22nd Jul 2005 15:09
Britannic Global Income Trust PLC22 July 2005 BRITANNIC GLOBAL INCOME TRUST PLC PROPOSALS FOR A SCHEME OF ARRANGEMENT UNDER SECTION 425 OF THE COMPANIES ACT 1985 PROPOSALS FOR THE WINDING UP OF BRITANNIC GLOBAL INCOME SECURITIES PLC 1. Summary The Board of Britannic Global Income Trust plc (the "Company") announces thatagreement has been reached on the terms of a proposed scheme of arrangementunder section 425 of the Companies Act 1985 (the "Scheme") under which bothOrdinary and ZDP shareholders should achieve an improvement in the value oftheir shares by comparison to a winding up of the Company and its subsidiary,Britannic Global Income Securities plc ("BGIS"). The Scheme is subject to theconditions set out in Appendix I. These proposals (the "Proposals") value the Ordinary shares of the Company at0.5 pence each (approximately £360,000 in aggregate), whereas on a winding up ofthe Company the Ordinary shares would be worthless. The Board estimates that if the proposals are implemented ZDP shareholders willachieve a return of 14.6 pence per share, compared with a return of 11.4 penceper share on a winding up - a 28 % increase in assets attributable to ZDPshareholders. The Scheme is expected to be completed on or around 7 October 2005 and paymentsto Ordinary shareholders are expected to made shortly thereafter. ZDPshareholders will receive their payments following the winding up of BGIS whichwill begin on 30 November 2005. Your board is aware that many Ordinary shareholders have incurred verysubstantial losses on their investment in the Company and that the Proposalswill only result in relatively small payments. However, on the basis of thecurrent financial position of the Company, the directors do not consider thatthere is any realistic prospect that any funds would be available for adistribution to Ordinary shareholders in any subsequent liquidation of theCompany. Against this background, the directors believe that the Scheme offersOrdinary shareholders an opportunity to realise some value from their shareswhere otherwise there would be none. Under the Proposals (i) Second Terrace Hill Investing Limited and Second ParkCircus Investing Limited (together the "Purchasers") will acquire the entireissued share capital of the Company and provide cash to enable the Company topay or compromise, as appropriate, the claims of its creditors ("SchemeCreditors") and (ii) the Company will assign to its subsidiary BGIS, rights tocertain compensation/ claims potentially payable to/ in favour of the Company.The Proposals to Scheme Creditors involves the distribution of the assets of theCompany represented by cash on the Effective Date (net of expenses - "SchemeExpenses") in order, as appropriate, to pay in full or to compromise the claimsof the Company's creditors. As part of the arrangements, the Purchasers haveagreed to increase the assets of the Company represented by cash available fordistribution to its creditors under the Scheme by making a capital contributionof approximately £770,000 (from which the estimated Scheme Expenses of £407,000will be deducted on the Effective Date) plus an amount equal to the mid-marketvalue of the Company's portfolio of investment companies at the Effective Datewhich will be paid in cash on or before the Effective Date. The proposed Purchasers of the Company are two UK resident companies. Furtherinformation on the Purchasers is set out in Appendix II of this announcement. The Board, who have been so advised by Ernst & Young LLP, consider the terms ofthe Proposals to Shareholders to be fair and reasonable and recommend thatShareholders vote in favour of the Scheme. The directors also consider the termsof the Proposals to the unsecured creditors to be fair and reasonable andrecommend that they vote in favour of the Scheme. 2. Proposals The Proposals are to be implemented by way of the Scheme. The Scheme is subjectto the conditions set out in Appendix I of this announcement. If the Scheme becomes effective all of the Ordinary shares will be transferredto the Purchasers and Ordinary shareholders will receive from the Purchasers foreach Ordinary share 0.50 pence in cash. Ordinary shareholders (other than Overseas Shareholders) may alternatively electto receive Loan Notes instead of all or part of the cash consideration to whichthey would otherwise be entitled on the basis set out in paragraph 3 below. If the Scheme becomes effective, arrangements will be implemented through theScheme by means of which the assets of the Company represented by cash at theEffective Date net of the Scheme expenses will be distributed to the SchemeCreditors to pay or compromise, as appropriate, their claims against theCompany. As part of the arrangements, the Purchasers have agreed to increase theassets of the Company represented by cash available for distribution