24th Dec 2008 11:24
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
Mapeley Limited (the "Company")
Posting of shareholder circular in connection with proposed subscription by a related party of 20% Convertible Bonds due 2013 (the "Convertible Bonds") to be issued by the Company and the termination of the Relationship Agreement
24 December 2008
Posting of Circular and Notice of EGM
Mapeley Limited announces its intention to post a circular to Shareholders shortly in connection with an issue of £45 million of 20% Convertible Bonds due 2013 and the termination of the Relationship Agreement between the Company and certain entities managed by affiliates of Fortress Investment Group LLC. Unless otherwise defined in this announcement, capitalised terms used in this announcement are as defined in the Circular.
In addition to posting the Circular to Shareholders, the Company also intends to post an Information Memorandum (and accompanying Application Form) to Qualifying Shareholders shortly. The Information Memorandum will provide further information on, and the detailed terms and conditions of, the Convertible Bonds.
The Circular will summarise the principal terms of the Convertible Bonds and contain information on the consequences of the termination of the Relationship Agreement and provide an update on Mapeley's financial position and working capital. It will also include the timetable for the Issue of Convertible Bonds and details of the Mapeley EGM which will be held at Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 1WW on 26 January 2009 at 1.30 p.m. London time. The purpose of the meeting is to approve the Resolution contained in the Circular relating to the termination of the Relationship Agreement and the subscription by Fortress for its pro rata share of the Convertible Bonds.
The Issue of the Convertible Bonds is conditional, amongst other things, upon the passing of the Resolution by Independent Shareholders at the EGM.
The Board of Mapeley unanimously recommends that Independent Shareholders vote in favour of the Resolution. Wesley Edens, the Chairman of the Company who is connected with the Fortress Shareholders by virtue of his being, among other things, a director of Fortress Investment Group, has not taken part in the Board's consideration of the Transactions or in the recommendation to vote in favour of the Resolution. Each of the other members of the Board intends to vote in favour of the Resolution in respect of his own shareholding.
A copy of the Circular will shortly be available for viewing at the Document Viewing Facility of the FSA (25 North Colonnade, London E14 5HS) and will shortly be available for inspection at Mapeley's registered office (Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 1WW) as well as at the offices of Linklaters LLP (One Silk Street, London EC2Y 8HQ) during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) until the Mapeley EGM.
A letter to Shareholders from Roger Carey, the Chairman of the Independent Committee of Mapeley, is included in the Circular.
Roger Carey, Chairman of the Independent Committee of Mapeley, commented as follows:
"This transaction addresses the Company's immediate need for additional capital at a time of considerable economic and financial uncertainty. Qualifying Shareholders have the opportunity to subscribe for the Convertible Bond. Fortress's underwriting ensures to a significant degree that, subject to the Resolution being passed at the EGM, £45 million of additional capital will be available to the Company."
Background to the Transaction
Mapeley's business is built around secure long term relationships with predominantly government and investment-grade tenants generating a strong income stream, much of which is inflation linked or has fixed uplifts. Despite the resilience of its income streams, Mapeley needs to raise additional funds for general corporate and working capital purposes and to meet a scheduled debt repayment in April 2009.
In March 2008, Mapeley entered into a corporate loan of £60 million (the Corporate Facility) as part of the refinancing of borrowings taken on in connection with the prior acquisition of property assets as described in more detail in the Circular. This loan matures in April 2009 and is secured over all the assets of the Company. Since completing the refinancing in March 2008, conditions in global capital markets have deteriorated markedly such that the ability of companies that invest in UK real estate to raise funds in the capital markets is currently extremely limited. The Company has not been able to identify a source of additional debt financing in the time frame necessary to provide the Company with adequate reassurance in respect of its financial position.
The Corporate Facility has a loan-to-value covenant as do three non-recourse debt facilities (the Non-Recourse Facilities) secured over assets which net of debt represent 27 per cent. of Mapeley's Total Equity (as at 30 June 2008). Although Mapeley is currently in compliance with the covenants in its debt facilities, the potential failure to meet loan-to-value covenants in the Non-Recourse Facilities remains even once the Corporate Facility is repaid from a combination of Mapeley's existing cash and the net proceeds of the Convertible Bond Issue. The consequences of a breach of covenants in the Non-Recourse Facilities could be the enforcement of security by the lenders and resultant loss to the Mapeley Group of the relevant assets and the cash flow associated with them. However, the remainder of the Mapeley Group's business would be unaffected.
