TIDMAST
RNS Number : 6982D
Ascent Resources PLC
02 February 2015
Ascent Resources PLC
("Ascent" or the "Company")
Variation of Terms of 2013 and 2014 Convertible Loan Notes
Approval of the Waiver by the Takeover Panel
Notice of General Meeting
Further to the announcement of 24 December 2014, Ascent
announces that it has today entered into a refinancing of the 2013
Convertible Loan Notes and the 2014 Convertible Loan Notes with
Henderson, the majority holder of the Loan Notes.
Variation of Terms of 2013 and 2014 Convertible Loan Notes
To date GBP4.95 million has been drawn under the 2013 CLNs and
GBP3.5 million has been drawn under the 2014 CLNs. The remaining
GBP0.5 million as yet undrawn under the 2014 CLNs is expected to be
drawn in the next few weeks. In total, including accrued interest,
some GBP10 million in aggregate was due for repayment under the
2013 and 2014 CLNs, in part on 23 December 2014 and in part on 31
January 2015.
In return for extending the maturity date of the Loan Notes and
terminating the accrual of further interest, the board of Ascent
has agreed to adjust the conversion price in respect of both the
2013 and 2014 Convertible Loan Notes from 0.5p and 0.2p
respectively to 0.1p for all Loan Notes.
Rule 9 Whitewash
On a fully diluted basis, and assuming full conversion of the
Loan Notes currently held by them, Henderson is currently
interested in 71.0% of the total voting rights of the Company.
Following the variations to the Loan Notes made today, Henderson
will, on conversion of the Loan Notes held by them, on a fully
diluted basis, assuming full draw down of the 2014 CLNs and
assuming only Henderson convert, be interested in 88.6 per cent. of
the total voting rights of the Company, which, without a waiver of
the obligations under Rule 9 of the Takeover Code, would oblige
Henderson to make a general offer to Shareholders under Rule 9 of
the Takeover Code. The Takeover Panel has agreed, however, to waive
this obligation subject to Independent Shareholder consent being
obtained to approve the Waiver.
Circular
A Circular will shortly be posted to shareholders, the purpose
of which is, amongst other things, to provide Shareholders with
details of the amendments to the Loan Notes, to explain the
background to the Company's current position, and to explain why
the Independent Directors consider that the terms of the
Supplemental Loan Note Instruments giving effect to the amendments
and the Waiver are fair and reasonable and in the best interests of
Independent Shareholders generally and the Company as a whole.
Extracts from the Circular can be found below.
Notice of General Meeting
Contained in the Circular is a notice of general meeting of
Ascent to be held on 19 February 2015 at 10.30 a.m. at the offices
of finnCap Limited, 60 New Broad Street, London EC2M 1JJ.
Other
Unless otherwise defined, all capitalised terms in this
announcement shall have the meaning given to them in the Circular,
which can be found on the Company's website
www.ascentresources.co.uk.
Enquiries:
Ascent Resources PLC 0207 251 4905
Clive Carver, Chairman
Len Reece, CEO
finnCap Limited, Nominated Adviser 0207 220 0500
Charlotte Stranner
The following text has been extracted from the circular:
1. Introduction
I am writing in connection with the 2013 Convertible Loan Notes
and the 2014 Convertible Loan Notes currently in issue and in
particular to set out certain resolutions your Board is
recommending to shareholders which are required to implement the
terms of an agreement entered into between the Company and
Henderson, which holds some 97.1 per cent. of the Loan Notes in
issue, on 2 February 2015.
In summary, a repayment of GBP3.7 million (including accrued
interest) in respect of the 2014 Loan Notes became due on 23
December 2014 and remains outstanding. Repayment of a further
GBP5.8 million (including accrued interest) in respect of the 2013
Loan Notes became due on 31 January 2015. The Company does not have
the funds required to repay the amounts due.
Your Board has therefore agreed, in return for extending the
maturity date of the Loan Notes and terminating the accrual of
interest on them, to adjust the conversion price applicable to both
the 2013 and 2014 Loan Notes from 0.5p and 0.2p respectively to
0.1p for all of the Loan Notes. Further details of the variations
made to the Loan Notes are set out below in paragraph 4 of this
letter.
