to GBP19.45 million by Phoenix
UK Fund. The Proposed Transaction (comprising the Subscription and
the Debt Restructuring) will result in:
o a reduction in the Group's external debt finance from
approximately GBP17.0 million to GBP10.0 million (which sum shall
not be repayable (as to principal and interest, absent any default
under the Debt Facility Restatement Agreement) until the fifth
anniversary of completion of the Proposed Transaction);
o Phoenix UK Fund and SGF (a wholly owned subsidiary of the
Company) together acquiring the right, title and interest of the
Group's existing lender, RBS, in the RBS Debt as follows:
-- GBP7.0 million in principal sum of the RBS Debt will be
acquired by SGF; and
-- the balance of the RBS Debt, in the principal sum of up to
GBP10.5 million, will be acquired by Phoenix UK Fund.
To the extent that on completion of the Proposed Transaction the
RBS Debt exceeds GBP17.0 million, Phoenix UK Fund has agreed to pay
RBS up to GBP500,000 to purchase at par the amount of such
excess.
Phoenix UK Fund will also acquire and hold the benefit of all
existing security granted in favour of RBS;
o Phoenix UK Fund will acquire all the right, title and interest
of the Group in the SG Guernsey Intercompany Indebtedness in
consideration of a payment of GBP2.75 million;
o a cash injection of GBP6.2 million by way of the Subscription
for 248,000,000 new Ordinary Shares (or such greater number of
Ordinary Shares as shall result in Phoenix UK Fund holding a
minimum of 58 per cent. of the Enlarged Issued Share Capital) at a
price of GBP0.025 per Ordinary Share (or such lower price per
Ordinary Share as results from dividing an aggregate subscription
price of GBP6.2 million by the number of Ordinary Shares actually
issued to Phoenix UK Fund), of which it is intended GBP1.2 million
will be ear-marked for the acquisition of trading inventory and the
balance will be utilised to discharge transaction expenses,
existing creditors and provide working capital. On completion of
the Subscription, Phoenix UK Fund will own approximately 58.09 per
cent. of the Enlarged Issued Share Capital; and
o Phoenix UK Fund being entitled to receive such proceeds from
the administration, liquidation or other insolvency process of SG
Guernsey as would otherwise be payable to either RBS (as a creditor
in respect of the RBS Debt) or the Group by virtue of the SG
Guernsey Intercompany Indebtedness;
- Under the terms agreed with Phoenix UK Fund for the
Subscription, Phoenix UK Fund will have a right, for so long as it
(and/or its associates) continues to hold not less than 20 per
cent. of the issued voting share capital of the Company, to
nominate a director to the Board. Phoenix UK Fund's first such
nominated director will be Mr Graham Elliott Shircore, who will be
appointed to the Board on completion of the Proposed
Transaction;
- Phoenix UK Fund has separately reached agreement with the
Administrators of SG Guernsey for the acquisition of certain
trading inventory of SG Guernsey (primarily comprising stamps and
other collectibles). The Acquisition is conditional on completion
of the Proposed Transaction.
- The Proposed Transaction is subject, inter alia, to the
approval at an Extraordinary General Meeting of the Company of the
Resolutions necessary to give the Board the authority to issue the
Subscription Shares and also subject to the Independent
Shareholders passing the Rule 9 Waiver Resolution for the purposes
of approving the waiver of any obligation on Phoenix UK Fund to
make a Rule 9 Offer as a result of the proposed Subscription;
- A circular setting out details of the Proposed Transaction,
the Rule 9 Waiver and the Acquisition and giving notice of the
Extraordinary General Meeting to approve these proposals will be
sent to Shareholders as soon as reasonably practicable following
its approval by the Panel and will be made available on the
Company's website;
- Each of the Subscription, the Debt Restructuring and the
Acquisition are inter-conditional, such that they will only become
effective if all are completed simultaneously. Completion of the
Proposed Transaction and the Acquisition are expected to take place
on Admission; and
- The Company has received irrevocable undertakings to vote in
favour of the Resolutions required to approve the Proposed
Transaction from Shareholders and Directors holding in aggregate
56,473,988 Ordinary Shares, equating to approximately 31.56 per
cent. of the Ordinary Shares currently in issue. These irrevocable
undertakings include undertakings from all of the Directors who
hold Ordinary Shares and Lombard Odier Investment Managers group
("LOIM") for accounts managed or sub-advised by LOIM entities.
Enquiries:
The Stanley Gibbons Group plc
Harry Wilson +44 (0)207 836
Andrew Cook 8444
finnCap Ltd (Nomad and Broker)
Stuart Andrews / Christopher
Raggett / Anthony Adams (corporate +44 (0)20 7220
finance) 0500
Yellow Jersey PR (Financial +44 (0)7747 788
PR) 221
Charles Goodwin stanleygibbons@yellowjerseypr.com
finnCap Ltd, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority, is acting only for the
Company and no one else in connection with the proposals and will
not be responsible to anyone other than the Company for providing
the protections afforded to clients of finnCap Ltd or for providing
advice in relation to the proposals, the contents of this
announcement or any other matters referred to in this
announcement.
