TIDMREAC
RNS Number : 9995Z
React Energy PLC
23 September 2015
23 September 2015
REACT Energy plc
("REACT" or the "Company")
Publication of Circular and Notice of Extraordinary General
Meeting
Further to the announcement on 15 July 2015 in which it
announced the Company's exit from examinership, REACT Energy plc
(AIM:REAC), the energy infrastructure developer and operator which
focuses on the production of clean energy in the UK and Ireland,
announces that the circular relating to the Waiver of Rule 9 (the
"Circular") is being sent to shareholders today, which sets out in
more detail the background to the funding provided by the Concert
Party and details of the Waiver of Rule 9 of the Takeover Rules.
All capitalised terms in this announcement are as defined in the
Circular.
The Circular contains a notice of the Extraordinary General
Meeting (the "EGM") to approve the Whitewash Waiver. The General
Meeting will be held at 11.00 a.m. on Friday 16 October 2015 at The
Cork Airport Hotel, Cork, Ireland.
The Circular is available for inspection on the Company's
website: www.reactenergyplc.com.
1. Background
The Company's shares were suspended from trading on AIM from 1
December 2014 at the Company's request pending a clarification of
the Company's financial position.
On 13 May 2015 the Company announced that it had made a petition
pursuant to the Act to the High Court in Ireland to appoint an
Examiner to the Company. An Examiner was appointed by the Court on
20 May 2015.
The decision to seek examinership followed the suspension of
funding discussions with a strategic investor which resulted from a
dispute with the landlord on the Enfield site, related difficulties
in financing the repowering of the Newry site and actions taken by
certain creditors of REACT and related companies.
An Independent Accountants' Report from Grant Thornton on REACT
and related companies concluded that it was possible for a
sustainable and profitable business to emerge from the Examinership
process based on a restructuring of REACT and related companies.
Altair, an existing loan note holder supported REACT throughout the
Examinership process, and together with a third party strategic
investor indicated that they would be prepared to invest in REACT
to facilitate a scheme of arrangement for the restructured
business.
REACT also announced that as part of the Examinership process it
had issued a loan note to Altair for up to EUR 500,000 ("Further
Altair Loan Note"). The proceeds of the loan note were used to fund
the Examinership process.
The High Court approved the Scheme of Arrangement on 14 July
2015 which was followed by the exit of the Company from the
Examinership process on 25 July 2015, the Effective Date. The
Company announced on the 15 July 2015 the issue of GBP1,000,000
(before expenses) of a Secured Loan Facility to fund on-going
working capital requirements.
Following the approval of the Scheme creditors were issued with
37,470,972 new Ordinary Shares in the Company at a price of GBP0.11
each (being the closing price of an Ordinary Share on the 1
December 2014, the date of suspension of the Company's Ordinary
Shares from AIM), which after issue amounted to circa 55% of the
enlarged issued share capital. This was as a result of the
conversion of EUR5.7 million of debt into equity. The 37,470,972
new Ordinary Shares were issued to the relevant creditors and are
held by a Trustee on their behalf. The Trustee has entered into a
'Lock-in' restriction on behalf of the creditors, whereby they are
unable to dispose of the new Ordinary Shares that were received
pursuant to the Scheme for a period of one year from the date of
Admission. The new Ordinary Shares were admitted to trading on AIM
on 31 July 2015.
2. Key Elements of the Funding Proposals
The Company had been actively engaged in discussions with
potential providers of finance including with EcoFinance a group
which sources finance for renewable energy projects. As announced
on 8 June 2015, the Company signed a conditional facility letter
for the Secured Loan Facility with EcoFinance the drawdown of which
was subject to certain conditions precedent being met under the
Loan Facility, the Scheme being approved by shareholders and
creditors and ultimately the High Court.
Summary of the EcoFinance proposal
EcoFinance is a privately owned company registered in England.
It was incorporated in May 2015 as a special purpose entity
specifically for the purposes of entering into the proposed REACT
transaction. It enjoys relationships with a number of co-investment
partners both in the UK and globally.