On a fully diluted basis, and assuming full conversion of the
Loan Notes held by them, Henderson was previously interested 71.0%
of the total voting rights of the Company. Following the variations
to the Loan Notes as set out below in paragraph 4 of this letter,
Henderson will, on conversion of the Loan Notes held by them, on a
fully diluted basis, assuming full draw down of the 2014 CLNs and
assuming only Henderson converts, be interested in 88.6 per cent.
of the total voting rights of the Company, which, without a waiver
of the obligations under Rule 9 of the Takeover Code, would oblige
Henderson to make a general offer to Shareholders under Rule 9 of
the Takeover Code. The Takeover Panel has agreed, however, to waive
this obligation subject to Independent Shareholder consent being
obtained to approve the Waiver.
2 Background
2013 CLNs
On 24 December 2012 Henderson agreed to subscribe for up to
GBP5.5 million of convertible 9 per cent. loan notes, convertible
at any time at the discretion of the holder into Ordinary Shares at
200 Ordinary Shares per GBP1 principal of loan note, an effective
conversion price of 0.5p per Ordinary share. A first tranche of
GBP3 million was drawn immediately and the remaining GBP2.5 million
was made available to all Shareholders at that time by way of an
open offer giving Shareholders the opportunity to subscribe for
2013 CLNs on identical terms to Henderson, or to subscribe for new
Ordinary Shares at 0.5 pence per Ordinary Share.
Of the aggregate GBP5.5 million raised from the issue of the
2013 CLNs and the open offer referred to above, Henderson
subscribed GBP4.8 million in the form of 2013 CLNs and other
Shareholders subscribed GBP0.7 million of which GBP0.3 million was
in the form of 2013 CLNs and the remaining GBP0.4 million was in
the form of new Ordinary Shares. Clive Carver, Chairman, and Len
Reece, CEO, subscribed GBP17,500 and GBP63,644 in the form of 2013
CLNs respectively.
2014 CLNs
In February 2014, following further Petišovci project delays
during 2013, the Company agreed with Henderson to create a new GBP5
million class of 9 per cent. convertible loan notes, convertible at
any time at the discretion of the holder, into Ordinary Shares at
100 Ordinary Shares per GBP1 principal of loan note, an effective
conversion price of 1p per Ordinary share.
The first GBP2 million available under the 2014 CLNs was drawn
immediately with the balance intended for sale to independent third
party investors, with the intention that the pricing of all the
2014 CLNs would be reset to the lowest price paid by these new
investors.
GPS Subscription
On 16 May 2014 Ascent announced a conditional subscription for
new Ordinary Shares by GPS of GBP11.7 million at a price of 0.8p
per Ordinary Share at the same time as an associated redemption and
conversion of the 2013 and 2014 Convertible Loan Notes. Also
announced was an additional subscription by GPS of a further GBP3.3
million, subject to conditions relating to the performance of the
Petišovci project and the adjacent methanol plant in the period to
31 December 2014.
However, in July 2014, Ascent announced that it had been
informed by GPS that GPS' joint venture partner had not placed GPS
in funds to complete the initial subscription and accordingly the
planned conversion and redemption of the 2013 and 2014 Convertible
Loan Notes would not take place.
On 8 September 2014, by which time it had become clear that it
would not be possible to secure investment from new third party
subscribers for the GBP3 million balance undrawn under the 2014
Convertible Loan Note Instrument , the Company agreed with
Henderson a variation to the terms of the 2014 Convertible Loan
Note Instrument whereby Henderson agreed to subscribe for a further
GBP2 million in principal of 2014 CLNs convertible into Ordinary
Shares at 500 Ordinary Shares per GBP1 principal of loan note, an
effective conversion price of 0.2p per Ordinary Share.
Additionally, Henderson was granted security for all amounts due to
Henderson at any time in connection with the Loan Notes in the form
of an equitable mortgage over the shares in Ascent Slovenia
Limited.
As part of the variation of the terms of the 2014 Convertible
Loan Note Instrument the Company was given until 23 December 2014
to find alternative funding to repay the GBP2 million drawn in
September 2014 in order to avoid the conversion price of the first
GBP2 million of 2014 CLNs drawn down in February 2014 being rebased
from 1p to 0.2p, which would have otherwise occurred under the
terms of the original instrument.
