Proposed Capital Restructuring

 

TIDMHYWD 
 
RNS Number : 0162A 
Heywood Williams Group PLC 
01 October 2009 
 

1 October, 2009 
 
 
Heywood Williams Group PLC 
 
 
Proposed Capital Restructuring 
 
 
 
 
Introduction 
Heywood Williams announces today that it has reached agreement with its UK 
Banking Syndicate on the terms of a proposed debt and share capital 
restructuring, including a proposed cancellation of the admission of its 
Ordinary Shares to the Official List and to trading on the London Stock 
Exchange's market for listed securities. 
 
 
Key Points 
The Restructuring is designed to put in place an appropriate long term capital 
structure to enable the Group to trade through the current adverse economic 
conditions and to have the capability grow as its markets recover.  The Board 
believes that the proposed Restructuring represents the only available route to 
achieving a long term sustainable capital structure for the benefit of all 
stakeholders in the current market conditions. 
 
 
The key terms of the Restructuring are: 
 
 
  *  A debt for equity exchange of GBP21 million of existing bank debt; 
 
  *  A GBP6 million increase in the Group's committed facilities from the UK Banking 
  Syndicate to GBP45 million; 
 
  *  Agreement with the Group's UK independent Pension Trustee to defer deficit 
  repair contributions, on an affordability basis, until 2014; 
 
  *  Immediately following the Restructuring, the UK Banking Syndicate and its Board 
  representative will together hold 80% of the Company's issued share capital on a 
  fully diluted basis, with existing Shareholders holding 10% and, as a 
  requirement of the Restructuring, the executive members of the Board and certain 
  other members of the senior management also holding 10%; and 
 
  *  Cancellation of admission of Ordinary Shares to the Official List and to trading 
  on the London Stock Exchange's market for listed securities. 
 
The proposals are conditional upon, amongst other things, Shareholder approval 
being obtained at a General Meeting to approve all the resolutions associated 
with the proposed Restructuring of Heywood Williams. The General Meeting has 
been convened for 11.00 am on 20 October and will be held at the offices of 
Pinsent Masons LLP at 3 Hardman Street, Manchester M3 3AU. 
 
 
 
 
Roger Boyes, Chairman of Heywood Williams, said: 
 
 
"The Board believes that the proposed Restructuring and related proposals 
present the best prospects for securing a significantly improved financial 
structure for the Group and the continuing support of its UK Banking Syndicate, 
upon which the Group is dependent for its ability to trade." 
 
 
Board Recommendation 
The proposed long term capital structure and associated restructuring is 
designed to address the adverse impact of the current major market downturns on 
Heywood Williams' indebtedness and associated interest costs, whilst retaining 
the possibility of delivering value to Shareholders in the future. It will also 
remove any capital repayments until 2013 and UK pension deficit repair 
contributions until 2014, which is expected to further enhance cash flow 
generation. Furthermore, the Restructuring will provide appropriate headroom at 
peak drawings and, as such, sufficient working capital should be available to 
meet the increased demand as the Group's markets recover. As a result of all 
these actions, the credit profile of the Group is expected to be enhanced with 
regard to suppliers and customers alike. 
 
 
The Board has considered and explored a range of strategic alternatives in 
conjunction with its advisers. The Board has concluded that the proposed 
Restructuring represents the only available route to achieving a long term 
sustainable capital structure for the benefit of all stakeholders in the current 
market conditions. 
 
 
It is important to note that the Board believes that failure to approve the 
Restructuring proposals would immediately have material and very detrimental 
consequences for the Group. In such circumstances it is highly unlikely that the 
Ordinary Shares would retain any value. 
 
 
Consequently, the Board strongly recommends that Shareholders vote in favour of 
the Restructuring proposals announced today. 
 
 
For further information, please contact: 
 
 
+------------+----------------------------------+--------------------------------+ 
|            |                                  |                                | 
+------------+----------------------------------+--------------------------------+ 
| Contacts:  | Heywood Williams Group PLC       | Tel: [phone]             | 
|            | Robert Barr, Chief Executive     |                                | 
|            | Mike Richards, Finance Director  |                                | 
|            |                                  |                                | 
+------------+----------------------------------+--------------------------------+ 
|            | Financial Dynamics               | Tel: [phone]             | 
+------------+----------------------------------+--------------------------------+ 
|            | Jon Simmons/Sophie Moate         | Tel: [phone]             | 
|            | Rothschild                       |                                | 
|            | Ed Welsh                         |                                | 
|            | Chris Alonso                     |                                | 
|            |                                  |                                | 
+------------+----------------------------------+--------------------------------+ 
 
 
 
 
 
 
 
 
 
 
LETTER FROM THE CHAIRMAN OF HEYWOOD WILLIAMS GROUP PLC 
 
 
HEYWOOD WILLIAMS GROUP PLC 
(Incorporated under the Companies Act 1985 and 
registered in England and Wales No. 5954792) 
 
+---------------------+-----------------------------------+--------------------------+ 
|                     |                                   |                          | 
+---------------------+-----------------------------------+--------------------------+ 
| Directors           |                                   |        Registered Office | 
+---------------------+-----------------------------------+--------------------------+ 
| Roger Boyes         | (Non-Executive Chairman)          |           Brindley House | 
| Robert Barr         | (Chief Executive)                 |              Premier Way | 
| Mike Richards       | (Finance Director)                |  Lowfields Business Park | 
| William Schmuhl     | (Chairman - US operations)        |                   Elland | 
| Mark Wild           | (Group Counsel and                |           West Yorkshire | 
| Graham Menzies      | Company Secretary)                |                  HX5 9HF | 
| Stephen Rogers      | (Non-Executive Director)          |                          | 
|                     | (Non-Executive Director)          |                          | 
+---------------------+-----------------------------------+--------------------------+ 
|                     |                                   |                          | 
+---------------------+-----------------------------------+--------------------------+ 
 
 
1 October 2009 
To Shareholders and, for information only, to holders of options over Ordinary 
Shares under the Heywood Williams Share Schemes 
 