to itscreditors under the Scheme by making a capital contribution (the "CapitalContribution") of approximately £770,000 (from which the Scheme Expenses will bededucted on the Effective Date) plus an amount equal to the mid-market value ofthe Company's portfolio of investment companies at the Effective Date which willbe paid in cash to the Company on or before the Effective Date. It is estimatedthat the assets of the Company represented by cash as at the Effective Dateincluding the Capital Contribution and net of Scheme Expenses and afterrepayment of the Bank Debt will be approximately £2.8 million. Subject to the Scheme becoming effective, the Company has also agreed as part ofthe Scheme to assign to BGIS the rights to certain compensation/claimspotentially payable to/in favour of the Company. It is estimated that Scheme Expenses will be £407,000 (including irrecoverableVAT). If the Scheme does not become effective, Scheme Expenses are expected tobe approximately £60,000 (including irrecoverable VAT) although Terrace Hill hasagreed to make a contribution (the "Cost Contribution") of £60,000 towards theScheme Expenses if the Scheme does not become effective for any reason otherthan a failure to secure the required levels of support from shareholders andcreditors. If the Scheme becomes effective then the Cost Contribution will betreated as part of the Capital Contribution. If the Scheme becomes effective, cheques in respect of the cash considerationdue for the Scheme Shares and definitive certificates for any Loan Notes towhich Shareholders are entitled will be despatched not later than 14 days afterthe date when the Scheme becomes effective (the "Effective Date").The Effective Date is expected to be on or around 7 October 2005. 3 The Loan Note Alternative As an alternative to all or part of the cash consideration which would otherwisebe receivable by them under the Scheme, Ordinary shareholders (other thanOverseas Shareholders) are entitled to elect to receive Loan Notes to be issuedby one or both of the Purchasers (to be decided at their sole discretion) on thefollowing basis: For 0.50 pence of cash consideration under the Scheme, 0.50 pence nominal valueof Loan Notes. The Loan Note Alternative is conditional on the Scheme becoming effective in allrespects. No Overseas Shareholder may elect for the Loan Note Alternative. A Noteholder shall have the right to require all or any part (being 1 pennynominal value or any multiple thereof) of his holding of Loan Notes to be repaidin accordance with the terms of the Loan Note Instrument on 31 December 2005 and/or any 30 June or 31 December falling thereafter. Any Loan Notes not previouslyrepaid will be redeemed on 30 June 2012. Shareholders should be aware that the Loan Notes will not bear interest, willnot be guaranteed and will not be transferable. The redemption price of the LoanNotes is calculated by reference to the quoted mid market price of a UnitedUtilities PLC ordinary share and therefore the redemption price of the LoanNotes may well go down as well as up depending on the performance of UnitedUtilities PLC shares. 4. Background to the board's recommendations The Company was incorporated on 30 November 2000. In December 2000, the Companyallotted 71.25 million Ordinary Shares and BGIS allotted 18.75 million ZDPShares at a subscription price of 100 pence per share pursuant to placings madeat that time. The Company was established as a split capital investment trust and invested inother UK investment trusts with the objective of providing Shareholders with ahigh level of income together with the potential for income and capital growth.The objective of BGIS was to provide ZDP Shareholders with a predetermined finalcapital entitlement. The Company is geared by way of unsecured bank debt and a loan note issued toBGIS. It is proposed that the Company will repay the bank debt in full prior tothe Effective Date. The management of the Company's investments is contracted out to BritannicInvestment Managers Limited (the "Manager"). The Company first breached its banking covenants in 2002 as a consequence of asharp decline in the value of the Company's assets. Since that time, it has beennecessary to sell most of the Company's assets. Dealings in the Ordinary and the ZDP shares on the London Stock Exchange weresuspended on 25 July, and the suspension was lifted on 17 March 2005. The Company has significant capital losses and the board has been working withadvisers with the objective of realising some value in respect of those lossesfor the Company. The Purchasers consider that over time it may be possible toutilise certain of these capital losses and are therefore seeking to acquirecontrol of the Company and its losses. 