Whilst there are a number of ongoing discussions relating to
farm-ins to the Petišovci project none of these are likely to be
completed until the IPPC permit is received. Given the uncertainty
on the timing of the permit and as the Company has not been able to
complete a funding transaction with GPS, the Company has been
unable to raise such alternative funding to repay the GBP2 million
drawn in September 2014.
3 Current position
During the past two years we have focused on:
-- disposing of assets in Hungary, the Netherlands, Switzerland
and Italy to allow the available funding to be concentrated on the
Company's Petišovci project;
-- renegotiating the agreements underpinning the Petišovci
project to bring them into line with best International
practice;
-- obtaining project funding to develop the first phase of the
Petišovci project; and
-- securing the all-important Integrated Pollution Prevention
& Control ("IPCC") permit to allow development of the Petišovci
project to commence.
Asset disposals
The disposals of our assets in Hungary, the Netherlands and
Switzerland were completed quickly and without incident.
In Italy the position was very different. After a marketing
exercise it became clear that Ascent would have to pay a buyer to
take ownership of the assets. An agreement was therefore completed
with GPS under which GPS would acquire Ascent's Italian subsidiary
Ascent Italia, as part of which Ascent issued 32,126,793 Ordinary
Shares to GPS fully paid and GPS assumed all future work
commitments and financial liabilities in relation to Ascent
Italia.
Within a few months it became clear that Ascent was potentially
in breach of warranties given to GPS concerning the validity of
certain licences in which Ascent Italia was interested.
Accordingly, a settlement was reached with GPS whereby Ascent
issued a further 260,000,000 Ordinary Shares to GPS in return for a
full waiver from GPS of any and all claims or potential claims by
GPS under the Ascent Italia SPA.
Agreements in relation to the Petišovci project
In October 2013 a new suite of agreements to international
standards was entered into with our partners, which should allow
the project to move ahead at a faster pace and which we hope will
also facilitate the introduction of new capital.
Project funding
To date we have not been able to secure project funding. The
principal issues being the uncertainty on the timing of the
relevant permits and also nervousness on the part of one potential
lender in relation to the duration of the well tests undertaken
when Pg10 and Pg11A were first drilled.
We continue to discuss ways of introducing project funding to
the project with two major banks that are supportive and have
demonstrated a commitment to the project. At the date of this
document we have not yet found a mechanism for turning that support
into a workable funding proposal. In any event project funding will
be conditional on securing the required IPPC permit, an update in
relation to which is provided below.
IPPC permit
We require the IPPC permit in order to commence work at
Petišovci. We were pleased to announce on 24 December 2014 that the
Slovenian authorities had commenced a 30-day period of public
consultation in respect of the permit. The public consultation
period has now completed. Ascent will be shown any objections
lodged and will have an opportunity to respond. Thereafter it will
be for the Slovenian authorities to decide how to proceed.
GPS Update
Since the failure of GPS to honour their commitment to invest
GBP11.7 million in Ordinary Shares during the summer of 2014 we
have been working with them to try to find an alternative way
forward. However, GPS has informed the Company that it has
experienced additional significant issues as the result of its
acquisition of Ascent Italia which now makes the completion of any
alternative transaction highly unlikely.
Whilst your Board does not believe the Company has any further
liability to GPS in respect of Ascent Italia, it is of the view
that pursuing GPS through the UK and Italian courts to seek redress
for GPS's failure to perform under the Subscription Agreement does
not makes commercial sense at this time.