Dear Shareholder 
Proposed Restructuring, proposed cancellation of admission of Ordinary Shares to 
the Official List and to trading on the London Stock Exchange's market for 
listed securities, approval of Related Party Transaction, approval of waiver of 
Rule 9 of the Takeover Code and Notice of General Meeting 
1.Overview 
Today, Heywood Williams announced that it had reached agreement with its UK 
Banking Syndicate on the terms of a proposed debt and share capital 
restructuring of Heywood Williams, including the proposed Cancellation of the 
admission of its Ordinary Shares to the Official List and to trading on the 
London Stock Exchange's market for listed securities. 
The Restructuring is designed to put in place an appropriate long term capital 
structure to enable the Group to trade through the current adverse economic 
conditions and to have the capability to grow as its markets recover. The key 
terms of the Restructuring are: 
-a debt for equity exchange of GBP21 million of existing bank debt resulting in 
the issue of 14,410,974 A Ordinary Shares to the UK Banking Syndicate; 
-a grant of Warrants over 6,600,362 A Ordinary Shares to the UK Banking 
Syndicate; 
-a GBP6 million increase in the Group's committed facilities from the UK Banking 
Syndicate to GBP45 million following the Restructuring; 
-agreement with the Pension Trustee to defer deficit repair contributions, on an 
affordability basis, until 2014; 
-immediately following completion of the Restructuring the UK Banking Syndicate 
and Mike McTighe (who will be appointed to the Board by the UK Banking 
Syndicate), will together be interested in 80 per cent. of the Company's issued 
share capital on a fully diluted basis, with Existing Shareholders holding 10 
per cent. and the executive members of the Board and certain other members of 
the senior management also being interested in 10 per cent.; and 
-cancellation of admission of Ordinary Shares to the Official List and to 
trading on the London Stock Exchange's market for listed securities. 
The Proposals are conditional upon, inter alia, Shareholders' approval being 
obtained at the General Meeting. Given that the Related Party Directors will be 
participating in the Proposals, the Restructuring requires approval as a related 
party transaction under the Listing Rules. In addition, the Listing Rules 
require that the Cancellation is subject to the prior approval of Shareholders. 
Further details of the Related Party Transaction and the Cancellation are set 
out in paragraphs 3.6 and 4 below. 
The Restructuring and other Proposals are also conditional upon, inter alia, the 
approval by the Independent Shareholders at the General Meeting on a poll of (i) 
the Shared Ownership Plan and (ii) the waiver of Rule 9 of the Takeover Code 
granted by the Takeover Panel. Further details of the Shared Ownership Plan and 
the Rule 9 Waiver are set out in paragraphs 3.4 and 8 below. 
Accordingly, the purpose of this document is to provide Shareholders with the 
background to and reasons for the Proposals, to explain why your Board considers 
the Proposals to be in the best interests of the Company and its Shareholders as 
a whole and to seek the requisite approval from Shareholders for the Proposals. 
Further details of the Restructuring and the Proposals are contained in Part III 
of this document. 
At the end of this document you will find notice of a General Meeting which has 
been convened for 11.00 am on 20 October 2009 for the purpose of considering 
and, if thought fit, approving Resolutions to implement the Proposals. 
The Proposals set out in this document are very important and require your close 
attention. Your Board is of the view that the Proposals present the best 
prospects for securing a significantly improved financial structure for the 
Group and the continuing support of its UK Banking Syndicate, upon which the 
Group is dependent for its ability to trade. Your attention is drawn to the 
recommendation of the Board set out in paragraph 19 below. 
Shareholders should note that the Directors will not be able to proceed with the 
Restructuring and other Proposals unless and until all the proposed Resolutions 
are approved at the General Meeting. 
Furthermore, Shareholders should note that the Board believes that, without the 
Restructuring and other Proposals in place, it is highly likely that the Group 
would be unable to continue to operate within its existing banking facilities 
and would require significant immediate emergency funding. The Board is of the 
view that it is probable that appropriate emergency funding sources would not be 
available and, in this event, the Group would be unable to sustain its position 
as a going concern. Therefore, it is highly likely that failure to pass the 
Resolutions would lead the Group to enter into administration or some other form 
of insolvency procedure. 
You are strongly urged to vote in favour of the Resolutions to be proposed at 
the General Meeting by completing the enclosed Form of Proxy and returning it to 
the address marked as soon as possible and, in any event, so as to be received 
by no later than 11.00 am on 18 October 2009. 
You may, if you wish, register the appointment of a proxy or proxies, or voting 
instructions for the General Meeting electronically by logging on to 
www.sharevote.co.uk. You will need to use the series of numbers made up of your 
Voting ID, Task ID and Shareholder Reference Number printed on your Form of 
Proxy. Full details of the procedure are given on the website referred to above. 
The proxy appointment and/or voting instructions must be received by Equiniti at 
least 48 hours before the appointed time of the General Meeting, that is to say, 
no later than 11.00 am on 18 October 2009. Please note that any electronic 
communication sent to the Company or Equiniti that is found to contain a 
computer virus will not be accepted. The use of the internet service in 
connection with the General Meeting is governed by Equiniti's conditions of use 
set out on the website, www.sharevote.co.uk, and may be read by logging on to 
that site. 
2.Background to and reasons for the Restructuring and Cancellation 
2.1Background 
Since the latter part of 2007 and during 2008, the Group has faced unprecedented 
downturns in the building products markets it serves due to the impact of the 
global credit crisis on consumer spending. Approximately 80 per cent. of the 
Group's sales are branded building products to customers in the home improvement 
and residential new build market segments across Europe and North America. All 
of the markets that the Group serves are suffering from one of the most severe 
downturns experienced in recent economic cycles. Consumer credit for housing 
related activities has reduced significantly whilst becoming more expensive. 
These very tough market conditions in the home improvement and residential new 
build markets deteriorated much further in the second half of 2008 and the first 
half of 2009. It is estimated that the global residential housing markets in 
which the Group operates have declined on average by 40 per cent. since the 
second half of 2007. These adverse market conditions are expected to continue 
for the remainder of 2009, and your Board does not anticipate any significant 
market recovery until well into 2010. Group sales in the first half of 2009 were 
down 24 per cent. compared to the same period in 2008. 
The Group's specialist distribution businesses responded rapidly to the adverse 
market conditions by reducing costs significantly, defending margins, continuing 
to drive new product introductions and, most importantly in the Board's view, 
generating cash by reducing working capital. Since 31 December 2007, for 
example, the Group has reduced headcount by over 35 per cent. and a reduction of 
working capital generated a cash inflow of GBP5.0 million in 2008. 
The significant downturn in the Group's markets has had a major impact on 
revenue, which reduced overall by 12.5 per cent. to GBP219.2 million in 2008 
(GBP250.5 million in 2007). The reduction in total revenue of GBP31.3 million 
had a substantial impact on adjusted operating profit, which decreased to GBP2.5 
million from GBP11.7 million in 2007. After finance costs and share of associate 
losses, the adjusted loss before taxation was GBP2.3m (2007: GBP9.1 million 
profit). After interest and tax, the adjusted loss for the year resulted in an 
adjusted diluted loss per share of 4.0 pence (2007: 7.7 pence earnings per 
share). The Group had net debt of GBP46.7 million at the end of 2008 (2007: 
GBP36.9 million), an increase of GBP9.8 million due primarily to payment of the 
deferred consideration of GBP8.0 million in respect of the Carlisle Brass 
acquisition. 
The downturn has continued into the first half of 2009 impacting the Group 
further, with revenue reduced overall by 23.9 per cent. to GBP88.5 million in 
the six months to June 2009 (GBP116.3 million in the six months to June 2008). 
The Group reported an operating loss before exceptionals of GBP5.2 million in 
the six months to 30 June 2009 (profit of GBP3.5 million in the six months to 
June 2008). For the six months to 30 June 2009, exceptional items of GBP1.9m 
million were incurred, primarily in respect of severance costs and advisory fees 
associated with bank facility negotiations. After interest, tax and before 
exceptionals, the loss for the six months to 30 June 2009 resulted in a diluted 
loss per share of 9.0 pence (six months to 30 June 2008: 1.0 pence earnings per 
share). As at 30 June 2009, the Group had net debt of GBP47.6 million compared 
to GBP46.7 million as at 31 December 2008.1 
2.2Reasons for the Restructuring 
The combination of the economic downturn and the reduction in the availability 
of consumer credit have had a direct adverse impact on the Group's performance 
and led to a significant reduction in cash flows generated by the Group's 
businesses. As a result, the Group will not be able to generate sufficient cash 
flows to sustain interest and principal payments on its debt facilities based on 
its current capital structure and indebtedness. During the first half of 2008, 
your Board recognised that the deterioration in the Group's operating 
performance would affect its ability to meet its banking covenants during the 
second half of 2008, as well as its scheduled debt principal repayments due to 
the UK Banking Syndicate and its scheduled UK pension deficit repair 
contributions in 2009. The management therefore entered into early discussions 
with the UK Banking Syndicate and the Pension Trustee to agree a solution. The 
UK Banking Syndicate agreed to issue two covenant waiver letters in September 
and December 2008. 
After an in-depth review of the Group's markets and its competitive positioning, 
your Board concluded that the depth and length of the current downturn would 
continue to affect the Group in 2009 and for the majority of 2010, and that a 
recovery to pre-downturn activity levels would take a number of years to 
achieve. As a result, during the first half of 2009, it was agreed with the UK 
Banking Syndicate to establish a medium term solution, in order to provide 
sufficient time to organise and implement a long term sustainable capital 
structure, and in order to avoid covenant breaches that could have had a 
negative impact on the Group's business relationships and activity. 
 
