TIDMR4E
RNS Number : 6909F
Reach4Entertainment Enterprises PLC
13 November 2015
13 November 2015
reach4entertainment enterprises plc
('r4e', the 'Company' or 'Group')
Proposed Placing, Capital Reorganisation, Bank Refinancing
and Notice of General Meeting
r4e, the transatlantic media and entertainment company, is
pleased to announce the proposals for a Placing, Capital
Reorganisation and Bank Refinancing and notice of a General
Meeting.
David Stoller, Chairman of r4e, said: "I would like to thank
everyone in the Company for their hard work over what has been a
long process, as today sees us nearing the culmination of that work
to re-capitalise our Group. AIB has demonstrated its continued
support for r4e in the settlement of our existing loan facility by
agreeing to receive a settlement sum and the grant of certain
Warrants. This, together with the new capital being raised, will
provide the necessary change to secure our financial position and
enable us to re-launch the Company.
As a substantial existing shareholder myself, I welcome the new
shareholders and am glad that on completion of the proposals, r4e
will be able to focus on growth and generating attractive returns
for all shareholders."
Defined terms used in this announcement have the meaning as set
out at the end of this announcement.
Highlights
Placing
-- The Company has conditionally raised GBP4 million (before
expenses) by way of a conditional placing of 400,000,000 New
Ordinary Shares at a price of 1 penny per share.
-- As part of the Placing, existing investor Nigel Wray, via his
investment company, Euroblue Investments Limited, has agreed to
subscribe for 118,900,000 shares, bringing his total interest in
the Company to 124,900,000 shares, or 26.30% of the Enlarged Share
Capital.
-- Completion of the Placing is subject, inter alia, to
shareholder approval, which will be sought at a General Meeting of
the Company which will be held at 10.00 a.m. on 2 December 2015 at
the office of Clintons, 55 Drury Lane, Covent Garden, London, WC2B
5RZ.
-- It is expected that Admission will become effective and that
dealings in the Placing Shares and the New Ordinary Shares on AIM
will commence on 3 December 2015.
Bank Refinancing
-- The Company is seeking to refinance its existing loan
facility agreement of GBP14,785,000 ("Facility Agreement") with AIB
Group (UK) P.L.C. ("AIB"), of which GBP14,155,000 is
outstanding.
-- Under the proposal, the Company and AIB have agreed in principle that the Company will:
o pay to AIB the Cash Settlement, being GBP9 million plus
certain expenses, against the termination of the Facility Agreement
and release of the security granted in connection with the Facility
Agreement; and
o grant the Warrants to AIB Joint Ventures. The Warrants will,
on issue, represent five per cent. of the Enlarged Share Capital as
enlarged by the exercise of the Warrants and are exercisable for
five years at the Placing Price, only when the closing mid-market
price of a New Ordinary Share reaches 5p or more on any Trading Day
during that five year period, subject to the right to exercise
earlier upon the occurrence of certain specified Acceleration
Events (as defined in the Warrant Instrument).
-- The Company has received an offer letter for a new three year
secured asset based debt facility of GBP9.5 million with PNC
Business Credit Services Ltd being made up of a GBP1 million term
loan and a revolving credit facility of up to GBP8.5 million based
on qualifying accounts receivable. The facility is to be used to
refinance the AIB loan and provide the Company with working capital
and is subject to agreement of legal documentation and the
satisfaction of certain conditions precedent.
Capital Reorganisation
-- The Company is proposing to undertake the Capital
Reorganisation so that the par value of the Ordinary Shares is
reduced to below the Placing Price. This proposal would, if passed,
involve splitting each issued Existing Ordinary Share into one New
Ordinary Share of 0.5 pence nominal value and one Deferred Share of
2 pence nominal value.
Future Strategy
-- Upon completion of the Placing and the Bank Refinancing, the
Directors believe that the Proposals being recommended will
strengthen the Company's financial base and enable it to pursue a
strategy for growth incorporating the following key elements:
-- Leveraging the Company's leading brands to increase
cross-over of shows between London and New York
-- Seeking to broaden the geographic coverage of existing West
End and Broadway shows into new markets, such as Asia
-- Expanding the Company's services into adjacent markets and
geographies and to new customer bases, leveraging the Company's
existing brands and reputation;
-- Expanding the Company's digital and online offerings
-- Increasing investment in online advertising and marketing, including data and analytics
-- Launching mobile and location targeted advertising
Circular and General Meeting
A circular, which provides further details of the Placing and
Bank Refinancing and includes a notice convening the General
Meeting, is being sent to shareholders of the Company today (the
"Circular"). At the General Meeting, resolutions will be put to
shareholders to approve the Capital Reorgansiation and
consequential amendments to the Company's Articles of Association,
as well as to seek authority to allot and issue New Ordinary Shares
and the Placing Shares. Copies of the circular will be available
from the Company's website, www.r4e.com. Extracts from the circular
are set out below.