Forward-looking statements
This announcement includes certain "forward-looking" statements
with respect to the financial condition, results of operations and
business of the Group and certain plans and objectives of the board
of directors of the Company with respect thereto. The
forward-looking statements contained herein may include statements
about the expected effects on the Group of the proposals, the
expected timing and scope of the proposals, anticipated earnings
enhancements and other strategic options, as well as other
statements in this announcement other than historical facts.
Forward-looking statements include, without limitation, statements
typically containing words such as "intends", "expects",
"anticipates", "targets", "estimates" and words of similar import.
These statements are based on assumptions and assessments made by
the board of directors of the Company in the light of their
experience and their perception of historical trends, current
conditions, expected future developments and other factors they
believe appropriate. They have not been reviewed by the auditors of
the Company. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking
statements.
All subsequent oral or written forward-looking statements
attributable to the Company or any of their respective members,
directors, officers or employees or any persons acting on their
behalf are expressly qualified in their entirety by the cautionary
statement above. All forward-looking statements included in this
announcement are based on information available to the Company on
the date of this announcement and are made only as of the date of
this announcement. Undue reliance should not be placed on such
forward-looking statements.
Subject to compliance with the Takeover Code and the AIM Rules,
the Company does not intend, or undertake any obligation, to update
any information contained in this announcement.
Background to and reasons for the Proposed Transaction
Over the last two years, the Group has undergone a programme of
intense rationalisation as the Board has sought to streamline the
Group to a business which is capable of trading profitably,
reducing its debt burden and seeking to enhance value for
Shareholders. During that time, a number of businesses and assets
have been sold or closed, overhead costs have been reduced
significantly and the Group's focus has been re-aligned to its
heritage of serving the philatelic and numismatic collectibles
market.
As announced on 21 November 2017, this decline and certain
legacy issues in the investments division led to the administration
of the Company's wholly owned subsidiary, SG Guernsey, through
which the Group's investments division activities were conducted,
although the rest of the Group was not affected and has continued
to trade normally throughout.
Accordingly, the Group has reached a turning point where,
following completion of the Proposed Transaction, the Board
believes that the Company will finally be in a position to rebuild
for the future.
Restructuring update
The strategic review, initiated in January 2016, led to a
wholesale change of the Board and the majority of senior
executives. Since then, the new management team has comprehensively
reviewed every facet of the Group's business and implemented the
following changes:
-- we have integrated the coin and stamp acquisitions made in
2013 and 2014, to belatedly harness some of the benefits which
should have been derived following completion of those
transactions;
-- there has been a complete change in the Company's advisors
serving at the outset of the restructuring plan, including the
former auditors who resigned in February 2016;
-- the closure of "The Marketplace" division in September 2016,
which brought to an end an ill-conceived project, which had
severely over-run budgeted expenditure, consuming some GBP10.0
million in cash over the previous three years and having failed to
deliver the E-Commerce platform hoped for at the outset;
-- we cooperated with the U.S. Securities & Exchange
Commission and the Department of Justice (the "DOJ") investigations
into transactions involving a former client and a director of a New
York-based subsidiary of Mallett Plc, where the DOJ concluded its
criminal prosecution in April 2017. The Board is now pursuing civil
action against the former director and/or others in respect of
losses it has incurred as a result of these matters;
-- in June 2017, we initiated a formal sale process (under note
2 on Rule 2.6 of the Code) to explore the full bandwidth of
commercial options available to the Board. This led to discussions
with a number of interested parties. However, given the complicated
restructuring which the business has gone through and certain
legacy liabilities which remained, it became clear to the Board
that an asset sale or strategic investment would be likely to
provide a more favourable outcome for shareholders than an offer
for the Company as a whole. Accordingly, the Company announced the
end of the formal sale process on 2 October 2017;
-- on 21 November 2017, an administration order was granted in
respect of the Group's wholly owned subsidiary, SG Guernsey,
through which our investments division activities were conducted.
SG Guernsey`s assets comprised GBP12.6 million of philatelic
inventory whereas its potential liabilities primarily consisted of
around GBP54.0 million contingent liabilities, relating to buy-back
guarantees, and a further approximately GBP11.0 million of other
balance sheet liabilities;
-- the Directors believe that the administration of SG Guernsey
has fundamentally limited the exposure of the Group to the buyback
liabilities and removed the cashflow burden associated therewith.