As part of the medium term solution, in February 2009, the Pension Trustee 
agreed to defer GBP3.75 million of pension deficit repair contributions due from 
January 2009 to March 2010 until April 2010 onwards. Also in February 2009, the 
UK Banking Syndicate confirmed the availability of the existing GBP60.0 million 
committed facility and agreed new covenants through to June 2010. These 
covenants are based on maximum absolute variances against budget for EBITDA, 
operating cash flow and operating net assets of the UK, certain Irish and the 
Chinese companies within the Group and are measured on a quarterly basis. The UK 
Banking Syndicate also agreed to defer GBP6.7 million of repayments of the term 
loan due quarterly from September 2009 to June 2010. These deferred capital 
repayments are to be paid over the remaining repayment term of the loan from 
September 2010 to September 2011. This agreement was predicated on the Group 
implementing a long term sustainable capital structure solution by the end of 
November 2009 (the UK Banking Syndicate having approved an extension to this 
milestone from the original date of end of September 2009 until the end of 
November 2009), and contained different milestones generating additional payment 
obligations if missed. Your Board is pleased to confirm that all of these 
milestones have been achieved to date and that no such additional payment 
obligations have been incurred under the agreement. Failure to reach the final 
milestone of implementing a long term sustainable capital structure by the end 
of November 2009 would trigger a payment of GBP4.5 million to the UK Banking 
Syndicate, which would be payable in five equal quarterly instalments from the 
Group's quarter end date falling on or about 30 September 2010. 
 
 
1    The financial information contained in this paragraph has been extracted 
without material adjustment from the Group's audited financial results for the 
years ended 31 December 2007 and 31 December 2008, and from the unaudited 
financial results for the six months ended 30 June 2009. 
In addition, in January 2009, the Group was able to replace its expiring US 
facility with a new US$10.0 million (GBP6.2 million) revolving credit facility 
from Cole Taylor Bank, which expires in January 20122. The facility is subject 
to net worth and earnings covenants if utilisation of the facility exceeds 
US$7.0 million (GBP4.3 million) such that currently the limit on the facility 
is, in effect, US$7.0 million (GBP4.3 million). The facility is for utilisation 
within the US only. 
During 2008, at the same time as the Group was initiating discussions with its 
UK Banking Syndicate, your Board considered and explored various options to try 
and generate sufficient cash in order to address the level of the Group's 
indebtedness and maximise value for Shareholders. However, in your Board's 
opinion no viable alternative solution was available. Consequently, your Board 
believes that the Restructuring and other Proposals represent the only available 
route to achieving a stronger balance sheet and providing a long term 
sustainable capital structure for the Group. 
In reaching its conclusions that the Restructuring and the other Proposals 
represent the only available route to achieving a stronger balance sheet and 
providing a long term sustainable capital structure for the Group, your Board 
relied on its assessment of the Group's current indebtedness, the current 
depressed operating performance, the lack of any expected significant market 
recovery until well into 2010 and the lack of alternative corporate solutions. 
In addition, your Board does not believe that it would be possible, in the 
current market conditions, to raise sufficient new finance by way of an equity 
issue. In the absence of any new equity, the Board reached agreement with its UK 
Banking Syndicate and Pension Trustee to the proposed Restructuring and related 
Proposals. 
3.Outline of the Restructuring 
3.1Overview 
As at 30 June 2009, the Group's unaudited net borrowings were GBP47.6 million3, 
including GBP51.0 million in respect of the UK Banking Syndicate's GBP60.0 
million committed facility. In addition, the Group's UK Pension Scheme deficit 
was valued at GBP11.0 million on an IAS 19 basis at 30 June 2009 but has been 
valued by the actuary of the Pension Scheme at GBP43.5 million on an actuarial 
funding basis as at 31 December 2008. 
Your Board has agreed with the Pension Trustee that, based on the current 
forecasts and subject to completion of the Proposals, no pension deficit repair 
contributions will be made until 2014 unless the business outperforms the 
current plan. From 2014, contributions are proposed to revert to the 
pre-Restructuring agreed level of GBP3.0 million per annum, gradually increasing 
to GBP5.0 million per annum from 2018. Your Board has also agreed with the 
Pension Trustee the assumptions relating to the 31 December 2008 triennial 
valuation of the Pension Scheme, resulting in a pension deficit of GBP43.5 
million referred to above. 
 
It is intended that the Restructuring will provide the Group with a long term 
sustainable capital structure. On completion of the Restructuring, the UK 
Banking Syndicate has agreed to convert GBP21.0 million of existing debt into 
equity and to provide GBP6.0 million of incremental committed working capital 
facilities to help the Group address its liquidity requirement in the short and 
medium term. The debt for equity conversion will result in a significant 
reduction in the Group's borrowings. Amended UK Banking Syndicate committed 
facilities available to the Group totalling GBP45.0 million will comprise a 
GBP30.0 million term loan, an GBP11.0 million revolving credit facility, a 
GBP1.5 million term loan and an interest roll up term loan of GBP2.5 million. An 
arrangement fee of GBP1.4 million will become payable on 30 September 2013 in 
connection with the amended committed facilities, if the Restructuring proceeds. 
In exchange for the conversion of GBP21.0 million of existing debt into equity, 
the UK Banking Syndicate and Mike McTighe will, in aggregate, receive 80 per 
cent. of the equity, on a fully diluted basis, post Restructuring. In order to 
align the interests of the UK Banking Syndicate and the Management Team in the 
future of the Group, the UK Banking Syndicate requires that, as part of the 
Restructuring, an appropriate management incentive package is agreed, whereby 
the Management Team is interested in 10 per cent. of the equity immediately 
following the Restructuring. This will be effected by the Management Team, 
jointly with the EBT Trustee, subscribing to C Ordinary Shares as described in 
paragraph 3.4 below. The Proposals will result in Existing Shareholders holding 
10 per cent. of the share capital post Restructuring on a fully diluted basis. 
Of the 80 per cent. stake that would otherwise be allocated to the UK Banking 
Syndicate, 2 per cent. will be held by Mike McTighe, who will be appointed to 
the Board by the UK Banking Syndicate. Mike McTighe will also hold these shares 
jointly with the EBT Trustee in a similar manner to the Management Team. 
 
 
2    GBP-USD exchange rate of 1.62 as at 22 September 2009 used to convert USD 
facilities to GBP equivalents. 
3    Extracted without material adjustment from the Group's unaudited financial 
results for the interim period ended 30 June 2009. 
 