4 Terms of the amendments to the 2013 CLNs and 2014 CLNs
To date GBP4.95 million has been drawn under the 2013 CLNs and
GBP3.5 million has been drawn under the 2014 CLNs. The remaining
GBP0.5 million as yet undrawn under the 2014 CLNs is expected to be
drawn in the next few weeks. In total, including accrued interest,
some GBP10 million in aggregate is or was due for repayment under
the 2013 and 2014 CLNs, in part on 23 December 2014 and in part on
31 January 2015.
As referred to above, the Company's ability to raise additional
finance to repay the 2013 CLNs and 2014 CLNs in the absence of IPPC
permit and project funding is extremely limited. Accordingly on 2
February we entered into a refinancing of the 2013 CLNs and 2014
CLNs on terms agreed with Henderson, the holder of GBP8,193,917 in
principal amount of the aggregate GBP8,451,907 in principal amount
of Loan Notes currently in issue, as follows:
-- the 2013 Convertible Loan Note Instrument and the 2014
Convertible Loan Note Instrument have been amended to provide a
maturity date of either 19 November 2015 or, if earlier, the
occurrence of a Liquidity Event;
-- the Loan Notes have an effective conversion price equivalent
to 0.1p per Ordinary Share such that the holders of Loan Notes
(assuming full draw down of the 2014 CLNs and assuming all Loan
Note holders convert) will on conversion hold some 87.3 per cent.
of the enlarged share capital of the Company on a fully diluted
basis;
-- the Loan Notes have ceased to accrue interest as from and
including 1 February 2015 and no interest payments in respect of
interest already accrued will be made until the Loan Notes are
redeemed; and
-- no further adjustments to the effective conversion price will
be permitted, unless the Company adjusts the nominal value of its
Ordinary Shares.
Henderson holds 95 per cent. of the 2013 CLNs and 100 per cent.
of the 2014 CLNs and on 2 February 2015 approved the loan note
holder resolutions that were required to amend the 2013 CLNs and
2014 CLNs as described above. The other holders of 2013 CLNs are
accordingly now subject to the same changes and as such, other
holders of 2013 CLNs are no longer able to seek repayment of the
2013 CLNs held by them until the new maturity date described
above.
Under the terms of the 2013 and 2014 Convertible Loan Note
Instruments as originally drawn, holders of Loan Notes were
protected in the event that a general offer was made for the
Company which the Loan Note holders were not able to accept because
the Directors did not have the authority to allot and issue new
Ordinary Shares were the Loan Note holders to convert the Loan
Notes held by them, or where conversion could take place for any
other reason. In such circumstances there was a provision in the
2013 and 2014 Convertible Loan Note Instruments whereby the Loan
Note holders were entitled to receive a repayment from the Company
in cash equal to the amount that they would have received under the
general offer had a conversion of the Loan Notes taken place.
As part of the amendments made to the Loan Notes on 2 February
2015, your Board has agreed an extension to that protection to
cover all situations where, should the Independent Shareholders
vote against the Proposals or conversion of the Loan Notes is not
possible for any legal or regulatory reason, the amount payable to
Loan Note holders on a Liquidity Event will be three times the
principal value of the Loan Notes plus accrued interest.
This approximates to the change in the blended effective
conversion rate of the Loan Notes, which was prior to 3 February
2015 approximately 0.3 pence and is now 0.1 pence.
5. Rule 9 Whitewash
The Takeover Code governs, inter alia, transactions which have
as their objective or potential effect obtaining (directly or
indirectly) obtaining or consolidating control of a company to
which the Takeover Code applies. Under Rule 9 of the Takeover Code,
any person who acquires, whether by a series of transactions over a
period of time or not, an interest in shares (as defined in the
Takeover Code) which, taken together with shares in which persons
acting in concert with him are interested, carry 30 per cent. or
more of the voting rights of a company which is subject to the
Takeover Code, is normally required to make a general offer to all
the remaining shareholders of the relevant company to acquire their
shares.
Similarly, Rule 9 of the Takeover Code also provides that when
any person, together with persons acting in concert with him, is
interested in shares which, in aggregate, carry more than 30 per
cent. of the voting rights of such company, but does not hold
shares carrying 50 per cent. or more of such voting rights, an
offer obligation will arise if an interest in any other shares
carrying voting rights is acquired from non-members of the
group.
Rule 9 of the Takeover Code further provides, among other
things, that where any person who, together with persons acting in
concert with him, holds over 50 per cent. of the voting rights of a
company, no obligations normally arise from acquisitions by any
member of the concert party.
An offer under Rule 9 must be in cash and must be at the highest
price paid by the person required to make the offer, or any person
acting in concert with him, for any interest in shares of the
company in question during the 12 months prior to the announcement
of the offer.
