TIDMCSLT

RNS Number : 3192X

Cosalt PLC

07 February 2013

Cosalt plc

Update re disposals and financial position

Cosalt plc ("Cosalt" or "Company") provides the following update regarding the potential disposals of its main operating businesses ("Disposals") and its discussions with lenders and the trustees of the Cosalt Group's main defined benefit pension scheme ("Pension Trustees").

The Disposals

The Company is in discussions with potential buyers of its two main operating businesses, Cosalt Workwear and Cosalt Offshore. As reported previously, the Directors continue to believe that the Disposals would not result in any value being attributable to shareholders due to the level of the Group's net indebtedness and pension scheme liabilities, and it is the Directors' opinion that the disposal of each of these businesses as a going concern remains the best way of ensuring their long term future, safeguarding jobs, and ensuring continuity of service both to customers and to suppliers. In reaching their opinion, the Directors have considered their wider fiduciary duties and have acknowledged the important role of these two businesses, both within their industries and within their local communities.

In view of the respective sizes, each of the Disposals would constitute a Class 1 transaction for the purpose of the Listing Rules and would therefore, for so long as the Company remains subject to the Listing Rules and in the absence of the Company being eligible to obtain a dispensation from the requirements of the Listing Rules, require shareholder approval.

Consent to the Disposals would also be required from the Group's lenders (as detailed below) and Pension Trustees. Due to the timeframe involved in the Disposals, and in particular the time required to seek shareholder approval, the support of the lenders would also be required to enable the Group to continue to trade whilst shareholder approval is sought.

Discussions with lenders and Pension Trustees

The Cosalt Group had net borrowings of approximately GBP17m as at 31 December 2012 and the Company has been in discussions with its lenders and the Pension Trustees with regard to a solution to the Group's financial position. The facilities provided by each of The Royal Bank of Scotland plc and HSBC Bank plc (together the "Banks"), Sovereign Holdings Limited ("Sovereign"), David Ross (a director of the Company) and Oval (2245) Limited ("Oval"), a company controlled by Mr Ross, expired on 31 December 2012. The Banks and Pension Trustees have security over the Group's assets. In addition, the Banks have the benefit of guarantees provided by Mr Ross and Sovereign which expire on 31 March 2013 ("Bank Guarantees").

A summary of the latest position with each of the relevant parties is as follows:

-- No agreement has been reached with the Pension Trustees in relation to the resumption of payments to the Group's main defined benefit scheme. The amounts which would ultimately be payable would not be determined until a recovery plan acceptable to the Pensions Regulator was agreed with the Pension Trustees. However, the Pension Trustees have previously indicated to the Company that annual payments of the order of GBP2.1 million might be required over a 28 year period.

-- Oval and Mr Ross have not yet made any demand in relation to the repayment of their facilities. Indeed, whilst no agreement has been reached in relation to the extension of those facilities, the Company has continued to make drawdowns under the working capital facilities.

-- Sovereign has demanded repayment of its loan of GBP1m but to date has taken no further action.

-- Having to date reserved their position in relation to their facilities, the Banks have now written to the Company raising concerns that the Directors have expressed an intention to pursue what the Banks describe as an expensive and lengthy process to seek shareholder approval for the Disposals, and whether under those circumstances there would be sufficient funds available to the Group to continue to trade until the Disposals are completed, given the expiry of the facilities on 31 December 2012 and the expiry of the Bank Guarantees on 31 March 2013. The letter also sets out a series of conditions which the Company is required to meet in order to avoid the Banks enforcing their security on or before 28 February 2013.

The conditions required by the Banks (if they are to consider an alternative course of action to enforcing their security on or before 28 February) include that the Company must have funding from lenders other than the Banks in place to meet the costs associated with seeking shareholders' approval in a manner which does not reduce realisations from the Disposals and to fund any losses and working capital requirements of the Group's business from 4 February up to completion of both of the Disposals. In addition, they require that Mr Ross and Sovereign extend the expiry date of the Bank Guarantees to a date beyond the expected date of the Disposals.

The Company has had and continues to have extensive discussions with existing and potential funders but no alternative source of funding is currently available to the Group. In the event that the Banks conditions cannot be met, in the absence of the Banks agreeing an alternative course of action to enforcing their security, the Directors consider that Cosalt plc (the parent company of the Cosalt Group) would be likely to enter insolvency proceedings on or before 28 February 2013.

ENDS

Enquiries:

 
 Cosalt plc                       Tel: +44 (0) 1472 725560 
  Trevor Sands, Chief Executive 
  Officer 
 
   Cardew Group                                                         Tel: +44 (0) 207 930 0777

Tim Robertson / Tom Horsman

This information is provided by RNS

The company news service from the London Stock Exchange

END

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