The outstanding indebtedness currently owed to the Group by SG
Guernsey amounts to approximately GBP6.5 million and the Group
ranks as an unsecured creditor in respect of that amount alongside
other unsecured creditors of SG Guernsey. Under the terms of the
Debt Restructuring, this indebtedness will be assigned to Phoenix
UK Fund; and
-- over the same period, cost saving measures have been
identified and implemented that will reduce annualised total
operating costs, excluding professional fees associated with the
restructuring, by over GBP12.0 million (65 per cent.) and we have
generated cash of some GBP6.0 million from the sale of parts of the
Interiors Division and the disposal of non-core businesses and
assets. Although the full benefit will not become apparent until
the financial year ending 31 March 2019, total monthly employment
costs, as at the end of January 2018, have fallen by over 75 per
cent. since January 2016.
The future business of the Group
Although we have been successful in streamlining the business
activities of the Group, the ability to grow its core businesses
has been hampered by a lack of working capital in the Group. This
has arisen both from the need to reduce the Group's debt, which had
previously reached unsustainable levels, and due to the one-off
costs of the restructuring programme. These included the final
redundancy costs and the professional fees that we incurred as we
dealt with the long-running litigation, the administration and the
inevitable demands for close scrutiny by our bankers in order that
they felt able to continue providing their much needed support
throughout this period.
Throughout, the Board's central objective has been to restore
value by building long-term relationships with our clients, across
a wide range of international markets, where we can provide
differentiated offerings and build brand recognition. The Board
also continues to believe that there is an opportunity to grow
online revenues and we plan to refocus our E-commerce strategy on
selling the Group`s own proprietary assets of high quality
collectibles and world renowned publications.
The core activities of the Group are conducted through the
Stanley Gibbons and Baldwins divisions, which share similar
characteristics and benefit from commercial advantages associated
with being market leaders in the philatelic and numismatic markets
respectively, including:
-- large global markets;
-- brand integrity and leadership;
-- loyal collector customer base; and
-- invaluable industry expertise which is revered worldwide.
Hence, we now have a clear focus and understanding of our
heritage brands and expertise, competitive advantages and
achievable corporate goals and the Directors remain convinced that
the Group has undeveloped strategic value, not only in its existing
markets but also across the broader global collectibles market.
Bank debt finance
As reported on 29 December 2017, total bank debt finance stood
at GBP16.8 million as at 27 December 2017 and the Group was in
default under its bank facilities. In consequence, the Group has
continued to be reliant upon the ongoing support of RBS, with whom
we have worked closely over the last two years. This has allowed
the management team the latitude to accommodate the decline in
trading performance, at the same time as progressing the
restructuring of the business. However, following completion of the
Proposed Transaction, RBS will cease to be the Group's principal
source of funding. External debt finance will, instead, be provided
by Phoenix UK Fund which will also be a longer term strategic
investor in the Group via the Subscription. The Group's debt
finance will be reduced to GBP10.0 million, repayable (as to
principal and interest) at the end of five years following
completion of the Proposed Transaction (absent any default under
the Debt Facility Restatement Agreement).
Under the terms agreed with Phoenix UK Fund for the Debt
Restructuring, Phoenix UK Fund will have the right to take such
action as it considers necessary under the Debt Facility
Restatement Agreement and/or in respect of the security interests
assigned to it pursuant to the RBS Debt Assignment (as the case may
be), for the purposes of preserving its position as a creditor in
the administration, subsequent liquidation or other insolvency
process relating to SG Guernsey, until such time as that process
comes to a close.
Management and Board changes
The initial restructuring review undertaken by the Board
identified the need for major management changes across the Group
and these have been made over the last two years.
There has been a wholesale change in the Board composition,
which has been reinforced by the introduction of directors with
specialist change management, financial and collectibles
experience, which have now been in place for over eighteen months.
Furthermore, all of the operational executives of the Group are now
London-based, allowing for the introduction of the robust measures
implemented by the Board as part of its restructuring plans.
We are aware that the delivery of a premium service to our
customers is dependent upon maintaining a strong specialist
capability within our staff as experts in their field. Therefore,
as part of our plan to reinforce our executive team, as we rebuild
for the future, Guy Croton joined the Company as Managing Director
of Philately in November 2017. Guy, who has worked in the industry
for 22 years, is highly respected in his field. For the last 15
years Guy has worked at Spink, latterly as Head of The Philatelic
Division and his recruitment has had an immediate impact on our
stamps business.
Following completion of the Proposed Transaction, the Board will
no longer require such a strong emphasis on change management.
Hence, it is proposed that the following board changes will take
place:
-- Harry Wilson, who was appointed in May 2016, and temporarily
assumed the role of Executive Chairman upon the departure of the
former Chief Executive Officer in July 2016, will return to his
role as Non-executive Chairman.
-- Under the terms agreed with Phoenix UK Fund for the
Subscription, Phoenix UK Fund will have a right, for so long as it
(and/or its associates) continues to hold not less than 20 per
cent. of the issued voting share capital of the Company, to
nominate a director to the Board. Phoenix UK Fund's first such
nominated director will be Mr Graham Elliott Shircore, who will be
appointed to the Board on completion of the Proposed
Transaction.