5. Assignation of rights to certain compensation/ claims potentially payable to/in favour of the Company As one of the arrangements by means of which the claims of BGIS against theCompany will be paid or compromised under the Scheme, it is proposed that theCompany and BGIS will enter the Assignation under which with effect from theEffective Date the Company will assign to BGIS the following: (a) the right to the claim to be advanced in Court proceedings to be raised bythe Company against the Manager for repayment of approximately £240,000 of valueadded tax that has been paid by the Company on investment management fees it haspaid to the Manager in respect of the management of the Group's portfolio ofinvestments; (b) the right to make any claim competent to the Company against the Manager,any other member of the Manager's group or any third party in connection withmatters of the type investigated by the FSA or Treasury Select Committee as partof their investigation into the split capital trust sector; and, (c) the right to receive any compensation paid to the Company in connection withmatters of the type investigated by the FSA or Treasury Select Committee as partof their investigation into the split capital trust sector. There is no guarantee that the Company will obtain compensation in respect ofany of these matters. 6. General A circular setting out details of the Scheme will be posted to Ordinary and ZDPshareholders as soon as it is practicable and subject to the Company obtainingan order of the Court convening the meetings of Ordinary shareholders andcreditors. Recipients of the circular are advised to read the circular settingout details of the Scheme and, as appropriate, to seek independent financialadvice. The availability of the Scheme to persons not resident in the United Kingdom maybe affected by laws of the relevant jurisdictions. Overseas Shareholders shouldinform themselves about and observe any applicable legal or regulatoryrequirements. This announcement does not constitute an offer or an invitation tooffer to purchase any securities. 7. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the"City Code"), any person who, alone or acting together with any other person(s)pursuant to an agreement or understanding (whether formal or informal) toacquire or control relevant securities of Britannic Global Income Trust plc,owns or controls, or becomes the owner or controller, directly or indirectly, ofone per cent. or more of any class of securities of Britannic Global IncomeTrust plc is required to disclose, by not later than 12.00 noon (London time) onthe London business day following the date of the relevant transaction, dealingsin such securities of that company (or in any option in respect of, orderivative referenced to, any such securities) during the period to theEffective Date of the Scheme or, if earlier, the date on which the Scheme lapsesor is otherwise withdrawn. Under the provisions of Rule 8.1 of the City Code, all dealings in relevantsecurities of Britannic Global Income Trust plc by Second Terrace Hill InvestingLimited or Second Park Circus Investing Limited or Britannic Global Income Trustplc, or by any of their respective "associates" (within the meaning of the CityCode) must also be disclosed. If you are in any doubt as to the application of Rule 8 to you, please contactan independent financial advisor authorised under the Financial Services andMarkets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk orcontact the Panel on telephone number +44 20 7638 0129; fax +44 20 7236 7013. For further information contact:Ernst & Young LLPPeter Ames 020 7951 4315Lough Callahan 020 7951 1561 The Directors of the Company accept responsibility for the information containedin this announcement other than the information relating to the Purchasers, thedirectors of the Purchasers and Terrace Hill Group PLC, including, withoutlimitation, the information set out in Appendix II of this announcement. The directors of the Purchasers accept responsibility for the informationcontained in this announcement relating to the Purchasers, the directors of thePurchasers and Terrace Hill Group PLC including, without limitation, theinformation set out in Appendix II of this announcement. To the best of the knowledge and belief of the Directors of the Company and thedirectors of the Purchasers (who have all taken reasonable care to ensure thatsuch is the case) the information contained herein for which they respectivelytake responsibility is in accordance with the facts and does not omit anythinglikely to affect the import of such information. Ernst & Young LLP, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Britannic GlobalIncome Trust plc in connection with the Proposals to Shareholders and will notbe responsible to anyone other than Britannic Global Income Trust plc forproviding the protections afforded to clients of Ernst & Young LLP or forproviding advice in relation to the