 
Details of the UK Banking Syndicate's proposed equity interests are described in 
Part III of this document. It will comprise a combination of A Ordinary Shares 
and Warrants. As at 1 October 2009, assuming that all the Warrants are exercised 
in full, the UK Banking Syndicate would hold shares representing, in aggregate, 
78 per cent. of the Company's equity. 
The UK Banking Syndicate has made it clear to your Board concerning the 
Restructuring that it is not in a position to improve the terms of the 
Restructuring beyond those set out in this document. 
The Board believes that the implementation of the Proposals will create a 
stronger foundation for the Group's business going forward, from both a 
financial and trading perspective. 
As part of the Proposals, the prior consent of the Majority Investors will be 
required in order for the Company or any Group Company to take certain actions. 
Shareholders should note that the actions which require the Majority Investors' 
prior consent are extensive in nature and that the Board will be unable to agree 
any material transactions without the Majority Investors' prior consent. Details 
of the actions which will require such consent are set out in paragraph 2.7(f) 
of Part III of this document. 
From a financial perspective, both the new debt service payment schedule and the 
new amortisation schedule should reduce the pressure on operating cash flow and 
enable the Group to address its obligations. The Proposals are intended to 
provide additional headroom at peak drawings and, as such, sufficient working 
capital should be available to meet the increased demand as the Group's markets 
recover. 
In addition, the Proposals are expected to improve the credit rating of the 
Group and provide additional stability to the relationships of the Group with 
its customers, suppliers, employees and other stakeholders. 
3.2Share sub-division and partial share reclassification 
To facilitate the Restructuring, the Company will undertake a share sub-division 
and partial share reclassification. Under the share sub-division, each existing 
Ordinary Share of 20 pence will be sub-divided into 20 new D Ordinary Shares, 
each having a nominal value of one penny. Therefore, the Company's existing 
84,853,519 issued Ordinary Shares of 20 pence nominal value will initially be 
split into 1,697,070,380 D Ordinary Shares in the Company each having a nominal 
value of one penny. 
Under the terms of the partial share reclassification, of the 1,697,070,380 D 
Ordinary Shares arising as a result of the share sub-division, 629 out of every 
630 D Ordinary Shares will be converted into Deferred Shares. One share out of 
the 630 shares will remain as a D Ordinary Share with a nominal value of one 
penny each. Where an individual holding of D Ordinary Shares is not wholly 
divisible by 630, the 629 or fewer D Ordinary Shares that are in excess of the 
whole multiple of 630 will be converted into Deferred Shares. After the proposed 
share sub-division and partial reclassification, Existing Shareholders will 
therefore hold, in aggregate, 2,693,761 D Ordinary Shares and 1,694,376,619 
Deferred Shares (subject to adjustment for fractional entitlements as described 
above). 
 
The Deferred Shares are being issued for technical reasons and, once issued, 
will confer no voting or economic rights upon Shareholders. No share 
certificates will be issued in respect of the Deferred Shares. Shortly after the 
completion of the Restructuring, it is anticipated that the Company will 
exercise its right under the new Articles to procure that all of the Deferred 
Shares are transferred to the Company for an aggregate price of one penny and 
cancelled. Shareholders will not receive any payment as a result of this 
transfer to the Company of their Deferred Shares, but nor will the transfer 
cause Shareholders to forego any valuable economic or voting rights. Further 
details in relation to the Company's right to effect this transfer are set out 
in paragraph 2.9(e)(iv) of Part III of this document. 
Pending receipt of a share certificate in respect of the D Ordinary Shares, 
Shareholders wishing to transfer their D Ordinary Shares will be required to 
produce their existing Heywood Williams share certificates to the Registrars. 
With effect from the date of the completion of the Restructuring, share 
certificate(s) for existing Ordinary Shares will cease to be valid. On receipt 
of a share certificate in respect of his D Ordinary Shares, a Shareholder should 
destroy his share certificates in respect of existing Ordinary Shares. 
3.3Debt for equity exchange 
As part of the Restructuring, the UK Banking Syndicate has agreed to convert 
GBP21 million owed to them under the Facilities Agreement into A Ordinary Shares 
representing 70.86 per cent. of the enlarged ordinary share capital of the 
Company immediately following the issue of those A Ordinary Shares, the B 
Ordinary Shares and the C Ordinary Shares (as referred to below) and the share 
sub-division and reclassification in respect of D Ordinary Shares referred to 
above (but excluding for this purpose, all A Ordinary Shares arising from the 
exercise of the Warrants). 
The UK Banking Syndicate will be granted Warrants over 6,600,362 A Ordinary 
Shares. Separately, the Warrants will only become exercisable by the UK Banking 
Syndicate either (i) immediately before a successful application for admission 
of all or any class of share capital of the Company on the Official List, the 
London Stock Exchange's AIM market or any other recognised investment exchange; 
or (ii) immediately before the sale of 51 per cent. or more of the share capital 
of the Company. 
Mike McTighe and the EBT Trustee will jointly subscribe for B Ordinary Shares 
representing 2.0 per cent. of the enlarged fully diluted ordinary share capital 
of the Company following the issue of those B Ordinary Shares, the A Ordinary 
Shares (including A Ordinary Shares to be issued following the exercise of the 
Warrants), the C Ordinary Shares (as referred to below) and the share 
sub-division and reclassification in respect of D Ordinary Shares referred to 
above. 
Based on the assumptions set out below, the following table provides summary 
details of the UK Banking Syndicate's and Mike McTighe's expected respective 
interests in Heywood Williams' issued share capital on completion of the 
Restructuring: 
 
+------------------------------------------------------+---------------+-------------+ 
|                                                      |               |             | 
+------------------------------------------------------+---------------+-------------+ 
| Name of Shareholders                                 |    Percentage |  Percentage | 
|                                                      |     of issued |   of issued | 
|                                                      |      ordinary |    ordinary | 
|                                                      |         share |       Share | 
|                                                      |       capital |     capital | 
|                                                      |   immediately | immediately | 
|                                                      |     following |   following | 
|                                                      |    completion | exercise of | 
|                                                      |            of |    Warrants | 
|                                                      |           the |             | 
|                                                      | Restructuring |             | 
+------------------------------------------------------+---------------+-------------+ 
| Lloyds Banking Group (shares being allotted to       |         47.68 |       52.00 | 
| Bank of Scotland plc and Lloyds TSB Bank plc         |               |             | 
| or as they direct)                                   |               |             | 
+------------------------------------------------------+---------------+-------------+ 
| National Australia Bank Limited                      |         23.18 |       26.00 | 
+------------------------------------------------------+---------------+-------------+ 
| Mike McTighe / EBT Trustee1                          |          2.65 |        2.00 | 
+------------------------------------------------------+---------------+-------------+ 
|                                                      |               |             | 
+------------------------------------------------------+---------------+-------------+ 
|                                                      |               |             | 
+------------------------------------------------------+---------------+-------------+ 
| Total                                                |         73.51 |       80.00 | 
+------------------------------------------------------+---------------+-------------+ 
|                                                      |               |             | 
+------------------------------------------------------+---------------+-------------+ 
|                                                      |               |             | 
+------------------------------------------------------+---------------+-------------+ 
 
 
 
 
1These percentages include, in respect of Mike McTighe, shares which will be 
owned jointly with the EBT Trustee as described in paragraph 3.5 of this Part I 
 