In addition to the Circular, the Company will today post to
shareholders a letter regarding the new Financial Reporting
Standard FRS102 that will apply to r4e as the standalone parent
company of the Group and the Company's intention to utilise certain
disclosure exemptions available. A copy of this letter will be
available on the Company's website, www.r4e.com.
David Stoller, Chairman of r4e, said:
"r4e is the market leader in theatre promotion in both the West
End and Broadway. It is a unique business and one which has
significant potential to develop. Historically the Company has been
prevented from pursuing opportunities due to capital constraints.
This recapitalisation will lift those constraints and therefore
marks the start of a new phase in the development of the
Group."
Enquiries:
+44 (0) 20 7968
reach4entertainment 1655
David Stoller, Executive Chairman
Allenby Capital Limited (Nominated +44 (0) 20 3328
Adviser and Broker) 5656
Jeremy Porter / James Reeve (Corporate
Finance)
Katrina Perez/Kelly Gardiner (Corporate
Broking)
Novella Communications (Financial +44 (0) 20 3151
PR) 7008
Tim Robertson/Ben Heath
Extracts from the Circular
(References to pages or paragraphs below refer to the relevant
pages or paragraphs of the Circular)
LETTER FROM THE CHAIRMAN OF REACH4ENTERTAINMENT ENTERPRISES
PLC
1. Introduction
I am pleased to be able to write to you and set out your Board's
proposals for re-launching the Company. As you will know, the
Company has been severely constrained by the costs associated for
paying for the high level of debt the Company currently has
compared to its market capitalisation which has restricted our
ability to invest. As a Board we have been working to address this
issue for some time and so it is pleasing to now be able to set out
below our proposals for re-launching the Company supported by new
investment, a new capital structure and a refinancing of the
current debt facilities.
Earlier today the Company announced that it has conditionally
raised GBP4,000,000 (before expenses) by way of a placing of
400,000,000 New Ordinary Shares at a price of 1 penny per share.
The Placing has been undertaken in connection with the Bank
Refinancing, further details of which are set out in paragraph 2
below. In order to proceed with the Placing, the Capital
Reorganisation will need to be undertaken by the Company, further
details of which are set out in paragraph 5 below. In addition to
the Placing, in order to complete the Bank Refinancing, it is
proposed that the Company will enter into the New Facility with
PNC, further details of which are set out in paragraph 3 below.
The Placing Shares have been conditionally placed with
institutional and other investors, subject to the passing of the
Resolutions at the GM, Allenby being satisfied with the contents of
the Availability Confirmation Letter and Admission. The proceeds of
the Placing will be used to finance the Cash Settlement due under
the Settlement Agreement which, together with the New Facility, are
expected to secure full and final settlement of the Company's
obligations under the Facility. On the Completion Date, it is
proposed that the Company will enter into and complete the
Settlement Agreement and the New Facility, both of which will be in
agreed form prior to Admission. In the case of the New Facility,
PNC is expected to deliver the Availability Confirmation Letter
prior to Admission confirming, amongst other matters, the amount
available for drawdown under the New Facility.
r4e is a world leader in providing promotion, advertising and
marketing services to the theatre and live entertainment
industries. The Board believes that the Proposals being recommended
will strengthen the Company's financial base and enable it to
pursue a strategy for growth incorporating the following key
elements:
-- leveraging the Company's leading brands to increase
cross-over of shows between London and New York;
-- seeking to broaden the geographic coverage of existing West
End and Broadway shows into new markets, such as Asia;
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 07:15 ET (12:15 GMT)
-- expanding the Company's services into adjacent markets and
geographies and to new customer bases, leveraging the Company's
existing brands and reputation;
-- expanding the Company's digital and online offerings;
-- increasing investment in online advertising and marketing,
including data and analytics; and
-- launching mobile and location targeted advertising.
The purpose of this document is to explain the background to and
reasons for the Proposals, to explain why the Board considers the
Proposals to be in the best interests of the Company and its
Shareholders as a whole and why the Directors recommend that you
vote in favour of the Resolutions to be proposed at the GM, notice
of which is set out at the end of this document.