-- Henry Turcan (who has represented the interest of funds or
accounts managed or sub-advised by LOIM entities) will stand down
from the Board on completion of the Proposed Transaction.
In addition, on completion of the Proposed Transaction, ESCL,
which was appointed in December 2015 to oversee the restructuring
of the business, will conclude the provision of its consultancy
services to the Group. Notwithstanding this, Clive Whiley, who is
managing director of ESCL, and who has been an executive director
of the Company since March 2016, has agreed to remain as a
Non-executive Director thereafter for a period of at least one year
following completion of the Proposed Transaction.
The Directors believe that the injection of liquidity
contemplated by the Subscription and also the Debt Restructuring
will give the Group the opportunity to become a market-leading,
capital-light, stamp and coin dealing platform. The Group will be
better placed to maximise the opportunities available to it
alongside a strategic partner, whose interests are wholly aligned
with all other stakeholders. We look forward to working with
Phoenix UK Fund to achieve this.
Accordingly, the Board is unanimous in recommending that
Shareholders approve the Resolutions which are necessary to allow
the Proposed Transaction to proceed.
Current trading and prospects
As announced on 29 December 2017, Group trading continues to be
subdued in large part due to legacy issues, including, in
particular, a reduction in investment sales of high end
collectibles and a shortage of working capital.
However, on completion of the Proposed Transaction, the
realignment of available resources will be complete and with the
distractions of so many non-core activities removed, we will be
able to look to the future. Completion of the Proposed Transaction
will provide the Group with a breathing space, alongside reducing
total debt to a level more commensurate with the lower level of
business activity. Furthermore, the proposed equity subscription by
Phoenix UK Fund will provide the working capital necessary to
invest in new inventory, potentially allowing trading volumes to be
increased and to facilitate a controlled investment in digitisation
of the intellectual property surrounding the Group's publications
and brands. In summary, it will provide some headroom from the day
to day financial pressures under which the Group has been operating
and allow us the confidence to invest for the future.
The Board believes that in addition to the financial benefits
from the Proposed Transaction, the introduction of a long term
strategic partner in the shape of Phoenix UK Fund, with experience
of supporting similar businesses through transition, will add value
beyond just the financial investment to the Group.
Use of Subscription proceeds and cash position
The gross proceeds of the Subscription are expected to be
utilised as follows:
GBP5.0 million: Working capital requirements, discharging
existing creditors and transaction
expenses
GBP1.2 million: Ear-marked for the acquisition
of trading inventory (both stamps
and coins)
Following completion of the Proposed Transaction:
-- the Group's cash resources will be increased by approximately
GBP5.4 million after the expenses of the Proposed Transaction
(being approximately GBP0.3 million of share issue costs and GBP0.5
million of other related professional fees); and
-- the Group's total obligations to external debt finance
(comprising the Phoenix Debt) will be reduced to GBP10.0 million
(which sum will, absent any default under the Debt Facility
Restatement Agreement, not be repayable as to principal and
interest until the fifth anniversary of completion of the Proposed
Transaction).
The Circular will include the pro forma balance sheet of the
Group included in the Company's unaudited interims report and
accounts for the six months ended 30 September 2017, but further
extended to show the estimated impact of the Proposed Transaction
on the Group balance sheet, had it occurred on 30 September
2017.
Summary of principal agreements required to give effect to the
Proposed Transaction
Escrow and Framework Agreement
Each of the Subscription, the Debt Restructuring and the
Acquisition are inter-conditional, such that they will each only
become effective if all are completed simultaneously. The Escrow
and Framework Agreement governs how the completion of the
Subscription, the Debt Restructuring and the Acquisition will be
effected.
Under the terms of the Escrow and Framework Agreement, the
parties have agreed that on Admission (which must take place by 29
March 2018) and subject to the satisfaction of the steps and
conditions described in the Escrow and Framework Agreement, the
agreements relating to the Subscription, the Debt Restructuring and
the Acquisition, as further described below, will simultaneously
and irrevocably complete.
Further information on the terms of the Escrow and Framework
Agreement will be set out in the Circular.
Subscription Letter
Under the terms of the Subscription Letter, the Company has
conditionally agreed to issue the Subscription Shares to Phoenix UK
Fund at the Subscription Price, raising approximately GBP6.2
million for the Company. On completion of the Subscription, Phoenix
will own approximately 58.09 per cent. of the Enlarged Issued Share
Capital.
Completion of the Subscription is subject to the satisfaction of
certain conditions, including the passing of the Resolutions and
Admission. Completion is also subject to the Independent
Shareholders passing the Rule 9 Waiver Resolution for the purposes
of approving the waiver of any obligation on Phoenix UK Fund to
make a Rule 9 Offer as a result of its acquisition of the
Subscription Shares.
In addition, the Subscription Letter will only proceed to
completion if the Debt Restructuring and the Acquisition complete
simultaneously, in accordance with the terms of the Escrow and
Framework Agreement.