Assumptions: 
(i)That there are 84,853,519 Ordinary Shares in issue immediately prior to 
completion of the Restructuring and options over 4,627,725 Ordinary Shares 
(which would have to be satisfied out of the issue of new Ordinary Shares) in 
existence immediately prior to completion of the Restructuring and that none of 
these options are exercised prior to the exercise of the Warrants. 
(ii)That no Bank disposes or acquires any A Ordinary Shares allotted to it 
pursuant to the Restructuring prior to the exercise of the Warrants. 
(iii)That references to percentages of issued ordinary share capital are 
references to the percentage of income or capital distribution made by the 
Company which the relevant Shareholder(s) are entitled to receive. 
(iv)That no other Shares are issued by Heywood Williams prior to the exercise by 
the Banks of the Warrants. 
3.4The Shared Ownership Plan 
Following the Cancellation becoming effective, a Shared Ownership Plan will be 
adopted by the Company as part of the Restructuring. Under the Shared Ownership 
Plan, each member of the Management Team (other than Richard Karcher) will 
subscribe, jointly with the EBT Trustee, for C Ordinary Shares upon and subject 
to the terms of a Joint Ownership Agreement. Under the terms of the Joint 
Ownership Agreement, the relevant Management Team member will benefit from the 
growth in value of his jointly owned C Ordinary Shares less an amount of 
interest calculated at a rate fixed when the C Ordinary Shares are subscribed 
(on a simple interest basis). The principal terms of the Shared Ownership Plan 
and the Joint Ownership Agreement are set out in paragraph 2.13 of Part III of 
this document. 
For US tax reasons, Richard Karcher will participate in a share option in 
respect of C Ordinary Shares. This will be established as part of the Shared 
Ownership Plan and will have comparable commercial terms to the Shared Ownership 
Plan regarding the cessation of employment and when value may be realised from 
the arrangements. 
The C Ordinary Shares which will be issued jointly to the relevant Management 
Team member (other than Richard Karcher) and the EBT Trustee for the purposes of 
the Shared Ownership Plan and the C Ordinary Shares which will be issued to the 
EBT Trustee over which Richard Karcher will be granted a nil-cost option will, 
immediately following the Restructuring, represent 10 per cent. of the issued 
share capital of the Company on a fully diluted basis. Rothschild, as Heywood 
Williams' financial adviser, considers the proposed terms of the Shared 
Ownership Plan to be fair and reasonable as far as the Independent Shareholders 
are concerned. 
3.5Mike McTighe 
As referred to in paragraph 3.1 of this Part I, Mike McTighe will also subscribe 
jointly with the EBT Trustee for B Ordinary Shares. The jointly owned B Ordinary 
Shares to be subscribed by Mike McTighe and the EBT Trustee will amount to 2 per 
cent. of the Company's issued share capital on a fully diluted basis immediately 
following completion of the Restructuring. Mike McTighe and the EBT Trustee's 
subscription for the jointly owned shares will be pursuant to a joint ownership 
agreement, the terms and effect of which will be the same as the Joint Ownership 
Agreements to be entered into by each member of the Management Team (other than 
Richard Karcher) and the EBT Trustee. As Mike McTighe will become a 
non-executive director and not an employee of the Company, his joint ownership 
agreement will be outside of the Shared Ownership Plan. 
The aggregate number of shares to be issued as a result of the Restructuring to 
Mike McTighe and the UK Banking Syndicate on a fully diluted basis will not 
exceed 80 per cent. of the issued share capital in the Company. 
As the UK Banking Syndicate's appointee to the Board, Mike McTighe's prior 
consent will be required for the Company or any other Group Company to take 
certain actions. Shareholders should note that the actions which require Mike 
McTighe's prior consent are extensive in nature and that the Board will be 
unable to agree any material transactions without Mike McTighe's prior consent. 
Details of the actions which will require such consent are set out in paragraph 
2.7(e) of Part III of this document. 
3.6Related Party Transaction 
As described above and in Part III of this document, the Management Team (other 
than Richard Karcher), will participate in the Restructuring by subscribing, 
jointly with the EBT Trustee for C Ordinary Shares and Richard Karcher will 
receive a nil-cost option to acquire C Ordinary Shares. The C Ordinary Shares 
and the C Ordinary Shares subject of the nil-cost option will represent, in 
aggregate, 10 per cent. of the issued share capital of the Company on a fully 
diluted basis, immediately following completion of the Restructuring. 
Each member of the Management Team is either a Director or a director of a 
subsidiary of the Company and is therefore classified by the Listing Rules as a 
"related party". Consequently, the Management Team's participation in the 
Restructuring is a related party transaction under the Listing Rules and will 
require Shareholders' approval at the General Meeting. Members of the Management 
Team, and their associates will be prohibited from voting in relation to the 
Resolutions. 
The Related Party Directors have not taken part in the Board's consideration of 
the Proposals. 
 
 
The beneficial and non-beneficial interests of the Management Team, and of those 
non-executive Directors who will remain with the Company after completion of the 
Restructuring, but excluding unexercised options (other than, in the case of 
Richard Karcher, the nil-cost option referred to in paragraph 3.4 of this Part I 
and Part III of this document) or awards over the Ordinary Shares, as at the 
date of this document and immediately following completion of the Restructuring 
are set out below: 
 
+--------------------------+--------------+------------+------------------+------------------+ 
|                          |              |            |                  |                  | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Name                     |    Number of | Percentage |        Number of |    Percentage of | 
|                          |     existing |         of |         Ordinary |         Ordinary | 
|                          |     Ordinary |   existing |           Shares |           Shares | 
|                          |       Shares |   Ordinary |      immediately |      immediately | 
|                          |              |     Shares |        following |        following | 
|                          |              |            |       completion |       completion | 
|                          |              |            |           of the |           of the | 
|                          |              |            | Restructuring1,2 | Restructuring2,3 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Robert Barr              |       20,000 |      0.024 |          770,280 |            2.859 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Mike Richards            |            - |          - |          384,823 |            1.429 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Mark Wild                |      125,000 |      0.147 |          388,791 |            1.443 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Jason Anderson           |            - |          - |          384,823 |            1.429 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Martin Wardhaugh         |            - |          - |          384,823 |            1.429 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Richard Karcher          |            - |          - |          384,823 |            1.429 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Roger Boyes              |        6,292 |      0.007 |              199 |            0.001 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Graham Menzies           |        6,350 |      0.007 |              201 |            0.001 | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Stephen Rogers           |            - |          - |                - |                - | 
+--------------------------+--------------+------------+------------------+------------------+ 
|                          |              |            |                  |                  | 
+--------------------------+--------------+------------+------------------+------------------+ 
|                          |              |            |                  |                  | 
+--------------------------+--------------+------------+------------------+------------------+ 
| Total                    |      157,642 |      0.186 |        2,698,763 |           10.019 | 
+--------------------------+--------------+------------+------------------+------------------+ 
|                          |              |            |                  |                  | 
+--------------------------+--------------+------------+------------------+------------------+ 
|                          |              |            |                  |                  | 
+--------------------------+--------------+------------+------------------+------------------+ 
|                          |              |            |                  |                  | 
+--------------------------+--------------+------------+------------------+------------------+ 
 
 
 
