31st Mar 2008 07:02
Watermark Group PLC31 March 2008 31 March 2008 Watermark Group plc ("Watermark" or the "Company") New contract, underwriting of £7.5 million issue of new equity, bond conversionand appointment of new broker Watermark, a leading provider of in-flight catering and products to the airline,travel and hospitality industries, is pleased to announce that its wholly ownedsubsidiary, Air Fayre Limited ("Air Fayre"), has signed a partnership agreementwith United Airlines ("United") and proposes to create a solid capital structurefor the Company through a refinancing conditional on Shareholder approval. Thehighlights of this contract and refinancing are as follows: * Strategic relationship established with United Airlines; * Seven year contract signed to serve all of United's international and domestic in-flight catering needs out of its Los Angeles hub; * Early conversion of the Company's £8,000,000 Secured Fixed Rate Convertible Bonds due 2010 together with all rolled up interest at an amended conversion price of 7.5 pence per new Ordinary Share; * Issue of approximately 6.2 million Warrants to the Bondholders with an exercise price of 15 pence per new Ordinary Share as compensation for surrendering the preferred status of their Bonds and foregoing the 15.5 per cent. coupon attached to the Bonds; * Underwriting by certain Bondholders of £7.5 million of an issue of new Ordinary Shares at 7.5 pence per new Ordinary Share; * £2.0 million unsecured term facility extended to the Company by certain Bondholders; * Company's banking covenants have been reset; * The Directors are considering moving the trading of the Ordinary Shares to AIM; and * KBC Peel Hunt Ltd has been appointed as broker to the Company. Stephen Yapp, Chairman of Watermark said: "This is a transformationalopportunity for the Company and we are excited to be partnering with United. Ourunique business model can be replicated across North America and we look forwardto supporting United in its continued focus on costs, business growth andcustomer service excellence." "The signing of the new contract with United is proof of the benefits of ourapproach to the management of global supply chains in the travel industry andthe de-gearing of Watermark's capital structure will position us well for futuregrowth." The partnership with United Air Fayre has signed a partnership agreement with United, one of the largestglobal airlines, to provide logistics to manage all of United's on-boardcatering requirements at Los Angeles International Airport ("LAX"). The seven year contract with United will serve all of United's international anddomestic flights at LAX from late 2008. United currently flies fiveinternational and 86 domestic flights per day from LAX, all of which will beserviced by Air Fayre pursuant to this partnership agreement. The Directorsbelieve that this unique US business model will ensure that United and itscustomers receive superior quality, service and flexibility, all of which arekey requirements for United when it selects its strategic service providers. To support its commitment to the partnership Air Fayre will be establishing astate of the art 53,000 sq ft facility in Los Angeles on a site it has alreadyidentified. Detailed plans for the new facility have already been prepared andthe Company is currently conducting negotiations for the lease of the requiredspecialist vehicles and the identification and hire of the dedicated seniormanagement team for the Los Angeles facility and the required ground staff. Air Fayre's initial costs for setting up the facility in Los Angeles andproviding it with working capital will in part be financed by the Underwritingand the Term Facility (details of which are set out below). Capital restructuring Background As set out in the interim results for the six months ended 30 June 2007announced on 27 September 2007, the Directors noted that the Group's trading hadbeen adversely affected and costs had risen due to a loss of focus onoperational controls and efficiencies. Following a review of the businessconducted by the new management team, a new management structure was put inplace and a number of cost issues have been addressed. Whilst trading since 30June 2007 has significantly improved, the cash position of the Company remainstight. Despite this, the Company's bankers remain supportive and have agreed torevised covenants and have also consented to the signing of the United contract. £2 million unsecured term facility In order to provide the Company with immediate additional working capitalheadroom and also to finance some initial setup costs of the United contractprior to the Company receiving the net proceeds of the Underwriting, certain ofthe holders of the Company's £8,000,000 Secured Fixed Rate Convertible Bonds due2010 (the "Bonds") ("Bondholders") have extended to the Company a £2.0 millionunsecured term facility (the "Term Facility") on normal commercial terms. Anyfunds drawn down from the Term Facility will be repaid upon the allotment of thenew Ordinary Shares pursuant to the Underwriting. Underwriting of equity issue Certain Bondholders have agreed to underwrite £7.5 million of an issue of newordinary shares of 1p each in the Company ("Ordinary Shares"), conditional onapproval by the holders of Ordinary Shares ("Shareholders"), at an issue priceof 7.5 pence per new Ordinary Share (the "Underwriting"). Bond conversion The Directors have negotiated, and the Bondholders have consented by writtenresolution to, an early conversion of the Bonds and all accumulated interest upto and including the 4 June 2008 interest payment date amounting in aggregate,together with the outstanding principal, to approximately £9.3 million. Theconversion terms of the Bonds have been altered such that the conversion priceis 7.5 pence per new Ordinary Share. The Directors estimate that, uponconversion and