Under the terms of the Subscription Letter, Phoenix UK Fund will
have the right, for so long as it (and/or its associates) continues
to hold not less than 20 per cent. of the issued voting share
capital of the Company, to nominate a director to the Board.
Phoenix UK Fund has also made a commitment that, for so long as
the Ordinary Shares continue to be traded on AIM, it will procure
that a majority of directors on the Board from time to time are
independent of Phoenix UK Fund.
Further information on the terms of the Subscription Letter will
be set out in the Circular.
Debt Restructuring
The Debt Restructuring will be effected in accordance with the
terms of the Escrow and Framework Agreement and is conditional on
completion of the Subscription and the Acquisition. The primary
agreements relating to the Debt Restructuring comprise the RBS Debt
Assignment Agreements, the Supplemental Debenture, the SG Guernsey
Intercompany Indebtedness Assignment and the Debt Facility
Restatement Agreement, the principal terms of which will be as
follows:-.
(i) RBS Debt Assignment Agreements
Under the terms of the RBS Debt Assignment Agreements, on
completion of the Proposed Transaction, RBS will sell and assign
all of its right, title and interest in the RBS Debt to Phoenix UK
Fund and SGF as follows:
-- SGF Debt: GBP7.0 million in principal sum of the RBS Debt
will be acquired by SGF; and
-- Phoenix Debt: the balance of the RBS Debt, (up to GBP10.5
million in principal sum), will be acquired by Phoenix UK Fund.
To the extent that the RBS Debt at completion of the Proposed
Transaction exceeds GBP17.0 million, Phoenix UK Fund has agreed to
pay an additional sum to RBS of up to GBP500,000 for the
acquisition at par of the amount of any such excess. In the event
that Phoenix UK Fund makes such an additional payment, the Company
will reimburse Phoenix UK Fund by making a mandatory prepayment of
an amount equal to such additional payment and the Phoenix Debt
will be reduced by such amount accordingly.
Phoenix UK Fund (in its capacity as security agent on behalf of
Phoenix UK Fund and SGF as lenders) will also acquire all of the
existing security granted in favour of NatWest under the RBS Debt
Facility Agreement. Such security (as assigned to Phoenix UK Fund
pursuant to the RBS Debt Assignment) will continue to constitute
first ranking security over the business and assets of the Company
and certain operating companies within the Group.
Phoenix UK Fund will have the right to take such action as it
considers necessary under the Debt Facility Restatement Agreement
and/or in respect of the security interests assigned to it pursuant
to the RBS Debt Assignment (as the case may be) for the purposes of
preserving its position as a creditor in respect of the RBS Debt in
the administration, subsequent liquidation or other insolvency
process relating to SG Guernsey following completion of the RBS
Debt Assignment until such time as that process comes to a
close.
(ii) Supplemental Debenture
Phoenix UK Fund will also have the benefit of the Supplemental
Debenture which will create additional security over the business
and assets of the Company and certain companies within the Group
and, in particular, certain intellectual property rights within the
Group.
(iii) SG Guernsey Intercompany Indebtedness Assignment
Under the terms of the SG Guernsey Intercompany Indebtedness
Assignment, the SG Guernsey Intercompany Indebtedness will be
assigned to SGL by those other members of the Group to which such
indebtedness is owed.
Phoenix UK Fund will then pay GBP2.75 million to SGL as
consideration for the absolute assignment by SGL to Phoenix UK Fund
of all SGL's right title and interest in the SG Guernsey
Intercompany Indebtedness. Accordingly, Phoenix UK Fund will
receive such proceeds from the administration, liquidation or other
insolvency process of SG Guernsey as would otherwise be payable to
the Group by virtue of the assignment of the SG Guernsey
Intercompany Indebtedness.
SGL will then capitalise SGF for GBP2.75 million by way of a
subscription for shares, so as to provide SGF with the necessary
funds to acquire the SGF Debt from RBS.
(iv) Debt Facility Restatement Agreement
Under the terms of the Debt Facility Restatement Agreement,
Phoenix UK Fund, the Administrators, SGF, the Company and all other
obligors under the RBS Debt Facility Agreement will agree that on
and with effect from completion of the Proposed Transaction, the
terms of the RBS Debt Facility Agreement will be amended and
restated, such that:
-- absent any default under the Debt Facility Restatement
Agreement, the residual amount of the Phoenix Debt will be
repayable as to principal and all accrued interest on the fifth
anniversary of the Completion Date, or on such earlier date or
dates as the Company and Phoenix UK Fund may agree from time to
time;
-- interest on the Phoenix Debt will accrue at a rate of 5.0 per
cent. per annum but will not be payable until the expiry of the
term or earlier repayment or termination (interest will be
capitalised annually);
-- no interest will be payable on the SGF Debt;
-- Phoenix as lender may (in its absolute discretion) make
available a new uncommitted facility to SGL and The Fine Art
Auction Group Limited as borrowers, up to a maximum amount of
GBP5.0 million; and
-- the only financial covenants will be (i) a cash flow test and
(ii) an EBITDA test which will, in each case, be tested at the end
of each financial year, starting March 2019 with test hurdles of up
to a maximum amount of GBP2.5 million in year 5.