Potential interests in Ordinary Shares of Henderson following
the amendments to the terms of the 2013 and 2014 Convertible Loan
Note Instruments
Following conversion of the Loan Notes (assuming full draw down
of the 2014 CLNs and assuming only Henderson convert), and assuming
no disposals of Ordinary Shares by Henderson and no further issues
of Ordinary Shares by the Company in the meantime, the interests in
Ordinary Shares of Henderson and the percentage of the voting
rights in the Company attributable to such interests, assuming no
other party subscribes for Ordinary Shares under Options or
warrants, will be 9,903,618,084 Ordinary Shares, representing
approximately 88.6 per cent. of the total voting rights of the
Company at that time. This, without a waiver of the obligations
under Rule 9 of the Takeover Code, would oblige Henderson to make a
general offer to Shareholders under Rule 9 of the Takeover Code.
The Takeover Panel has agreed, however, to waive the obligation on
Henderson to make a general offer that would otherwise arise as a
result of the conversion of the Loan Notes taking Henderson's
holding to more than 30 per cent. of Ordinary Shares,
subject to approval on a poll by the Independent Shareholders of
the Whitewash Resolution as set out in the Notice.
The Waiver described in the Whitewash Resolution applies only in
respect of increases in the percentage interest of Henderson over
Henderson's current interest in Ordinary Shares resulting from the
conversion of the Loan Notes and not in respect of other increases
in Henderson's interests in Ordinary Shares. Henderson and holders
of 2013 Convertible Loan Notes are not allowed to vote on the
Whitewash Resolution.
Unless the Whitewash has been approved by Independent
Shareholders or unless Henderson makes a successful takeover offer
as required by the Takeover Code, Henderson will not be able to
convert the Loan Notes held by them to the extent that as a result
of such conversion, Henderson would hold 30 per cent. or more of
the total voting rights of the Company.
Shareholders should be aware that if the Resolutions are passed
and Henderson converts all of the Loan Notes held by them,
Henderson will have a direct interest in more than 50 per cent. of
the voting rights of the Company, and will be able to increase
their aggregate interest in the Company without incurring any
obligation under Rule 9 of the Takeover Code to make a general
offer to all Shareholders to acquire their shares in the Company.
However, Shareholders should also be aware that if the Resolutions
are passed, Henderson will not be restricted from making an offer
for the Company.
The intentions of Henderson
Henderson have confirmed to the Company that they are not
proposing, following any increase in their percentage interest in
Ordinary Shares or voting rights as a result of any conversion of
the Loan Notes to seek any change in the composition of the Board
or the general nature of the Company's business.
6. Related Party Transaction
Henderson is a substantial shareholder in Ascent, holding 12.7
per cent. of the voting rights of the Company and as such is
considered to be a related party of the Company as defined by the
AIM Rules. The amendments to the Loan Notes therefore constitute a
related party transaction pursuant to AIM Rule 13. The Independent
Directors of the Company (being Nigel Moore, Cameron Davies and
Colin Hutchinson), having consulted with the Company's nominated
adviser, finnCap, consider that the terms of the Loan Notes as
amended by the Supplemental Loan Note Instruments are fair and
reasonable insofar as the Company's shareholders are concerned.
7. Independence
As holders of 2013 CLNs, Clive Carver and Len Reece are deemed
not to be independent for the purposes of making a recommendation
to Independent Shareholders on the Proposals. Furthermore,
Henderson, as the party subject to the Whitewash, will not vote on
the Whitewash Resolution at the General Meeting. In addition,
holders of 2013 Convertible Loan Notes, including Len Reece and
Clive Carver, as beneficiaries of the Proposals, will also not be
allowed to vote on the Whitewash Resolution at the General
Meeting.
8. General Meeting
Set out at the end of this document is a notice convening a
General Meeting of the Company to be held at 10.30 a.m. on 19
February 2015 at the offices of finnCap, 60 New Broad Street,
London, EC2M 1JJ, at which the following resolutions will be
proposed:
The Company is proposing that Shareholders pass the Resolutions
in order to:
(a) approve the waiver granted by the Takeover Panel of
Henderson's obligation to make a general offer to Shareholders for
the entire issued and to be issued share capital of the Company
pursuant to Rule 9 of the Takeover Code as a result of the
allotment and issue of, equity securities to Henderson arising from
the conversion of the Loan Notes held by them (this resolution
requires voting on a poll by Independent Shareholders only);
(b) grant authorityto the Directors under section551 of the Act,
to allot relevant securities as required in relation to the
conversion of the Loan Notes;and
(c) empower the Directors, pursuant to section 570 of the Act,
to dis-apply the statutory pre-emption rights in relation to the
allotment of equity securities as required to allow conversion of
the Loan Notes.