Further details of the Company's working capital position, including a detailed qualified working capital statement, and the possible consequences of failing to comply with covenants in its debt facilities in the future will be contained in the Circular.
Summary of the Transaction
Against the background of turbulence in the global credit markets described above and, in particular, the UK commercial property sector, the Company has worked with Fortress to design an instrument which could be offered to Qualifying Shareholders, and be underwritten by Fortress, providing the Company with sufficient liquidity to address the repayment of the Corporate Facility. The Convertible Bond Issue is the result of this exercise. The net proceeds of the Convertible Bond Issue of approximately £44 million will be aggregated with the available cash within the Company at the time and £60 million will be used to repay the Corporate Facility. The balance will be used for general corporate and working capital purposes.
Under the terms of the Convertible Bond Issue, the Company is proposing to invite Qualifying Shareholders to acquire the Convertible Bonds at their principal amount pro rata to their existing holding of Ordinary Shares, raising £45 million (approximately £44 million net of costs and expenses). In order to take up Convertible Bonds under the Convertible Bond Issue Shareholders need to own at least 31,555 Ordinary Shares. The Convertible Bonds will pay a cash coupon of 20% per annum, payable quarterly in arrear. The Company may elect to defer interest payments for up to one year at a time; if it does so, it may not declare any dividends on the Ordinary Shares. Subject to certain exceptions, the Company has also agreed not to incur any new debt unless conversion rights shall have been exercised and/or purchases (and corresponding cancellations) and/or redemptions effected in respect of 50 per cent. or more of the Convertible Bonds. The initial conversion price will be £0.86, being the 10-day volume weighted average price up to and including 23 December 2008. The initial conversion price represents a 38% premium to the closing price on 23 December 2008. The Convertible Bonds will mature on 27 October 2013 and the Company has certain rights to redeem them before that date. A summary of the terms and conditions of the Convertible Bonds will be contained in the Circular and the full terms and conditions will be set out in the Information Memorandum.
In March 2008 the Company stated that it had revised its dividend policy so that dividends would be paid semi-annually at a revised payout ratio. The Board stated that such a change in dividend policy would enable the Company to increase balance sheet flexibility. In assessing the appropriate pay out ratio in the future, the Board will have regard to the impact of the Convertible Bond Issue on the Company's financial position and prevailing market conditions. If interest is deferred on the Convertible Bonds in accordance with their terms, the Company will not be entitled to pay dividends until such interest has been paid.
As a condition of the Convertible Bond Issue, the Company and Fortress are proposing to terminate the Relationship Agreement between the Company and Fortress which was entered into at the time of the Company's IPO in June 2005. In the event that the Underwriting Agreement is terminated on or before the Closing Date, the Relationship Agreement will not terminate. Further details of the Relationship Agreement will be contained in the Circular.
Pursuant to the Underwriting Agreement, Fortress has irrevocably undertaken to the Company to participate in the Convertible Bond Issue by subscribing and paying for its pro rata entitlement of Convertible Bonds at the Issue Price. Additionally, pursuant to the terms and conditions of the Underwriting Agreement, Fortress has agreed that, to the extent that the Convertible Bonds are not taken up by other Shareholders, it will acquire such Convertible Bonds at the Issue Price. The Underwriting Agreement is conditional upon, inter alia, the passing of the Resolution at the EGM. Further details of the Underwriting Agreement will be contained in the Circular.
As a related party, Fortress is not eligible to vote at the EGM. If the Independent Shareholders do not pass the Resolution, the Convertible Bond Issue will not proceed. (For the purposes of the Listing Rules the related parties are Fortress UK Acquisition Company, FIT Mapeley Holdings Limited, Fortress Investment Fund V (Fund A) L.P., Fortress Investment Fund V (Fund B) L.P., Fortress Investment Fund V (Fund C) L.P., Fortress Investment Fund V (Fund D) L.P., Fortress Investment Fund V (Fund F) L.P. and Fortress Investment Fund V (Fund G) L.P. and certain of their affiliated entities.)
In the event that Fortress and its associates (together with certain other Shareholders) hold more than 75 per cent. of the Ordinary Share capital of the Company, the Listing of the Company's Ordinary Shares on the Official List and the trading of its Ordinary Shares on the London Stock Exchange could be cancelled. If the Board decides, or if the Fortress Shareholders propose that the Company should request, that the Listing should be cancelled, the Board will comply with the requirements of the Listing Rules and issue a further circular to Shareholders seeking Shareholder approval for the cancellation of the Listing at a further general meeting of the Company. In the event that the Convertible Bond Issue proceeds and the Company fails to convene such a general meeting within a reasonable period of time of Fortress and its Associates notifying the Company that their shareholding exceeds 75 percent., Fortress has agreed to requisition, and take all reasonable steps to ensure the requisitioning of, a general meeting of the Company to seek such Shareholder approval. Fortress has agreed that if an EGM is held to consider the de-listing of Mapeley, it will vote in favour of de-listing. Further details in relation to the potential cancellation of the Listing are contained in the Circular.