Further information on the terms of the RBS Debt Assignment, the
Supplemental Debenture, the SG Guernsey Intercompany Indebtedness
Assignment and the Debt Facility Restatement Agreement will be set
out in the Circular.
Inventory Acquisition Agreement
Phoenix UK Fund has separately reached agreement with the
Administrators for the Acquisition of certain trading inventory of
SG Guernsey (primarily comprising stamps and other
collectibles).
The completion of the Inventory Acquisition Agreement will be
governed by the terms of the Escrow and Framework Agreement and the
Acquisition is conditional on completion of the Proposed
Transaction.
Further information on the terms of the Inventory Acquisition
Agreement will be set out in the Circular.
Information on Phoenix UK Fund
Phoenix UK Fund is a Bahamian domiciled mutual fund with
approximately 145 underlying investors comprised of a mixture of
institutional and high net worth individuals. The investment
objective of Phoenix UK Fund is to deliver excellent long term
investment returns mainly from UK equities.
Phoenix UK Fund has assets of approximately GBP215 million under
management as at 31 January 2018 (being the latest practicable date
prior to the release of this announcement).
PAMP is the investment manager of Phoenix UK Fund.
Further details in relation to Phoenix UK Fund and PAMP
(including a statement of its intentions in relation to the Group
following completion of the Proposed Transaction, as required under
the Takeover Code) will be set out in the Circular.
Extraordinary General Meeting
An Extraordinary General Meeting of the Company will be convened
to be held at the Company's head office at 399 Strand, London WC2R
0LX as soon as reasonably practicable following the approval of the
Circular by the Panel. The notice of the Extraordinary General
Meeting will be set out at the end of the Circular.
At the Extraordinary General Meeting, the Resolutions necessary
to give effect to the Proposed Transaction will be proposed.
The Subscription Resolutions, which will be conditional on the
passing of the Rule 9 Waiver Resolution, will be proposed as
follows:-
-- Resolution 1 will be proposed as a special resolution to
increase the Company's authorised share capital to allow for the
issue of the Subscription Shares.
-- Resolution 2 will be proposed as a special resolution (and
will be conditional on the passing of Resolutions 1 and 3) to
empower the Directors to allot and issue the Subscription Shares
pursuant to the authority granted by Resolution 3 free of the
pre-emption rights contained in the articles of association of the
Company. The power granted by this resolution, if passed, will be
in addition to, and will not revoke or supersede, the power to
allot Ordinary Shares on a non pre-emptive basis granted to the
Directors at the annual general meeting of the Company held on 1
November 2017.
-- Resolution 3 will be proposed as an ordinary resolution (and
will be conditional on the passing of Resolution 1) to authorise
the Directors to allot and issue the Subscription Shares pursuant
to the Subscription. The authority granted by this resolution, if
passed, will be in addition to, and will not revoke or supersede,
the authority to allot Ordinary Shares granted to the Directors at
the annual general meeting of the Company held on 1 November
2017.
The Rule 9 Waiver Resolution, which will approve the granting of
the Rule 9 Waiver by the Panel, will be proposed as an ordinary
resolution and will require a simple majority of the votes cast to
be cast in favour, in order for it to be passed. The Rule 9 Waiver
Resolution will be decided on a poll. Only the Independent
Shareholders will be entitled to vote on the Rule 9 Waiver
Resolution.
Positive outcome for the Group and its Shareholders
The Directors believe that the Proposed Transaction, if
implemented, will help to create a stronger capital structure and
will provide the Company with a strategic partner that will assist
in enabling the execution of the Board's strategy to put Stanley
Gibbons back at the heart of worldwide philatelic and numismatic
trading. Accordingly, the Directors believe the Proposed
Transaction to be in the best interest of all those with an
economic interest in the Group.
The Company is not currently generating sufficient cash to
enable it to fund capital repayments due to RBS pursuant to the
terms of the RBS Debt Facility Agreement. Additionally, there have
been a number of historic breaches of the covenants and, though
some have been waived by RBS, the existing facilities are currently
in default and therefore repayable on demand.
Based on projected cash flows, and without taking into account
the requirement to repay the indebtedness owed to RBS under the RBS
Debt Facility Agreement before its maturity date at the end of May
2018, the Board believes the Company requires additional capital in
the short term of approximately GBP5.0 million.
If the Proposed Transaction is not implemented, and absent
alterative solutions, the Group would not have the funding it needs
to meet its obligations under the RBS Debt Facility Agreement and
its trading activities.
