React Energy PLC Publication of Circular and Notice of EGM (9995Z)

TIDMREAC

RNS Number : 9995Z

React Energy PLC

23 September 2015

 
   23 September 2015 
 

REACT Energy plc

("REACT" or the "Company")

Publication of Circular and Notice of Extraordinary General Meeting

Further to the announcement on 15 July 2015 in which it announced the Company's exit from examinership, REACT Energy plc (AIM:REAC), the energy infrastructure developer and operator which focuses on the production of clean energy in the UK and Ireland, announces that the circular relating to the Waiver of Rule 9 (the "Circular") is being sent to shareholders today, which sets out in more detail the background to the funding provided by the Concert Party and details of the Waiver of Rule 9 of the Takeover Rules. All capitalised terms in this announcement are as defined in the Circular.

The Circular contains a notice of the Extraordinary General Meeting (the "EGM") to approve the Whitewash Waiver. The General Meeting will be held at 11.00 a.m. on Friday 16 October 2015 at The Cork Airport Hotel, Cork, Ireland.

The Circular is available for inspection on the Company's website: www.reactenergyplc.com.

   1.   Background 

The Company's shares were suspended from trading on AIM from 1 December 2014 at the Company's request pending a clarification of the Company's financial position.

On 13 May 2015 the Company announced that it had made a petition pursuant to the Act to the High Court in Ireland to appoint an Examiner to the Company. An Examiner was appointed by the Court on 20 May 2015.

The decision to seek examinership followed the suspension of funding discussions with a strategic investor which resulted from a dispute with the landlord on the Enfield site, related difficulties in financing the repowering of the Newry site and actions taken by certain creditors of REACT and related companies.

An Independent Accountants' Report from Grant Thornton on REACT and related companies concluded that it was possible for a sustainable and profitable business to emerge from the Examinership process based on a restructuring of REACT and related companies. Altair, an existing loan note holder supported REACT throughout the Examinership process, and together with a third party strategic investor indicated that they would be prepared to invest in REACT to facilitate a scheme of arrangement for the restructured business.

REACT also announced that as part of the Examinership process it had issued a loan note to Altair for up to EUR 500,000 ("Further Altair Loan Note"). The proceeds of the loan note were used to fund the Examinership process.

The High Court approved the Scheme of Arrangement on 14 July 2015 which was followed by the exit of the Company from the Examinership process on 25 July 2015, the Effective Date. The Company announced on the 15 July 2015 the issue of GBP1,000,000 (before expenses) of a Secured Loan Facility to fund on-going working capital requirements.

Following the approval of the Scheme creditors were issued with 37,470,972 new Ordinary Shares in the Company at a price of GBP0.11 each (being the closing price of an Ordinary Share on the 1 December 2014, the date of suspension of the Company's Ordinary Shares from AIM), which after issue amounted to circa 55% of the enlarged issued share capital. This was as a result of the conversion of EUR5.7 million of debt into equity. The 37,470,972 new Ordinary Shares were issued to the relevant creditors and are held by a Trustee on their behalf. The Trustee has entered into a 'Lock-in' restriction on behalf of the creditors, whereby they are unable to dispose of the new Ordinary Shares that were received pursuant to the Scheme for a period of one year from the date of Admission. The new Ordinary Shares were admitted to trading on AIM on 31 July 2015.

2. Key Elements of the Funding Proposals

The Company had been actively engaged in discussions with potential providers of finance including with EcoFinance a group which sources finance for renewable energy projects. As announced on 8 June 2015, the Company signed a conditional facility letter for the Secured Loan Facility with EcoFinance the drawdown of which was subject to certain conditions precedent being met under the Loan Facility, the Scheme being approved by shareholders and creditors and ultimately the High Court.

Summary of the EcoFinance proposal

EcoFinance is a privately owned company registered in England. It was incorporated in May 2015 as a special purpose entity specifically for the purposes of entering into the proposed REACT transaction. It enjoys relationships with a number of co-investment partners both in the UK and globally.