2. Bank Refinancing and Settlement Agreement
The Company is undertaking the Bank Refinancing as the Directors
believe that servicing the high level of debt being lent to the
Company via the existing Facility, of which approximately
GBP14,155,000 is outstanding, has restricted the Company in its
ability to develop its operations. Furthermore, as announced by the
Company on 10 June 2015, there is uncertainty over the Company's
ability to meet a significant scheduled repayment of the Facility
in April 2016. The Directors therefore believe that entering into
the Settlement Agreement will place the Company in a more stable
financial position and in a better position to pursue its expansion
strategy, as noted above.
The Company has reached an agreement with AIB in principle
pursuant to which upon completion of the Proposals and in
accordance with the Settlement Agreement:
-- the Company will pay to AIB the Cash Settlement in full and
final settlement of its obligations under the Facility and for
release of the security granted to AIB in connection with the
Facility; and
-- the Company will create and issue the Warrants to AIB Joint
Ventures. The Warrants will, on issue, represent approximately five
per cent. of the Enlarged Share Capital as enlarged by the exercise
of the Warrants. The Warrants are exercisable at a price of one
penny (1p) per share during the five year period commencing on the
date of issue, subject to the closing mid-market price (as shown on
AIM) of a New Ordinary Share being five pence (5p) or more on any
Trading Day during that five year period, subject to the right to
exercise earlier upon the occurrence of certain specified
Acceleration Events (as defined in the Warrant Instrument).
The Company and AIB propose to enter into and complete the
Settlement Agreement on the Completion Date and at the same time
that the New Facility is completed. In addition to the above, the
Settlement Agreement provides for, inter alia, the termination of
the Facility and the settlement by AIB of any and all claims
against the Company under the Facility Agreement.
In order to finance the Cash Settlement due under the Settlement
Agreement, the Company is proposing to enter into the New Facility
and has conditionally raised GBP4,000,000 pursuant to the Placing,
both of which are described below.
3. New Facility
On 25 September 2015 the Company announced that it had received
an offer letter from PNC for a three year secured asset based debt
facility of GBP9,500,000, made up of a cash flow term facility of
GBP1,000,000 and a revolving credit facility of up to GBP8,500,000
based on qualifying accounts receivable. In accordance with this,
the Company proposes to enter into the New Facility Agreement
providing a facility on similar terms which, along with the Placing
proceeds, will be used to repay the Facility in accordance with the
terms of the Settlement Agreement. Drawdown under the New Facility
will likely take place on the basis of solicitors' undertakings to
apply the drawdown sums (or part of them) to complete the
Settlement Agreement.
The Board of r4e expects that initial funds available for
drawdown under the revolving credit facility will be approximately
GBP6,000,000, depending on accounts receivable at the time. PNC's
provision of the New Facility will be subject to agreement of legal
documentation and the satisfaction of certain conditions
precedent.
4. Details of the Placing
The Company proposes to raise GBP4,000,000 (before expenses)
through the issue of the Placing Shares at the Placing Price. The
Placing Price represents a discount of approximately 56 per cent.
to the closing mid-market price of 2.25 pence per Ordinary Share on
12 November 2015, being the last Trading Day prior to the
announcement of the Placing. Having considered the price at which
the Ordinary Shares are currently traded, feedback from investor
marketing and other factors, the Directors have resolved that the
Placing Price is appropriate. The Placing Shares will represent
84.2 per cent. of the Enlarged Share Capital.
Pursuant to the terms of the Placing Agreement, Allenby, as
agent for the Company, has agreed to use its reasonable endeavours
to procure subscribers for the Placing Shares at the Placing Price.
The Placing Agreement is conditional upon, inter alia, the
Resolutions being duly passed at the GM, Allenby being satisfied
with the contents of the Availability Confirmation Letter and
Admission becoming effective on or before 8.00 a.m. on 3 December
2015 (or such later date as may be agreed, but not later than 18
December 2015). The Placing Agreement contains provisions entitling
Allenby to terminate the Placing Agreement at any time prior to
Admission in certain circumstances. If this right is exercised the
Placing will not proceed. The Placing has not been underwritten by
Allenby or any other person. The Company has agreed to pay a fee
and commission to Allenby in respect of the Placing.
As part of the Placing, Nigel Wray, via his investment company,
Euroblue Investments Limited, has agreed to subscribe for
118,900,000 Placing Shares at the Placing Price. Following
Admission, Mr Wray will be interested in 124,900,000 New Ordinary
Shares, representing approximately 26.30 per cent. of the Enlarged
Share Capital. Nigel Wray has expressed a desire to make a further
investment in the Company and it is anticipated that the Company
will consider further fundraising after Admission, if the Board
believes it is in the best interests of the Company and its growth
strategy. If, in connection with any further investment by Mr Wray,
New Ordinary Shares are proposed to be issued to Mr Wray which
would cause Mr Wray and his concert party to be interested in
shares carrying 30 per cent. or more of the Company's voting
rights, such issue of New Ordinary Shares would be subject to the
approval by independent shareholders of a waiver by the Takeover
Panel of rule 9 of the Takeover Code (a "whitewash").