The Secured Loan Facility comprises a five-year term loan of
GBP1,000,000 at 15% per annum fixed rate of interest, payable
monthly in arrears. The net proceeds of the Secured Loan Facility
will be utilised for corporate development and general working
capital purposes. The Secured Loan Facility is to be repaid by way
of a bullet repayment of capital (and any accrued interest) on
before the anniversary of 60 months from the date of drawdown of
the Secured Loan Facility.
Equity Kicker: an exercisable right is attached to the Secured
Loan Facility whereby 60 days from the drawdown under the Secured
Loan Facility, EcoFinance has the right to an amount of fully paid
new Ordinary Shares in the Company. The monetary value of the
exercisable right will be determined by the following formula:
-- 9 million x (Average Share Price minus 10p), where the
Average Share Price is the arithmetic average of the Company's
closing share price on each of the 60 days following
re-commencement of trading in the Company's shares. The value of
this right has a cap of GBP600,000 and a floor of GBP200,000. The
maximum number of shares issuable under this mechanism is 3,529,412
new Ordinary Shares.
-- 35,300,000 Warrants have been issued to Alchemy Capital, a
company related to the EcoFinance on drawdown of the Secured Loan
Facility, subject to any necessary shareholder and other regulatory
requirements. These Warrants entitle the holders to subscribe for
new Ordinary Shares at an exercise price of 10p per share. The
Warrants are assignable and capable of being exercised for a period
of seven years from the date on which the Secured Loan Facility is
drawn down.
Summary of Altair financing
Altair provided funding to REACT by way of a loan agreement to
finance the Examinership process, which was announced on 13 May
2015. The existing secured debt held by Altair, comprising the 9%
Secured Loan Note of GBP1.5 million issued in 2014 and the
Examinership financing facility of EUR500,000, was refinanced by
way of a new 7.5% GBP2 million Convertible Secured Loan Note
("CSLN") and is secured by the same security package granted in
favour of EcoFinance. This is governed by an inter creditor deed
under which the SLF security plus interest and costs shall rank in
priority to the CSLN security plus interest and costs. Under the
terms of the CSLN, Altair has the right to convert up to GBP1
million into new Ordinary Shares at GBP0.10p. Altair has also been
granted an exercisable right in the form of an equity kicker of up
to 3,529,412 new Ordinary Shares on the same basis as EcoFinance as
set out above.
The Company has also issued 3,150,000 Warrants to Origen Capital
Partners LLP, an entity related to Altair, on drawdown of the SLF.
These Warrants entitle the holders to subscribe for new Ordinary
Shares at an exercise price of GBP0.10 per share. These warrants
are assignable and capable of being exercised for a period of seven
years from the date on which the SLF is drawn down.
EcoFinance and Altair have entered into a separate agreement in
relation to financing provided to the Company whereby EcoFinance
has granted to Altair an option to acquire the benefit and security
of the GBP1,000,000 SLF. This is a one-year option and the price of
the option is a 5% premium on the capital amount.
3. Use of Proceeds
The net proceeds from the Fundraising will be used to fund
general working capital across the Group. The Directors believe
that the Fundraising will provide the Company with adequate
resources to develop a plan to enhance the value of its principal
assets. Development of, and revenue generation from, the principal
assets of the Company will require additional financing which is
expected to be sourced in due course.
4. Current and Potential Shareholding of the Concert Party
The Concert Party currently holds 204,545 Ordinary Shares
representing 0.3 per cent. of the Ordinary Shares currently in
issue. As described above, as a result of the Refinancing
Documents, it is expected that the Concert Party, could potentially
hold up to 55,713,369 new Ordinary Shares in the Company,
representing 45.06 per cent. of the Enlarged Share Capital (as
enlarged pursuant to the Refinancing Documents).
Number % of Issued Number of Number Total Number % of
of Ordinary Share shares to of Warrants of Ordinary Enlarged
Shares Capital be issued issued Shares Issued
(as at under the held post Share
the date Equity Kicker issue of Capital
of this and conversion Ordinary assuming
Document) of Altair Shares exercise
GBP1 million under the of all
loan at Equity Warrants
10p Kicker and conversion
and exercise of Farmers
of all loan
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