TIDMBES
Blavod Wines and Spirits PLC ('the Company')
8 October 2009
Convertible Loan Notes ('CLNs")
The Board is pleased to announce that it has agreed to raise
GBP0.4 million by the issue of GBP0.4 million nominal of
convertible unsecured loan notes, and as such CLNs to the value
of GBP0.4 million have been issued today,
The principal terms of the CLNs are as follows:
Interest: Interest will become payable on the CLNs at a rate
equivalent to 6% per annum on the total redeemable value of the
notes, such interest to be payable semi-annually in arrears on 31
March and 30 September of each year.
Security: the CLNs will be unsecured.
Term: the CLNs have a five year term maturing on 30 September
2014, unless converted or redeemed earlier.
Redemption : The CLNs shall fall to be repayable on the earlier of 30
September 2014 and an event of default. In addition, the Company has
the right to redeem the CLNs upon 30 days' written notice to CLN
Holders.
Conversion: at the option of the CLN holders, the principal of
the CLNs shall be convertible at any time, in whole or in part, into
new ordinary shares of 1p each in the Company as follows:
- at any time before 1 October 2010 at an equivalent price of 5p per
share (ie every GBP1 nominal of CLN converts to 20 new ordinary
shares);
- at any time between 1 October 2010 and 30 September 2011 at an
equivalent price of 5.5p per share; and
- at any time between 1 October 2010 and 30 September 2014 at an
equivalent price of 6p per share.
For the avoidance of doubt, the conversion price is determined by the
date on which formal application is made by the CLN holder to the
Company, rather than the date on which any resultant shares are
allotted or admitted to trading on AIM.
Potential Dilution
In the event that all the GBP0.4 million of CLNs are converted to
share, this would result in the issue of a maximum of 8,000,000
Ordinary Shares, representing 8.35 per cent of the share capital (as
enlarged by the conversion of all the CLNs.)
Rationale for the Fundraising and use of Proceeds
As set out in the Company's AGM statement in late July, sales in the
first quarter of the year had shown growth of c35% year on year. As a
result of this, the Company requires additional funding to provide
working capital to finance the continued rapid growth of business in
the important run up to Christmas.
Currently the company has no bank facilities and has largely financed
its growth via an invoice discounting facility. Given the Company's
balance sheet, the ability to obtain extended bank finance is limited
and would be very costly, and the Directors have concluded that the
Company needs to strengthen its capital base. The creation of an
unquoted unsecured convertible loan note with a 5 year duration
provides the Company with medium term security of finance, whilst
leaving the Company with flexibility surrounding its future funding
options. Additionally, a convertible instrument provides the
opportunity for these loans to be converted to equity capital over
time, which would strengthen the Company's capital base. Your
Directors have given consideration to the most appropriate method of
sourcing subscribers for this instrument, balancing the desire to
allow existing shareholders the chance to participate in any issue
against the time and cost of so doing, and the likely take up of such
an issue by those shareholders.
Whilst in principle the Board would have preferred to offer all
existing shareholders the opportunity to participate in the proposed
fundraising by way of, for example, a rights issue, it was decided
that, given the level of funds to be raised, conducting the capital
raising primarily by way of a limited marketing of CLNs was a more
suitable course of action. The principal reason for this has been
that the extra management time and financial cost involved in
conducting some form of pre-emptive issue would be considerable, and
that the Company's resources are better allocated in achieving the
Company's operational goals.
The Company believes that the CLNs offer a secure form of funding for
the medium term, and in the event that conversion occurs, this will
be at an escalating price in each case at a premium to the current
share price of 4.125p. Additionally the cost of securing the funding
in terms of legal and advisory fees has been minimal.
In the circumstances, the Directors believe that the issue of CLNs on
the terms described represents the best opportunity for the Company
to raise the working capital needed to move the business forward.
Investment in the CLNs by Directors
The following Directors have agreed to subscribe for GBP0.17 million of
the GBP0.4 million CLNs to be issued. Their current shareholdings and
their potential shareholdings as a result of conversion are also set
out below
Director CLN Shares % of No of
subscription held at issued shares
present share issued
capital assuming
max
conversion*
of CLNs
Colin Campbell GBP100,000 1,515,000 1.73 2,000,000
Lawrence Banks GBP50,000 2,245,000 2.56 1,000,000
Richard Ambler GBP20,000 1,132,339 1.29 400,000
* at the lowest conversion price of 5p per share
Related Party Transaction
As mentioned above, the subscribers for the CLNs comprise directors
Colin Campbell, Lawrence Banks and Richard Ambler. As such, their
respective participation in the CLNs represent 'related party
transactions' under the AIM Rules for Companies. Willie Phillips, the
sole independent director, having consulted with the Company's
nominated adviser, Brewin Dolphin Limited, considers that the terms
of the subscription are fair and reasonable insofar as the Company's
shareholders are concerned.
Interim Results
The Company expects to announce the interim results for the 6 months
ended 30 September 2009 in the week commencing 14 December 2009.
For further information please contact:
Blavod Wines and Spirits PLC
Richard Ambler, Chief Executive 0207
352 2096
Brewin Dolphin Investment Banking
Neil Baldwin, Director
0845 213 4730
ENDS
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