Proposals. APPENDIX ICONDITIONS TO THE SCHEME 1. The Proposals are conditional on the Scheme becoming unconditional andbecoming effective by not later than 25 November 2005 or such later date as theCompany, BGIS, the Purchasers, the Creditors Scheme Supervisor and the Court mayagree. The Scheme is conditional upon: (a) the approval of the Scheme by a majority in number representingthree-fourths in value of the Ordinary shareholders on the register of membersat the Voting Record Time present and voting, either in person or by proxy, atthe Ordinary shareholder meeting; (b) the approval of the Scheme by a majority in number representingthree-fourths in value of the Ordinary Scheme Creditors present and voting,either in person or by proxy, at the Scheme Creditors Meeting; (c) the approval of the Scheme by a majority in number representingthree-fourths in value of the Subordinated Scheme Creditors present and voting,either in person or by proxy, at the Subordinated Scheme Creditors Meeting; (d) the approval of the implementation of the Proposals and any variation of therights of the ZDP Shareholders under the Articles of Association of BGISinvolved in the Scheme by a majority of not less than three-fourths of the ZDPshareholders present and voting, either in person or by proxy, at the ZDPshareholder meeting; (e) the sanction of the Scheme by the Court (without modification save as agreedby the Company and the Purchasers) and an office copy of the Court Order beingdelivered to the Registrar of Companies in Scotland. 2. The Proposals are also conditional upon: (a) there being no breach or termination of the Transaction Deed prior to theEffective Date; (b) between the date of this Announcement and the Effective Date, the Companynot having:(i) issued or agreed to issue, or authorised or proposed the issue of,additional shares of any class, or securities convertible into or exchangeablefor, or rights, warrants or options to subscribe for or acquire, any such sharesor convertible securities;(ii) disposed of or having agreed to dispose of any shares in the capital ofBGIS; and(iii) entered into any new or varied any existing contractual arrangements(other than the Transaction Deed and engagement letters with the Company'sadvisers retained for the purposes of the Scheme) with service providers whichare binding on the Company. (c) between the date of this Announcement and the Effective Date, no change intax law or practice having occurred that would result in the Company's capitallosses not being available for offset against future chargeable gains which maybe realised by Terrace Hill Group PLC and its subsidiaries; and, (d) no step being taken prior to the Effective Date by any Ordinary shareholderor creditor of the Company to initiate a liquidation of the Company or a windingup of the Company or to appoint an administrator, receiver or administrativereceiver to the Company or all or any of its assets.The Purchasers reserve the right (but shall be under no obligation) to waive, inwhole or in part, all or any of the conditions set out in paragraph 2 above. APPENDIX IIInformation on the Purchasers The Purchasers are Second Terrace Hill Investing Limited and Second Park CircusInvesting Limited. Second Terrace Hill Investing Limited and Second Park Circus Investing Limitedwere incorporated as private companies limited by guarantee with no sharecapital under the Companies Act in Scotland on 7 June 2005. The registerednumber of Second Terrace Hill Investing Limited is 285846 and Second Park CircusLimited is 285847. Siobhan M Robinson and Donald R Macdonald are the only directors of SecondTerrace Hill Investing Limited. The sole member of Second Terrace Hill InvestingLimited is Terrace Hill Group PLC. Miranda A Kelly and Alistair B Wilson are the only directors of Second ParkCircus Investing Limited. The sole member of Second Park Circus InvestingLimited is Park Circus (Management) Limited, whose ultimate parent is TerraceHill Group PLC. Since incorporation, neither of the Purchasers has traded or entered into anymaterial negotiations other than in connection with the Proposals and thefinancing thereof. The Purchasers have confirmed that neither of the Purchasers nor any partyconnected with them nor any party acting in concert with them owns or controlsshares in the Company or its Subsidiary. Terrace Hill Group PLC will on or before the Effective Date lend up toapproximately £3.4 million to the Purchasers by way of an unconditional interestfree unsecured loan for the purpose of funding the consideration payable by thePurchasers to Ordinary shareholders under the Scheme and the other paymentspayable by the Purchasers pursuant to the Proposals. This information is provided by RNS The company news service from the London Stock Exchange ENDRelated Shares:
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