 
1These numbers include, in respect of Robert Barr, Mike Richards, Mark Wild, 
Jason Anderson and Martin Wardhaugh, C Ordinary Shares which will be owned 
jointly with the EBT Trustee pursuant to the Shared Ownership Plan 
2These numbers assume, in respect of Richard Karcher, his nil-cost options over 
384,823 C Ordinary Shares held by the EBT Trustee have been exercised in full 
3Percentages have been calculated on the assumption that the Warrants have been 
exercised in full by the Banks 
The Management Team will abstain from voting on the Resolutions at the General 
Meeting and will take all reasonable steps to ensure that their associates also 
abstain from voting on the Resolutions at the General Meeting. 
3.7Summary and Conclusion 
The proposed new capital structure immediately following the Restructuring, 
described in more detail in Part III of this document, represents the final 
outcome of the Board's negotiations with the UK Banking Syndicate. The 
Restructuring seeks to address the adverse impact of Heywood Williams' 
indebtedness and associated interest cost on its business, whilst retaining the 
possibility of delivering value to Shareholders in the future. It will also 
remove any capital repayments until 2013 and any UK pension deficit repair 
contributions until 2014 which is expected to enhance further cash flow 
generation. Furthermore, it will provide appropriate headroom at peak drawings 
and, as such, sufficient working capital should be available to meet the 
increased demand as the Group's market recovers. As a result of all these 
actions, the credit profile of the Group is expected to be enhanced with regard 
to suppliers and customers alike. This solution has been negotiated with a view 
to providing the Group with a sustainable long term capital structure. This 
proposed structure is considered to be key in aiming to ensure that the Group 
can address its financial obligations going forward. 
It is important to note that, as explained below in the working capital section 
(in paragraph 6.2 of this Part I), your Board believes that failure to approve 
the Resolutions at the General Meeting, would have material and very detrimental 
consequences for the Group. In such circumstances, the Board believes that it is 
highly likely that the Group would be unable to continue to operate within its 
existing banking facilities and would require significant immediate emergency 
funding. The Board is of the view that it is probable that appropriate emergency 
funding sources would not be available and, in this event, the Group would be 
unable to sustain its position as a going concern. Therefore, it is highly 
likely that failure to pass the Resolutions would lead the Group to enter into 
administration or some other form of insolvency procedure. 
 
4.Cancellation 
The Listing Rules require a listed company to maintain a sufficient number of 
shares in "public hands" at all times. Following the completion of the 
Restructuring the Company will not meet this requirement. Your Board is 
therefore seeking your approval for the Cancellation. Following the Cancellation 
the Company will not be required to comply with (or incur costs associated with 
complying with) the requirements of, amongst other things, the Listing Rules. 
The Cancellation is expected to take effect at 8.00 am on 23 November 2009. 
5.Current trading and outlook for the Group 
For the period ending 30 June 2009, the Group released the following statement: 
"Heywood Williams continues to face very difficult market conditions due to 
major declines in residential housing markets worldwide. Sales in the first half 
of 2009 were down 24% compared to the same period in 2008. It is estimated that 
the residential housing markets that the Group operates in have declined, on 
average, by 40% since the second half of 2007. The Group has reduced headcount 
by over 35% in the same period. Net debt at the end of June 2009 was GBP47.6 
million, which was better than expectations and GBP2.2 million less than June 
2008, reflecting the Group's success at reducing working capital. 
The key financial results for the first half of 2009 were: 
-Sales decreased by 24% to GBP88.5 million (2008: GBP116.3 million) 
-Operating loss (before amortisation and exceptional items) of GBP4.6 million 
(2008: profit of GBP4.1 million) 
-Adjusted loss before tax, notional interest, amortisation and exceptional items 
was GBP6.5 million (2008: profit of GBP1.9 million) 
-Exceptional items of GBP1.9 million were incurred, primarily in respect of 
severance and advisory fees associated with bank facility negotiations (2008: 
nil) 
-Reported loss after tax of GBP9.5 million (2008: profit of GBP0.9 million) 
-Working capital reduction of GBP6.3 million (2008: increase of GBP4.0 million) 
-Cash outflow of GBP0.9 million (2008: outflow of GBP4.6 million before 
acquisitions) 
-Closing net debt of GBP47.6 million (2008: GBP49.8 million) 
The Group's key markets are currently exhibiting signs of fragile stability, but 
at levels 30% to 60% below those experienced in late 2007. Our management teams 
continue to work hard to outperform their markets. Market share gains have been 
achieved and significant cost reductions continue to be implemented to align the 
cost base with the tougher market conditions we are now facing. Headcount across 
the Group has been reduced by a further 14% since the end of 2008, which is in 
addition to the 24% reduction made during 2008. 
Group overview 
Heywood Williams is a solutions provider/specialist distributor of branded 
building products with a strong portfolio of its own brands. 
The Group comprises of two Divisions, namely the Hardware Division which 
designs, sources and distributes architectural hardware to the UK and selective 
European markets and the North American Specialist Distribution Division which 
markets and distributes branded building products primarily to the manufactured 
housing and recreational vehicle markets. Approximately 80% of the Group's sales 
of branded building products are to customers in the residential new build and 
home improvement market segments across North America and Europe. The remainder 
of the Group's sales are split between door and window hardware for the UK 
commercial property market and branded building products for the recreational 
vehicle market in North America. 
The Group's priority over the short and medium term is to manage its balance 
sheet and maximise cash generation in order to weather the current very 
difficult market conditions and be well positioned for the subsequent market 
upturn. The two key objectives for 2009 are: 
-To ensure that the Group continues to operate within its banking covenants and 
facilities, and 
-To implement a more appropriate long term capital structure for the Group. 
 
Hardware division: UK / Europe 
The Hardware Division offers a broad range of hardware design and product 
solutions for housing developers, architectural ironmongers and 
window/conservatory fabricators. The Hardware Division has strong market leading 
positions in the UK, Ireland, Scandinavia and the Baltic States. The Division 
has some of the strongest brands in its respective markets, including Mila(TM), 
Carlisle Brass(TM) and Eurospec(TM). 
Sales in the first half of 2009 were GBP51.0 million (2008: GBP63.5 million) and 
the operating profit before amortisation and exceptional items was GBP0.2 
million (2008: GBP4.7 million). Cash generation has been strong in the first 
half helped by a working capital reduction of GBP3.1 million. 
Across our European markets, new build and home improvement activities were 
considerably reduced compared to the first half of 2008, due to the continuing 
combined effects of consumers being more cautious, coupled with a considerable 
reduction in the availability of finance. The first quarter of 2009 was 
particularly difficult. In the UK it is estimated that the overall hardware 
market fell 25% in the first quarter of 2009 compared to 2008, which in turn was 
down over 15% compared to 2007. The Irish building products market contracted by 
over 40% and the market in Scandinavia and the Baltics fell over 50% in the 
first quarter of 2009 compared to 2008. Fragile stability was the main feature 
of the markets we serve during the second quarter of 2009, albeit at levels 
significantly below the corresponding period in 2008. 
Against this unprecedented market deterioration, our management teams across the 
UK and European businesses have worked hard to outperform the market and 
minimise the impact of the downturn. Market shares have increased, including 
winning new business with a number of major accounts and significant cost 
reductions have been implemented to align the cost base with the tougher market 
conditions we are now facing. Headcount has been reduced by a further 17% since 
the end of 2008, which is in addition to the 23% reduction made during 2008. 
North American specialist distribution divison: LaSalle Bristol 
In North America, LaSalle Bristol is a leading specialist distributor of branded 
building products, with a particular focus on supplying floor coverings, 
plumbing products, lighting and air flow systems predominantly to the 
manufactured housing and recreational vehicle markets. LaSalle Bristol is the 
North American market leader in most of the product ranges it supplies. 
The manufactured housing and recreational vehicle markets in North America 
essentially collapsed in the fourth quarter of 2008 and very low levels of 
market activity were experienced in the first quarter of 2009. In the first half 
of 2009 wholesale shipments of recreational vehicles declined 55% and 
manufactured housing production fell by 45% compared to the same period in 2008. 
The output of both industries hit unprecedented lows in the first quarter. The 
second quarter of 2009 has shown some modest seasonal improvement in both 
markets from the extremely low first quarter levels. Currently, the relevant 
trade associations anticipate that annual shipments in 2009 of both recreational 
vehicles and manufactured homes will be circa 50% down compared to two years 
ago. 
LaSalle Bristol continues to outperform its competitors in an extremely 
difficult market. The LaSalle Bristol management team responded swiftly to the 
further downturn in the market by reducing costs early in the year, including a 
further headcount reduction of 9% since the end of 2008, which is in addition to 
the 28% reduction made during 2008. The team has been highly effective in 
generating cash by reducing stock levels quickly in response to reduced market 
demand while continuing to provide best in market customer service. 
Sales were down 47% to $55.6 million (2008: $104.6 million). In sterling, 
revenue was down 29% to GBP37.5 million (2008: GBP52.8 million). LaSalle Bristol 
had an operating loss of GBP4.8 million after the allocation of Group costs 
compared to a loss of GBP0.6 million in the same period in 2008. 
In January 2009, LaSalle Bristol successfully replaced a one year committed $6 
million credit facility with a new three year asset based $10 million facility. 
This facility is exclusively for the use of LaSalle Bristol and hence the 
company has ring fenced financing for the next 3 years. The cash management 
actions taken by the team at LaSalle Bristol have resulted in the company being 
cash generative in the period despite the earnings loss. LaSalle Bristol was 
cash positive at the half year and has not yet utilised its new dedicated line 
of credit. 
 
