24th Dec 2009 07:01
The Kellan Group Plc
("Kellan" or the "Company")
Issue of Convertible Loan Notes and Share Warrants
Convening of General Meeting
The Kellan Group Plc (AIM: KLN), a leading IT, accountancy, hospitality, leisure and professional services recruitment group, is pleased to announce that the Company intends, subject to the passing of resolutions to be proposed at a general meeting of the Company, to be held at 27 Mortimer Street, London W1T 3BL at 10 a.m. on 18 January 2010, to implement a Fundraising to raise approximately £1,000,000 before expenses, pursuant to the issue of Convertible Loan Notes. Such Convertible Loan Notes are to be subscribed for by the Directors (excluding the Independent Directors) and certain existing Shareholders. In addition, it is proposed that the Company will issue Share Warrants to the Noteholders.
The Company intends to use the proceeds of the Fundraising to strengthen the Company's balance sheet and to enable it to continue to meet its repayment obligations on its outstanding long term debt, whilst also maintaining sufficient working capital for its day to day requirements.
In order to enable the Company to enter into the Convertible Loan Note Instrument and the Warrant Instrument and to subsequently be able to satisfy its obligations to issue New Ordinary Shares and to provide authority to issue additional shares, the Board is now seeking authority to allot and issue the New Ordinary Shares and additional shares free from pre emptive rights. The Fundraising and issue of the Convertible Loan Notes and Share Warrants are therefore conditional upon the passing of the Resolutions.
Formal notice of the GM is being posted to Shareholders and is available on the Company's website at www.kellangroup.co.uk.
Convertible Loan Notes
The Convertible Loan Notes, which mature after 5 years from the date of the Convertible Loan Note Instrument, shall bear interest at the rate of 10 per cent. per annum, payable half yearly in arrears, until such time as they are repaid or converted in accordance with their terms of issue. 50 per cent. of such interest shall be paid in cash with the balance being satisfied by the issue of New Ordinary Shares at a price per share equal to the lower of 6.5p or the Volume Weighted Average Price of the 20 trading days preceding the relevant half year end, subject to a minimum price of 2p (such minimum price representing the nominal value of the Ordinary Shares).
A Noteholder may, by service of a conversion notice on the Company, direct the Company to allot and issue such number of New Ordinary Shares (rounded down to the nearest whole number) as is equal to the nominal value of the number of the Convertible Loan Notes to be converted divided by the Conversion Price.
The right to convert the Convertible Loan Notes will automatically lapse after five years or (if earlier) after a takeover offer for the Company becomes unconditional in all respects.
The issue of the Convertible Loan Notes to the Directors (other than the Independent Directors) of whom Anthony Reeves and John Bowmer are also "substantial shareholders" of the Company for the purposes of the AIM Rules, is deemed to be a related party transaction under the AIM Rules. In accordance with Rule 13 of the AIM Rules, the Independent Directors, having consulted with Strand Hanson Limited, the Company's nominated adviser, consider that the Fundraising, the issuing of the Convertible Loan Notes and the issuing of the Share Warrants on the terms of the Convertible Loan Note Instrument and the Warrant Instrument are fair and reasonable insofar as the Company's shareholders are concerned.
Share Warrants
Upon execution of the Convertible Loan Note Instrument, the Company proposes to issue Share Warrants to the Noteholders, which entitle them to subscribe for one New Ordinary Share at the Subscription Price in respect of each £1 paid to the Company by way of subscription for the Convertible Loan Notes issued to that Noteholder. The Share Warrants will automatically lapse after five years or (if earlier) after a takeover offer for the Company becomes unconditional in all respects.
Trading Update
After experiencing losses in excess of £1.4m at Adjusted EBITDA level during the first half of this year, the Group's trading during the second half of 2009 has stabilised with signs of improvement across some of the Group's brands which are anticipated to result in the Group moving closer to break-even at Adjusted EBITDA level for the second half of 2009.
In general, visibility remains poor across most of the Group's markets and management continues to adjust the Group's cost base in order to match current and near future demands for its services as they align with active clients to ensure that the Group can outperform its competitors.
Recommendation
The Directors unanimously recommend that Shareholders vote in favour of the Resolutions, as they have irrevocably undertaken to do in respect of the beneficial holdings in which they exercise the voting rights and which amount to 33,951,895 of the Existing Ordinary Shares, representing approximately 38.99 per cent. of the voting rights currently exercisable at a general meeting of the Company.
Tony Reeves and John Bowmer, Non-Executive Co-Chairmen of Kellan, commented:
"We are delighted that, in what continues to be a tough operating market for the Group, the Directors have shown their ongoing support for the business through their collective subscription for a large proportion of the Convertible Loan Notes. We are confident that the additional funding which the issue of the Convertible Loan Notes will generate, will ensure the Group is well positioned to enter 2010 in a position of relative strength."
Unless the context otherwise requires, defined terms used in this announcement shall have the meanings given to them in the circular to shareholders of the Company dated 24 December 2009 and available on the Company's website, www.kellangroup.co.uk.
Enquiries:
Kellan Group PLC
Ross Eades, Chief Executive Officer
Will Coker, Chief Financial Officer
Tel: + 44 (0) 20 7268 6200
Strand Partners Limited
Simon Raggett / Angela Peace
Tel: +44 (0) 20 7409 3494
Related Shares:
Kellan Group