In addition, certain Directors have agreed to subscribe for
Placing Shares as follows:
At the date
of this
document On Admission
---------------- -------------------------------
Director No. of Existing No. of Placing No. of New Percentage
Ordinary Shares subscribed Ordinary of Enlarged
Shares held Shares held Share Capital
David Stoller 19,828,973(1) 5,000,000 24,828,973(1) 5.23%
Marcus Yeoman 200,943 1,000,000 1,200,943 0.25%
(1) 901,615 of these Existing Ordinary Shares are due to be
transferred to Stoller Family Partners LLP, a company in which
David Stoller is a general partner, pursuant to an agreement
announced by the Company on 10 July 2015.
The Placing is being made on a non pre-emptive basis. The making
of a pre-emptive offer would require the production of a prospectus
which would have to comply with the Prospectus Rules of the FCA and
be pre-vetted and approved by the FCA. Having given the matter
careful consideration, the Directors do not believe that the time
and costs involved in producing a prospectus would be justified in
the context of a fundraising of this size and nature.
The Placing Shares will rank pari passu in all respects with the
New Ordinary Shares, including the right to receive all dividends
and other distributions declared following Admission.
5. Capital Reorganisation
The par value of each Existing Ordinary Share is 2.5 pence,
which is the minimum price at which additional Ordinary Shares can
be issued. As the Existing Ordinary Shares are now trading at below
this price, in order to proceed with the Placing, the Company is
proposing to undertake the Capital Reorganisation so that the par
value of the Ordinary Shares is reduced to below the Placing Price.
This proposal would, if passed, involve splitting each issued
Existing Ordinary Share into one New Ordinary Share of 0.5 pence
nominal value and one Deferred Share of 2 pence nominal value. For
the avoidance of doubt, the nominal value of the shares is
unrelated to the AIM market price of an Ordinary Share.
The New Ordinary Shares will have the same rights (including as
to voting, dividends and return of capital) as the Existing
Ordinary Shares. The number of New Ordinary Shares held by
Shareholders will be the same as the number of Existing Ordinary
Shares held by them immediately prior to the Capital
Reorganisation, but the Capital Reorganisation will allow the
Placing to take place.
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 07:15 ET (12:15 GMT)
The rights attaching to the Deferred Shares are set out in the
Notice of GM. The Deferred Shares will be effectively valueless as
they will not carry any rights to vote or any dividend rights. In
addition, holders of Deferred Shares will only, in extremely remote
and limited circumstances, be entitled to a payment on a return of
capital or on a winding up of the Company. The Deferred Shares will
not be quoted on AIM or any other stock market and will not be
transferable unless with the prior written consent of the Company.
No share certificates will be issued in respect of any of the
Deferred Shares. The Board may further appoint any person to act on
behalf of all holders of the Deferred Shares to transfer all such
shares to the Company (or its nominee) for an aggregate
consideration of 1 penny.
It is not intended that new share certificate(s) will be issued
to the holders of the New Ordinary Shares following the Capital
Reorganisation. Pending the issue of a new share certificate,
Shareholders' existing share certificate(s) will remain valid for
the same number of shares but with a different par value of 0.5
pence. Following the Capital Reorganisation, should Shareholders
wish to receive an updated share certificate, they should contact
the Registrars at the address set out herein or by contacting the
shareholder helpline of Capita Asset Services on 0371 664 0321.
Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the
applicable international rate. The helpline is open between 9 am -
5.30 pm, Monday to Friday excluding public holidays in England and
Wales. Please note that Capita Asset Services cannot provide any
financial, legal or tax advice and calls may be recorded and
monitored for security and training purposes.
6. Admission
Application will be made to the London Stock Exchange for the
Placing Shares and the New Ordinary Shares to be admitted to
trading on AIM. Conditional on, inter alia, the passing of the
Resolutions, it is expected that Admission will become effective
and that dealings in the Placing Shares and the New Ordinary Shares
on AIM will commence on 3 December 2015.
7. Share incentive scheme
The Directors are aware of the importance of retaining and
incentivising its key employees. Therefore, the Board has agreed to
put in place a share incentive scheme for employees and directors
under which it makes grants of, in aggregate, up to 20 per cent. of
the Company's issued share capital at (subject to tax and other
considerations) the Placing Price.