Group Funding 
The Group's priority over the short and medium term is to manage its balance 
sheet and maximise cash generation in order to weather the current very 
difficult market conditions and be well positioned for the subsequent market 
upturn. 
The Group was pleased to announce in February 2009 that it had agreed new medium 
term funding arrangements for the period to June 2010 with the UK Banking 
Syndicate, involving a covenant package more suited to current market 
conditions. The arrangements with the UK Banking Syndicate include a requirement 
to work with the UK Banking Syndicate to establish a more appropriate long term 
capital structure for the Group. Under the agreement, a GBP4.5 million liability 
is triggered if a satisfactory structure is not implemented by 30 September 
2009. 
Work in establishing an appropriate long term capital structure for the Group, 
which could result in a material dilution for existing holders of equity, is at 
an advanced stage. Following agreement with the UK Banking Syndicate, the timing 
for implementation of a satisfactory structure has been extended to 30 November 
2009 to allow for regulatory steps to be completed. In the meantime, both 
Divisions are operating within the revised covenants and have sufficient 
facility headroom. 
The Group's UK pension scheme deficit is valued at GBP11.0 million on an IAS 19 
accounting basis at 30 June 2009. However, the triennial actuarial valuation, 
which has been brought forward in parallel with the work on the long term 
capital structure, has resulted in a deficit of GBP43.5 million on an actuarial 
funding basis as at 31 December 2008. 
Implementation of the revised capital structure is conditional upon final 
agreement with the UK Banking Syndicate, followed by shareholder approval being 
obtained at a general meeting. Consequently, given that the above conditions 
currently prevail, this gives rise to uncertainty as to whether the proposed 
financial restructuring will be satisfactorily completed. However, on the basis 
that the proposed financial restructuring is satisfactorily completed, which is 
the Directors' expectation, the Directors are of the opinion that the going 
concern basis of accounting remains appropriate in preparing the Half Yearly 
Report. 
Outlook 
The Board believes that the Group will continue to face very difficult market 
conditions, at least for the remainder of 2009. The priorities for the Group 
remain to manage its balance sheet, maximise cash generation and implement a 
more appropriate long term capital structure." 
At the time of the interim results, finalising the details of the Proposals with 
the UK Banking Syndicate and obtaining the necessary Shareholder approval were 
key conditions to the implementation of the revised capital structure. This gave 
rise to uncertainty as to the appropriateness of the going concern basis for 
preparing the Group's interim financial statements given that, in the absence of 
the Restructuring or appropriate alternative funding sources, the Group would 
not have sufficient working capital for its present requirements. As announced 
today, an agreement has been reached with the UK Banking Syndicate, however the 
Proposals remain subject to Shareholder approval. Since the interim statement 
was issued on 27 August 2009, market conditions have remained challenging. The 
Board believes that the Proposals are key to the Group achieving its objectives 
for 2009 and beyond and, having explored the options, represent the only 
available route to achieving a stronger balance sheet and providing a long term 
sustainable capital structure for the Group, for the benefit of all 
stakeholders. 
6.Working capital 
6.1With the Restructuring 
Your Board is of the opinion that, following completion of the Restructuring, 
the Group has sufficient working capital for its present requirements, that is 
for at least the next 12 months from the date of this document. 
6.2Without the Restructuring 
Without the Restructuring and other Proposals in place, your Board is of the 
opinion that, the Group does not have sufficient working capital for its present 
requirements, that is for at least the next 12 months from the date of this 
document. 
The Board believes that, if Shareholders reject the Restructuring and other 
Proposals, the Group is highly likely to suffer material adverse consequences 
including, but not limited to: 
-significant reduction of creditor and stakeholder support; 
 
-substantial deterioration in relationships with customers, suppliers, employees 
and other stakeholders; and 
-reduction in the support and obligations of the Group's lenders, including the 
Group's ability to comply with the terms and conditions of the existing 
facilities. 
Whilst the Board recognises that it is difficult to predict the severity of 
these adverse consequences and the speed at which they would occur, the Board 
believes that it is highly likely that the Group would be unable to continue to 
operate within its existing banking facilities and would require significant 
immediate emergency funding. 
Your Board is of the view that it is probable that appropriate emergency funding 
sources would not be available. In this event, the Group would be unable to 
sustain its position as a going concern and could be forced to enter into 
administration or some other form of insolvency procedure. 
The Board believes that, in an administration or other insolvency process, it is 
highly unlikely that the Ordinary Shares would retain any value. The Board is of 
the opinion that the Restructuring and other Proposals represent the only 
available route to achieving a long term sustainable capital structure for the 
benefit of all stakeholders in the current market conditions. 
7.The Restructuring and Cancellation - matters to be taken into consideration 
Conditional upon the Resolutions being approved at the General Meeting, the 
Company will apply for the Cancellation and it is expected that cancellation of 
admission of the Ordinary Shares to the Official List will take effect from 8.00 
am on 23 November 2009 with trading in the Ordinary Shares on the London Stock 
Exchange's market for listed securities ceasing at the close of business on 20 
November 2009. In deciding whether or not to vote in favour of the Resolutions 
relating to the Restructuring and the Cancellation, Shareholders should take 
into consideration, inter alia, the following: 
-it is a condition of the Restructuring that each of the Resolutions (including 
the Resolution approving the Cancellation) are approved, and if they are not 
approved, the Restructuring Agreements will lapse and the Restructuring and 
other Proposals will not proceed. In such circumstances, the Board believes that 
it is highly likely that the Group would be unable to continue to operate within 
its existing banking facilities and would require significant immediate 
emergency funding. The Board is of the view that it is probable that appropriate 
emergency funding sources would not be available and, in this event, the Group 
would be unable to sustain its position as a going concern. Therefore, it is 
highly likely that failure to pass the Resolutions would lead the Group to enter 
into administration or some other form of insolvency procedure; 
-immediately following completion of the Restructuring, the UK Banking Syndicate 
and Mike McTighe (who will be appointed to the Board by the UK Banking 
Syndicate), will, in aggregate hold 80 per cent. of the Company's enlarged 
issued ordinary share capital on a fully diluted basis and the UK Banking 
Syndicate will be contractually entitled to appoint and remove one non-executive 
director (and two observers) to and from the Board. All other directors will be 
capable of being appointed and removed by Shareholders in general meeting. 
Accordingly, the members of the UK Banking Syndicate holding more than 50 per 
cent. of the Ordinary Shares will, together, be able to control such 
appointments and removals. In addition, the UK Banking Syndicate's prior consent 
will be required in respect of any material decisions which the Board may seek 
to take, details of these consent rights being set out in the description of the 
Restructuring Agreements in Part III of this document; 
-if the Cancellation occurs, it is likely that, thereafter, there will be no 
public market in the Ordinary Shares and the opportunity for Shareholders to 
realise their investment in the Company will be more limited; 
-following the Cancellation, the regulatory regime which applies solely to 
companies whose shares are admitted to the Official List and to trading on the 
London Stock Exchange's market for listed securities, comprised within the 
Listing Rules, will no longer apply. The Listing Rules require, inter alia, that 
a company which is subject to them seek the approval of its shareholders for 
various transactions including acquisitions or disposals above a particular 
magnitude and transactions between a company and related parties. Accordingly, 
it is possible that following the Cancellation a sale of all or part of the 
Company's business could be completed without Shareholders being entitled to 
vote on any such sale; and 
 