Completion of the Proposed Transaction will:
-- result in reduction of the Group's overall external debt
finance to GBP10.0 million and a reduced interest and covenant
burden for the Group;
-- provide working capital headroom to enable the Board to
complete the turnaround strategy pursued since January 2016;
and
-- secure for the Group a strategic partner with a history of
investing in brand-led consumer businesses.
Accordingly, Shareholders should be aware that if the
Subscription Resolutions and the Rule 9 Waiver Resolution are not
approved by the requisite number of Shareholders or the Proposed
Transaction does not proceed for any other reason, the Company will
be required to urgently secure financing from alternative sources
which may not be forthcoming. The Company remains in default of all
of its facilities and it may not be possible to secure alternative
finance and, even were it to be possible, will not, in the
Directors opinion, result in a more favourable outcome for
Shareholders. In that scenario, the Company could have insufficient
working capital to continue trading as a going concern, which would
be likely to have a significant negative impact on the Company's
existing equity share capital.
Definitions
The following definitions apply throughout this announcement
unless the context otherwise requires:
"Acquisition" the acquisition by Phoenix UK Fund of certain
trading inventory of SG Guernsey (primarily comprising stamps and
other collectibles) on and subject to the terms of the Inventory
Acquisition Agreement
"Administrators" Nick Vermeulen and Zelf Hussain of PricewaterhouseCoopers CI LLP and PricewaterhouseCoopers LLP respectively in their respective capacities as joint administrators of SG Guernsey
"Admission" admission of the Subscription Shares to trading on
AIM becoming effective in accordance with the AIM Rules
"AIM" the market of that name operated by the London Stock
Exchange
"AIM Rules" the AIM Rules for Companies published by the London
Stock Exchange from time to time
"Circular" the circular, which will be posted to Shareholders as
soon as reasonably practicable following the granting of the Rule 9
Waiver by the Panel
"Company" or "Stanley Gibbons" The Stanley Gibbons Group Plc
"Directors" or "Board" the directors of the Company as at the
date of this announcement whose names will be set out in the
Circular, or any duly authorised committee thereof
"Debt Facility Restatement
Agreement" the deed of amendment and restatement pursuant to
which the RBS Debt Facility Agreement is amended and restated on
and with effect from completion of the RBS Debt Assignment,
including the amended and restated RBS Debt Facility Agreement
attached thereto, the principal terms of which will be set out in
the Circular
"Debt Restructuring" the transactions contemplated by the Debt
Facility Restatement Agreement, the RBS Debt Assignment and the SG
Guernsey Intercompany Indebtedness Assignment
"Enlarged Issued Share Capital" the 426,916,643 Ordinary Shares
in issue immediately following completion of the Subscription and
Admission, (which, for the avoidance of doubt, assumes no further
issuances of Ordinary Shares other than as outlined in this
Document and excludes the exercise of any outstanding options over
Ordinary Shares)
"Escrow and Framework Agreement" an agreement dated 23 February
2018 and made between (1) the Company and other members of the
Group, (2) SG Guernsey, (3) Phoenix UK Fund, (4) the Administrators
(5) RBS and (6) NatWest, setting out the terms agreed for the
completion of the Subscription, the Debt Restructuring and the
Acquisition, the principal terms of which will be set out in the
Circular
"ESCL" Evolution Securities China Limited
"Extraordinary General Meeting" the extraordinary general
meeting of the Company, notice of which will be set out at the end
of the Circular
"finnCap" finnCap Ltd, financial adviser, nominated adviser,
broker and (for the purposes of rule 3 of the Takeover Code) rule 3
adviser to the Company
"Group" the Company and its existing subsidiaries and subsidiary
undertakings
"Independent Shareholders" the Shareholders other than Phoenix
UK Fund and persons acting in concert with it
"Inventory Acquisition Agreement" the agreement proposed to be
entered into between Phoenix UK Fund and the Administrators
relating to the Acquisition, the principal terms of which will be
set out in the Circular
"London Stock Exchange" London Stock Exchange plc
"NatWest" National Westminster Bank plc, the lender of record in
respect of the RBS Debt as at the date of this announcement
"Ordinary Shares" ordinary shares of 1 pence each in the capital
of the Company
"PAMP" Phoenix Asset Management Partners Limited, the investment
manager to Phoenix UK Fund, a company incorporated in England &
Wales with registration number 03514660
"Phoenix Debt" that portion of the RBS Debt to be acquired by
Phoenix UK Fund pursuant to the RBS Debt Assignment, being the
whole of the RBS Debt less an amount equal to the SGF Debt (and,
following completion of the Proposed Transaction, comprising a
principal sum of up to GBP10.5 million)
"Panel" the Panel on Takeovers and Mergers
"Person" a person (including an individual, partnership,
unincorporated syndicate, limited liability company, unincorporated