Conclusion
The Company requires additional capital to meet a short-term debt maturity. Mapeley does not believe that there is an alternative source of capital to the Convertible Bonds available to the Company in the timeframe necessary to address its financial needs. In reaching this conclusion, the Board has had regard to Mapeley's working capital requirements, market conditions, the level of the Company's share price and the lack of other forms of debt or equity finance. For these reasons the Company has decided to pursue the Convertible Bond Issue as being in the best interests of Shareholders as a whole.
The Convertible Bond Issue has been structured to enable Qualifying Shareholders to subscribe for the Convertible Bonds pro rata to existing shareholdings. In an extremely challenging market environment, Mapeley welcomes the significant degree of certainty of funds provided by Fortress's underwriting of the Convertible Bond Issue, and the short timeframe within which proceeds would be available. The Independent Directors believe that these attractions outweigh the adverse consequences of a possible cancellation of the Listing.
Unless the Independent Shareholders vote in favour of the Resolution, the Company may not have sufficient capital available to repay the Corporate Facility.
The purpose of the Circular is to provide Mapeley Shareholders with details of the Transactions and to explain why the Independent Committee is recommending that Shareholders vote in favour of the Resolution at the EGM.
Enquiries:
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Brunswick |
Tel: +44 (0)20 7404 5959 |
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Kate Holgate |
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Pavla Shaw |
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Lazard & Co., Limited |
Tel: +44 (0)20 7187 2000 |
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William Rucker |
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Patrick Long |
Lazard, who is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Mapeley in relation to the transaction and will not be responsible to any person other than Mapeley for providing the protections afforded to clients of Lazard or for providing advice in relation to the contents of this announcement, the Circular or the transaction.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
Mapeley Shareholders should specifically consider all of the information set out in the Circular before making any decision whether or not to vote in favour of the Resolution.
This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security.
The securities mentioned herein have not been, and will not be, registered under the US Securities Act of 1933 (the "Securities Act"). Securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of the securities mentioned herein in the United States.
This announcement does not constitute a prospectus or prospectus equivalent document. Nothing in this announcement should be interpreted as a term or condition of the Convertible Bond Issue. Any decision to acquire Convertible Bonds under the Convertible Bond Issue must be made only on the basis of the information contained in and incorporated by reference into the Information Memorandum expected to be posted to Qualifying Shareholders shortly.
No statement in this announcement is intended to constitute a profit forecast or profit estimate for any period, nor should any statement be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for Mapeley.
Neither the content of Mapeley's website (or any other website) nor the content of any website accessible from hyperlinks on Mapeley's website (or any other website) is incorporated in, or forms part of, this announcement.
The distribution of this announcement, the Circular, the Information Memorandum and/or related documents into certain jurisdictions other than the United Kingdom is or may be restricted by law and therefore persons into whose possession this announcement and any such documents come should inform themselves about and observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction.
Forward-Looking Statements
Some of the statements contained in this announcement may include forward-looking statements which reflect the Mapeley Group's or, as appropriate, the Directors' current views with respect to future events and financial performance. Statements which include the words "expect", "intend", "plan", "project", "anticipate", "will" and similar statements of a future or forward-looking nature identify forward-looking statements for the purposes of the US federal securities laws or otherwise.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Mapeley Group's actual results to differ materially from those indicated in these statements. These forward-looking statements speak only as at the date of this announcement. Subject to any continuing obligations under the Listing Rules and the Disclosure and Transparency Rules, the Company undertakes no obligation publicly to update or review any forward-looking statement contained in this announcement, whether as a result of new information, future developments or otherwise.
If one or more of these risks or uncertainties materialise, or if the Mapeley Group's underlying assumptions prove to be incorrect, the Mapeley Group's business, financial condition and results of operations could be adversely affected. Any forward-looking statements in this announcement reflect the Mapeley Group's or, as appropriate, the Directors' current views with respect to future events and are subject to certain risks and assumptions relating to the Mapeley Group's business, prospects, financial condition, results of operations, growth strategy and liquidity.
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