The Secured Loan Facility comprises a five-year term loan of GBP1,000,000 at 15% per annum fixed rate of interest, payable monthly in arrears. The net proceeds of the Secured Loan Facility will be utilised for corporate development and general working capital purposes. The Secured Loan Facility is to be repaid by way of a bullet repayment of capital (and any accrued interest) on before the anniversary of 60 months from the date of drawdown of the Secured Loan Facility.

Equity Kicker: an exercisable right is attached to the Secured Loan Facility whereby 60 days from the drawdown under the Secured Loan Facility, EcoFinance has the right to an amount of fully paid new Ordinary Shares in the Company. The monetary value of the exercisable right will be determined by the following formula:

-- 9 million x (Average Share Price minus 10p), where the Average Share Price is the arithmetic average of the Company's closing share price on each of the 60 days following re-commencement of trading in the Company's shares. The value of this right has a cap of GBP600,000 and a floor of GBP200,000. The maximum number of shares issuable under this mechanism is 3,529,412 new Ordinary Shares.

-- 35,300,000 Warrants have been issued to Alchemy Capital, a company related to the EcoFinance on drawdown of the Secured Loan Facility, subject to any necessary shareholder and other regulatory requirements. These Warrants entitle the holders to subscribe for new Ordinary Shares at an exercise price of 10p per share. The Warrants are assignable and capable of being exercised for a period of seven years from the date on which the Secured Loan Facility is drawn down.

Summary of Altair financing

Altair provided funding to REACT by way of a loan agreement to finance the Examinership process, which was announced on 13 May 2015. The existing secured debt held by Altair, comprising the 9% Secured Loan Note of GBP1.5 million issued in 2014 and the Examinership financing facility of EUR500,000, was refinanced by way of a new 7.5% GBP2 million Convertible Secured Loan Note ("CSLN") and is secured by the same security package granted in favour of EcoFinance. This is governed by an inter creditor deed under which the SLF security plus interest and costs shall rank in priority to the CSLN security plus interest and costs. Under the terms of the CSLN, Altair has the right to convert up to GBP1 million into new Ordinary Shares at GBP0.10p. Altair has also been granted an exercisable right in the form of an equity kicker of up to 3,529,412 new Ordinary Shares on the same basis as EcoFinance as set out above.

The Company has also issued 3,150,000 Warrants to Origen Capital Partners LLP, an entity related to Altair, on drawdown of the SLF. These Warrants entitle the holders to subscribe for new Ordinary Shares at an exercise price of GBP0.10 per share. These warrants are assignable and capable of being exercised for a period of seven years from the date on which the SLF is drawn down.

EcoFinance and Altair have entered into a separate agreement in relation to financing provided to the Company whereby EcoFinance has granted to Altair an option to acquire the benefit and security of the GBP1,000,000 SLF. This is a one-year option and the price of the option is a 5% premium on the capital amount.

3. Use of Proceeds

The net proceeds from the Fundraising will be used to fund general working capital across the Group. The Directors believe that the Fundraising will provide the Company with adequate resources to develop a plan to enhance the value of its principal assets. Development of, and revenue generation from, the principal assets of the Company will require additional financing which is expected to be sourced in due course.

4. Current and Potential Shareholding of the Concert Party

The Concert Party currently holds 204,545 Ordinary Shares representing 0.3 per cent. of the Ordinary Shares currently in issue. As described above, as a result of the Refinancing Documents, it is expected that the Concert Party, could potentially hold up to 55,713,369 new Ordinary Shares in the Company, representing 45.06 per cent. of the Enlarged Share Capital (as enlarged pursuant to the Refinancing Documents).

 
            Number         % of Issued   Number of         Number         Total Number    % of 
             of Ordinary    Share         shares to         of Warrants    of Ordinary     Enlarged 
             Shares         Capital       be issued         issued         Shares          Issued 
             (as at                       under the                        held post       Share 
             the date                     Equity Kicker                    issue of        Capital 
             of this                      and conversion                   Ordinary        assuming 
             Document)                    of Altair                        Shares          exercise 
                                          GBP1 million                     under the       of all 
                                          loan at                          Equity          Warrants 
                                          10p                              Kicker          and conversion 
                                                                           and exercise    of Farmers 
                                                                           of all          loan 

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