conditional on Shareholder approval, approximately 123.8 millionnew Ordinary Shares will be issued to the Bondholders. Conversion of the Bondswill take place on the issue of new Ordinary Shares pursuant to the UnderwritingAgreement. Issuance of Warrants As compensation for surrendering the preferred status of their Bonds andforegoing the 15.5 per cent. coupon attached to the Bonds, the Directors haveagreed to issue to the Bondholders, conditional on shareholder approval, anaggregate of approximately 6.2 million warrants with an exercise price of 15pence per new Ordinary Share with a four year expiry term (the "Warrants"). Theissue of the Warrants is conditional on such surrender and will occur on theissue of the new Ordinary Shares pursuant to the Underwriting. Related party participation SVG Capital plc ("SVG"), through it having an interest in approximately 15.4 percent. of the ordinary issued share capital of the Company and itsrepresentative, Graham Bird, being a Non-Executive Director of the Company, is arelated party pursuant to the Listing Rules of the UK Listing Authority (the"Listing Rules"). SVG currently has an interest in approximately £2.1 million ofprincipal of the Bonds which, together with the accumulated interest up to andincluding the 4 June 2008 interest payment date, amounts to approximately £2.4million. The Directors estimate that, upon early conversion, approximately 32.1million new Ordinary Shares will be issued to SVG. Additionally, pursuant to theconversion of its Bonds, SVG will also be issued Warrants over approximately 1.6million new Ordinary Shares. Maurice Ostro, by virtue of the fact that he was a Director of the Companywithin the 12 months prior to this announcement, is a related party pursuant tothe Listing Rules. Mr Ostro has an indirect interest in approximately £0.7million of principal of the Bonds which, together with the accumulated interestup to and including the 4 June 2008 interest payment date, amounts toapproximately £0.8 million. The Directors estimate that, upon conversion,approximately 11.2 million new Ordinary Shares will be issued to Mr Ostro.Additionally, pursuant to the conversion of his Bonds, Mr Ostro will also beissued Warrants over approximately 0.6 million new Ordinary Shares. Stephen Yapp, by virtue of the fact that he is a Director of the Company, is arelated party pursuant to the Listing Rules. Mr Yapp has a direct interest inapproximately £0.1 million of principal of the Bonds which, together with theaccumulated interest up to and including the 4 June 2008 interest payment date,amounts to approximately £0.2 million. The Directors estimate that, uponconversion, approximately 2.0 million new Ordinary Shares will be issued to MrYapp. Additionally, pursuant to the conversion of his Bonds, Mr Yapp will alsobe issued Warrants over approximately 0.1 million new Ordinary Shares. Shareholder consent The participations of SVG, Mr Ostro and Mr Yapp in the conversion of the Bondsand the issue of the Warrants are classified as related party transactions underthe Listing Rules and are, therefore, conditional on Shareholder approval ofcertain resolutions which will be sought at a general meeting of the Company("General Meeting"). The conversion of the Bonds, the issue of the Warrants and the issue of newOrdinary Shares pursuant to the Underwriting are also conditional on theapproval of certain resolutions by Shareholders to disapply sufficientpre-emption rights to satisfy the proposed issue of new Ordinary Shares whichwill also be sought at the General Meeting. A circular setting out details of the resolutions and requisitioning the GeneralMeeting will be sent to Shareholders in due course. Failure to obtain approval of the resolutions to be tabled at the GeneralMeeting will result in the Company having to urgently seek alternative sourcesof finance to meet its financial commitments under the new contract with United. Move to AIM The Directors are currently considering moving the trading of the OrdinaryShares to the AIM market of London Stock Exchange plc ("AIM"). The Directorsbelieve that AIM would be a more appropriate market for the Company and wouldenable the Company to agree and execute transactions more quickly and costeffectively should any development or opportunity arise in the future. A furtherannouncement with regard to the move to AIM will be made when appropriate. Appointment of broker The Company also announces the formal appointment of KBC Peel Hunt Ltd, whichhas assisted it in the above financing proposal, as its broker with immediateeffect. For further information, please contact: Watermark Group plc Tel: +44 (0) 20 8606 2000Stephen Yapp, Executive ChairmanCarl Fry, Interim Chief FinancialOfficer KBC Peel Hunt Ltd Tel: +44 (0) 20 7418 8900Oliver ScottDavid Anderson Tavistock Communications Tel: +44 (0) 20 7920 3150Jeremy CareyMatt Ridsdale About United United Airlines (NASDAQ: UAUA) operates more than 3,300* flights a day onUnited, United Express and Ted to more than 200 U.S. domestic and internationaldestinations from its hubs in Los Angeles, San Francisco, Denver, Chicago andWashington, D.C. With key global air rights in the Asia-Pacific region, Europeand Latin America, United is one of the largest international carriers based inthe United States. United also is a founding member of Star Alliance, whichprovides connections for its customers to 897 destinations in 160 countriesworldwide. United's 55,000 employees reside in every U.S. state and in manycountries around the world. News releases and other information about United canbe found at the company's website at united.com. * Based on the flight schedule between Feb. 12, 2008 and Dec. 31, 2008. SOURCE United AirlinesCONTACT: Worldwide Press Office of United Airlines, +1-312-997-8640 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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