The reasons for the Whitewash Resolution are set out at
paragraphs 1, 2 and 3 of this Part I. The Company does not have
sufficient authority to issue the Conversion Shares arising from
the conversion of the Loan notes, assuming that the Whitewash
Resolution is passed, and therefore Resolutions 2 and 3 are
proposed to grant the authority to the Board to make such
issues.
9. Action to be taken in respect of the General Meeting
Please check that you have received the following with this
document:
-- a Form of Proxy for use in respectof the General Meeting; and
-- a reply-paid envelope for use in connection with the return
of the Form of Proxy (in the UK only).
Whether or not you propose to attend the General Meeting in
person, you are strongly encouraged to complete, sign and return
your Form of Proxy in accordance with the instructions printed
thereon as soon as possible, but in any event so as to be received,
by post at Computershare Investor Services Plc, The Pavilions,
Bridgwater Road, Bristol, BS99 6ZY or, during normal business hours
only, by hand, at Computershare Investor Services Plc, The
Pavilions, Bridgwater Road, Bristol, BS13 8AE by no later than
10.30 a.m. on 17 February 2015 (or, in the case of an adjournment
of the General Meeting, not later than 48 hours before the time
fixed for the holding of the adjourned meeting).
Alternatively, you can submit your proxies electronically by
following the instructions on the website. Electronic proxy
appointments must be received by 10.30 a.m. on 17 February 2015 or,
in the case of an adjournment of the General Meeting, not later
than 48 hours before the time fixed for the holding of the
adjournedmeeting).
If you hold your shares in the Company in uncertificated form
(that is, in CREST) you may vote using the CREST Proxy Voting
service in accordance with the procedures set out in the CREST
Manual (please also refer to the accompanying notes to the Notice
of the General Meeting set out at the end of this document).
Proxies submitted via CREST must be received by the Company's agent
(ID 3RA50) by no later than 10.30 a.m. on 17 February 2015 (or, in
the case of an adjournment, not later than 48 hours before the time
fixed for the holding of the adjourned meeting).
This will enable your vote to be counted at the GeneralMeeting
in the event of your absence.The completion and return of the Form
of Proxy or the use of the CREST Proxy Voting service will not
prevent you from attending and voting at the General Meeting, or
any adjournment thereof.
10. Recommendation
In the absence of alternative funding to repay the 2013 CLNs and
2014 CLNs, the Company believes that it has secured the best terms
available from Henderson, being the majority holder of the Loan
Notes.
Shareholders are advised that in the event that the Resolutions
are not passed, then on 19 November 2015, or earlier in the event
that a Liquidity Event occurs, the Company will become immediately
liable to pay to Loan Note holders in cash three times the
principal value of the Loan Notes plus accrued interest and
Henderson, as the holder of the 2014 Convertible Loan Notes which
are secured, will have the right to appoint a receiver to sell the
shares in Ascent Slovenia Limited to achieve repayment. In such
circumstances, the Company is unlikely to be able to continue as a
going concern.
The Independent Directors therefore, having been so advised by
finnCap, consider the amendments to the 2013 CLNs and 2014 CLNs
pursuant to the Supplemental Loan Note Instruments and the terms
thereof and the Waiver to be fair and reasonable and in the best
interests of Independent Shareholders generally and the Company as
a whole. In providing advice to the Independent Directors, finnCap
has taken into account the Independent Directors' commercial
assessments. Accordingly, the Independent Directors recommend that
Shareholders vote in favour of the Resolutions and that Independent
Shareholders vote in favour of the Waiver.
The Independent Directors intend to vote in favour of the
Resolutions in respect of their aggregate shareholdings of 268,500
Ordinary Shares representing approximately 0.02 per cent. of the
Company's existing issued Ordinary Shares.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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