8. Recommendation
The Directors consider that the Proposals are in the best
interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously recommend that Shareholders
vote in favour of the Resolutions to be proposed at the GM, as they
intend to do in respect of their aggregate interests of 19,354,716
Ordinary Shares (representing approximately 25.84 per cent. of the
Existing Ordinary Shares).
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of Circular 13 November 2015
Latest time and date for receipt 10.00 a.m. on 30
of Forms of Proxy November 2015
General Meeting 10.00 a.m. on 2
December 2015
Completion Date* 4 December 2015
Admission and dealings in the 8.00 a.m. on 3
New Ordinary Shares and the Placing December 2015
Shares expected to commence on
AIM*
PLACING STATISTICS
Number of Existing Ordinary Shares in
issue 74,894,792
Number of New Ordinary Shares in issue
immediately following the Capital Reorganisation* 74,894,792
Number of Deferred Shares in issue immediately
following the Capital Reorganisation* 74,894,792
Placing Price per Placing Share 1 penny
Number of Placing Shares being placed
on behalf of the Company 400,000,000
Number of New Ordinary Shares in issue
following Admission* 474,894,792
Number of Placing Shares as a percentage
of the Enlarged Share Capital 84.2%
Number of Warrants in issue on the Completion
Date 24,994,462
Estimated net proceeds of the Placing GBP3.75
receivable by the Company million
*Conditional on the passing of the Resolutions at the General
Meeting
DEFINITIONS
The following definitions apply throughout this document, unless
the context requires otherwise:
"Act" the Companies Act 2006 (as amended);
"Admission" the admission of the Placing Shares
and the New Ordinary Shares to trading
on AIM becoming effective in accordance
with the AIM Rules;
"agreed form" a document in the form agreed by
the parties and initialled by them
or on their behalf for identification;
"AIB" AIB Group (UK) P.L.C.;
"AIB Joint Ventures" AIB Joint Ventures Limited a private
limited company registered in England
and Wales whose registered number
is 02094213 and whose registered
office is at AIB, St. Helen's, 1
Undershaft, London EC3A 8AB;
"AIM" the market of that name operated
by London Stock Exchange;
"AIM Rules" the AIM Rules for Companies and the
AIM Rules for Nominated Advisers
published by London Stock Exchange;
"Allenby" Allenby Capital Limited, the Company's
nominated adviser and broker;
"Availability the letter from PNC to the Company
Confirmation and Allenby confirming, inter alia,
Letter" (i) that PNC's client intake procedures
have been carried out to PNC's satisfaction,
(ii) whether any amendments are required
to the terms of the New Facility
as a result of any matter which has
been identified by PNC during its
audit of the accounts receivable
of the Company, together with details
of such amendments, and (iii) the
amount available to be drawn down
under the New Facility;
"Bank Refinancing" the refinancing being undertaken
by the Company and r4e Inc, as further
described in paragraph 2 of the Letter
from the Chairman contained in this
document;
"Board" or "Directors" the directors of the Company, whose
names are set out on page 6 of this
document;
"Capita Asset the trading name of Capita Registrars
Services" Limited;
"Capital Reorganisation" the reorganisation of the share capital
of the Company, further described
in paragraph 5 of the Letter from
the Chairman of the Company contained
in this document;
"Cash Settlement" the GBP9,000,000 (nine million pounds
sterling) plus applicable accrued
interest, credit card expenses, costs
and fees due to be paid to AIB or
its professional advisers on the
Completion Date, pursuant to the
Settlement Agreement;
"Company" or reach4entertainment enterprises plc;
"r4e"
"Completion Date" 4 December 2015;
"CREST" the computerised settlement system
(as defined in the CREST Regulations)
operated by Euroclear which facilitates
the transfer of title to shares in
uncertificated form;
"CREST Regulations" The Uncertificated Securities Regulations
2001 (SI 2001/3755), as amended;
"Deferred Shares" the 74,894,792 deferred shares of
2 pence each to be created pursuant
to the Capital Reorganisation;
"Enlarged Share the issued share capital of the Company
Capital" immediately following Admission;
"Euroclear" Euroclear UK & Ireland Limited, the
operator of CREST;
"Form of Proxy" the form of proxy enclosed with this
document for use in connection with
the GM;
"Facility" the secured sterling term loan facilities
in the aggregate principal amount
of fourteen million seven hundred
and eighty five thousand pounds sterling
(GBP14,785,000) made available to
the Company and other members of
its group under the Facility Agreement;
"Facility Agreement" the loan facility agreement entered
into between r4e and AIB dated 29
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