organisation, trust, trustee, executor, administrator, or other
legal representative)
"Phoenix UK Fund" Phoenix UK Fund Ltd, a company incorporated in
The Commonwealth of the Bahamas with registration number
72,182B
"Proposed Transaction" together the Subscription, the Debt
Restructuring and the Acquisition
"RBS" The Royal Bank of Scotland plc, the Company's bankers and
arranger of and agent for NatWest in respect of the RBS Debt (and
save where the context otherwise requires, references to RBS in
this announcement are references to both RBS and NatWest)
"RBS Debt" the outstanding indebtedness owed to NatWest by the
Group immediately before completion of the Proposed Transaction
(expected to be approximately GBP17.0 million)
"RBS Debt Assignment" the proposed sale and assignment of the
RBS Debt by NatWest, (i) as to an amount equal to the Phoenix Debt
to Phoenix UK Fund and (ii) as to an amount equal to the SGF Debt
to SGF
"RBS Debt Assignment Agreements" the agreements to give effect
to the RBS Debt Assignment, the principal terms of which will be
set out in the Circular
"RBS Debt Facility Agreement" the existing term and revolving
facilities agreement between, among others, the Company, NatWest
and RBS dated 26 September 2014 as amended and restated pursuant to
an amendment and restatement agreement dated 31 March 2016 (as
subsequently amended and/or restated from time to time)
"Resolutions" the resolutions to be proposed at the
Extraordinary General Meeting
"Rule 9" Rule 9 of the Code
"Rule 9 Offer" a general offer to acquire the entire issued
share capital of the Company as required by Rule 9
"Rule 9 Waiver" the waiver to be granted by the Panel of the
obligation which might otherwise arise under Rule 9 requiring
Phoenix UK Fund or any persons acting in concert with it to make an
offer for the issued share capital of the Company as a result of
the Subscription, subject to the passing of the Rule 9 Waiver
Resolution
"Rule 9 Waiver Resolution" the ordinary resolution proposed for
consideration by the Independent Shareholders to waive the
requirement for Phoenix UK Fund or any persons acting in concert
with it to make a Rule 9 Offer that would otherwise arise following
the Subscription, being resolution 4 as set out in the notice of
the Extraordinary General Meeting
"SG Guernsey" Stanley Gibbons (Guernsey) Limited (in administration)
"SG Guernsey Intercompany
Indebtedness" the outstanding inter-company balances (amounting
to approximately GBP6.5 million as at the date of this
announcement) owed by SG Guernsey to other members of the Group
"SG Guernsey Intercompany
Indebtedness Assignment" the proposed sale and assignment of the
SG Guernsey Intercompany Indebtedness to SGL and the subsequent
onward sale and assignment of such indebtedness to Phoenix UK
Fund
"SGF" Stanley Gibbons Finance Limited, a wholly owned subsidiary
of the Company incorporated solely for the purposes of giving
effect to the Debt Restructuring, incorporated in England and Wales
with company number 11180645
"SGF Debt" that portion of the RBS Debt to be acquired by SGF
pursuant to the RBS Debt Assignment, in the principal sum of GBP7.0
million
"SGL" Stanley Gibbons Limited, a wholly owned subsidiary of the
Company
"Shareholder(s)" holders of Ordinary Share(s) from time to
time
"Subscription" the conditional subscription for the Subscription
Shares by Phoenix UK Fund on and subject to the terms and
conditions of the Subscription Letter
"Subscription Letter" the subscription letter dated 23 February
2018 entered into between the Company and Phoenix UK Fund pursuant
to which Phoenix UK Fund has conditionally agreed to subscribe for
the Subscription Shares, the principal terms of which will be set
out section in the Circular
"Subscription Price" GBP0.025 per Subscription Share, (or such
lower price per Subscription Share as results from dividing an
aggregate subscription price of GBP6,200,000 by the number of
Ordinary Shares which if issued to Phoenix UK Fund would result in
it holding a minimum of 58 per cent. of the Enlarged Issued Share
Capital at Admission)
"Subscription Resolutions" the resolutions required to grant the
Board the requisite authority to allot the Subscription Shares to
Phoenix UK Fund on completion of the Subscription, being
resolutions 1, 2 and 3 as set out in the notice of the
Extraordinary General Meeting
"Subscription Shares" 248,000,000 new Ordinary Shares to be
issued at the Subscription Price (or, as the case may be, such
greater number of Ordinary Shares as shall result in Phoenix UK
Fund holding a minimum of 58 per cent. of the Enlarged Issued Share
Capital at Admission)
"Supplemental Debenture" the supplemental English law debenture
to be made between certain members of the Group as chargors and
Phoenix UK Fund as security agent
"Takeover Code" or "Code" the City Code on Takeovers and Mergers
(as amended from time to time)
"United Kingdom" or "UK" the United Kingdom of Great Britain and
Northern Ireland, its territories and possession, and all areas
subject to its jurisdiction
A reference to "GBP" is to pounds sterling, being the lawful
currency of the UK.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCEAKADAAXPEEF
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February 23, 2018 02:00 ET (07:00 GMT)
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