3rd Aug 2005 16:16
R.E.A.Hldgs PLC03 August 2005 R.E.A. Holdings plc (the "company") Proposed reorganisation of 4 per cent convertible loan stock 2012 ("convertibleloan stock") and issue of new 7.5 per cent dollar loan notes 2012/14 ("dollarnotes") The company announced on 23 May 2005 that it was considering proposals for areorganisation of the convertible loan stock which would result in holders ofthe stock exchanging their existing holdings for a combination of new ordinaryshares and new dollar denominated loan notes of the company. The company nowannounces that it intends to propose that the reorganisation be effected onterms that will result in every £100 nominal of convertible loan stock beingexchanged for 164 new ordinary shares and the dollar equivalent of £90 nominalof dollar notes (such dollar equivalent to be determined by reference to thesterling dollar exchange rate ruling on the latest practicable date prior topublication of the final proposals). The dollar notes will be issued in registered form in amounts and integralmultiples of $1 and will bear interest at the rate of 7.5 per cent per annum,payable half yearly in arrears on 30 June and 31 December of each year. Interestpayable on 31 December 2005 will accrue with effect from 1 July 2005. Intereston the convertible loan stock will cease to accrue after 30 June 2005 (being thelast date upon which interest was paid on the stock). The dollar notes will be unsecured obligations of the company. Unless previouslyredeemed or purchased by the company, the dollar notes will be redeemable at parby three equal annual instalments commencing 31 December 2012. If dollar noteshave been purchased by the company and cancelled, the amount of dollar notesthat the company will be obliged to redeem on any given redemption date will bereduced by the nominal amount of dollar notes purchased and cancelled prior tothat redemption (save in so far as such notes were purchased and cancelled priorto a previous redemption date and taken into account in reducing the dollar noteredemption requirement in relation to that previous redemption date). Holders of dollar notes will be entitled to elect to receive payments ofinterest and redemption monies due in respect of their holdings of dollar notesin pounds sterling. Where any such election has been made, the amount of eachdollar payment that, absent the election, would be due to the electing holder inrespect of the dollar notes held by that holder will be converted to poundssterling by the company shortly ahead of the due date of the payment and theresultant conversion proceeds will be paid to the holder in lieu of the dollaramount that would otherwise be payable. All holders of convertible loan stockwill be deemed to have made such an election. One object of the convertible loan stock reorganisation will be to establish thedollar notes as a new listed debt security of the company. The directors believethat this will facilitate further issues of dollar notes and thereby provide thegroup with access to longer term debt finance than is currently available to thegroup from banking sources. Access to such longer term finance is, in thedirectors' opinion, important for the group because it is only by debt funding aprudent proportion of the costs of its oil palm development programme that thegroup can hope to maximise the equity returns potentially available from suchprogramme. The present reliance for debt funding on Indonesian bank borrowingsrequires the group to accept debt with an average term of less than three years.That does not fit well with the growth cycle of an oil palm which takes nearlyfour years to maturity from nursery planting and then a further period of threeto four years to full yield; long term debt finance would better match thegroup's funding requirements. Because crude palm oil is priced in dollars, it isprudent for the group to borrow in dollars. Accordingly, the directors intend that in total $30,000,000 nominal of dollarnotes should be created of which only about $5,000,000 will be issued pursuantto the reorganisation of the convertible loan stock. The directors will seek toissue the balance of the dollar notes by way of multiple placings, principallywith substantial investors, over a period of up to four years so as to maintainan appropriate level of group indebtedness and to match (insofar as reasonablypracticable) and meet the maturing obligations and other funding requirements ofthe group. The proposed reorganisation of the convertible loan stock will be conditionalupon certain approvals being obtained from shareholders, holders of theconvertible loan stock and holders of the company's warrants and upon the newordinary shares and dollar notes resulting from the reorganisation beingadmitted to the Official List and to trading on the London Stock Exchange'smarket for listed securities and such admission becoming effective. R.E.A. Services Limited, a wholly owned subsidiary of the company, has for sometime owned £250,000 nominal of convertible loan stock. Implementation of theproposed reorganisation of the convertible loan stock would result in theexchange of the stock owned by R.E.A. Services Limited for new ordinary sharesand dollar notes. By law, a company may not issue its own shares to asubsidiary. Accordingly, R.E.A. Services Limited has today arranged to sell itsholding of convertible loan stock to an institutional purchaser at a price of£430 per £100 nominal of the stock. Formal documentation relating to the proposals described above is currently atan advanced stage and it is hoped that this can be despatched to shareholdersand holders of the convertible loan stock and the company's warrants in the nearfuture. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
R.e.a.hldgs.