-following the Cancellation, the Company will remain subject to the provisions 
of the Takeover Code for a period of time. 
8.Dispensation from Rule 9 of the Takeover Code 
Following the Restructuring and the exercise of the Warrants, Lloyds Banking 
Group will be interested in 14,007,558 A Ordinary Shares representing 52 per 
cent. of the issued ordinary share capital (calculated on the basis of the same 
assumptions as those on which the table in paragraph 3.3 on page 10 has been 
based). Under Rule 9 of the Takeover Code, where any person acquires, whether by 
a single transaction or series of transactions over a period of time, interests 
in securities in which he or persons acting in concert with him carry 30 per 
cent. or more of the voting rights of a company which is subject to the Takeover 
Code, that person is normally required by the Takeover Panel to make a general 
offer to the shareholders of that company to acquire their shares. 
Rule 9 of the Takeover Code also provides, inter alia, that where any person 
who, together with persons acting in concert with him, is interested in shares 
which in aggregate carry not less than 30 per cent. of the voting rights of such 
a company but is not interested in shares carrying more than 50 per cent. of 
such voting rights of the company, a general offer will normally be required if 
any further interests in shares are acquired by any such person which increases 
the percentage of shares carrying voting rights in which he is interested. 
An offer under Rule 9 of the Takeover Code must be made in cash and at the 
highest price paid per share by the person required to make the offer, or any 
person acting in concert with him, for any interest in shares of the company 
acquired during the 12 months prior to the announcement of the offer. 
Under the Takeover Code, a concert party arises where persons acting together 
pursuant to an agreement or understanding (whether formal or informal) 
co-operate, to obtain or consolidate control of that company. A person has 
control of a company if he is interested in shares carrying 30 per cent. or more 
of the company. 
The Takeover Panel has agreed, subject to the approval of Independent 
Shareholders on a poll at the General Meeting, to waive the obligation for any 
members of Lloyds Banking Group to make a general offer that would otherwise 
arise as a result of the Restructuring and subsequent exercise of Warrants. 
Accordingly, Resolution 6 is being proposed at the General Meeting and will be 
taken on a poll. 
Immediately following the Restructuring, Lloyds Banking Group will hold 47.68 
per cent. of the Ordinary Shares. Immediately following the exercise of the 
Warrants, Lloyds Banking Group will hold 52.00 per cent. of the Ordinary Shares. 
If the relevant Resolutions are passed and the Restructuring takes effect, then 
Lloyds Banking Group would hold 9,696,800 A Ordinary Shares and Warrants over 
4,310,758 A Ordinary Shares, which will, when exercised and assuming that no 
other shares are issued before such time, represent an interest in excess of 50 
per cent. of the voting rights of Heywood Williams, and will be able to increase 
its aggregate interest in Heywood Williams without incurring any obligation to 
make a general offer to all shareholders to acquire their shares in Heywood 
Williams. 
Lloyds has indicated that, with the exception of William Schmuhl who has agreed 
to resign from the Board on completion of the Restructuring and the appointment 
of Jason Anderson, Richard Karcher, Martin Wardhaugh and Mike McTighe to the 
Board on completion, it is not presently proposing any changes to the Board 
following completion of the Restructuring. Lloyds does not have any specific 
intentions regarding the future business of, or strategic plans for, Heywood 
Williams, the locations of Heywood Williams' places of business, the 
redeployment of its fixed assets or the continued employment of the Heywood 
Williams Group's employees and, other than in relation to the changes to the 
Board as set out above, the management of Heywood Williams following completion 
of the Restructuring. 
In any event, the UK Banking Syndicate has agreed with Heywood Williams under 
the Investment Agreement (a summary of which is set out in paragraph 2.7 of Part 
III of the Circular) that the various corporate governance rights which they are 
to be granted, including in respect of the appointment of directors and veto 
rights over significant matters, should be exercised by the Majority Investors. 
Lloyds Banking Group will not, on its own, constitute the Majority Investors and 
therefore, on completion of the Restructuring, Lloyds Banking Group would not be 
in a position on its own to implement any plans regarding the Heywood Williams 
Group. 
 
9.Information on Lloyds Banking Group 
Lloyds was incorporated on 21 October 1985 (registration number 95000). Lloyds' 
registered office is at Henry Duncan House, 120 George Street, Edinburgh EH2 
4LH. The Lloyds Banking Group is a leading UK based financial services group, 
whose businesses provide a wide range of banking and financial services in the 
UK and at a limited number of locations overseas. Its main business activities 
are retail, commercial and corporate banking, general insurance, and life, 
pensions and investment provision. 
Further information on the Lloyds Banking Group is set out in Parts V and VI of 
this document. 
10.Shareholder approval 
Implementation of the Proposals requires the passing of all of the Resolutions. 
The Resolutions are conditional upon each other and it will only be possible to 
implement the Proposals if all of the Resolutions are passed at the General 
Meeting. Shareholders should note that the Directors will not be able to proceed 
with the Restructuring and other Proposals unless and until all the proposed 
Resolutions are approved at the General Meeting. 
Set out below is a summary of the Resolutions to be proposed at the General 
Meeting: 
Resolution 1 - Sub-division and partial reclassification of Ordinary Shares, 
authority to allot, disapplication of pre-emption rights and adoption of new 
Articles 
Resolution 1 seeks Shareholders' (excluding the Management Team) approval to: 
(a)the sub-division and partial reclassification of the existing issued Ordinary 
Shares of 20 pence each into D Ordinary Shares of one penny each and Deferred 
Shares of one penny each. The sub-division and partial conversion will result in 
the 84,853,519 existing Ordinary Shares converting into a maximum of 2,693,761 D 
Ordinary Shares with the remainder of the existing Ordinary Shares being 
converted into Deferred Shares of one penny each; 
(b)give the Directors authority to allot 14,410,974 A Ordinary Shares, Warrants 
in respect of 6,600,362 A Ordinary Shares, 538,752 B Ordinary Shares, 2,693,761 
C Ordinary Shares and 50,193 D Ordinary Shares. Further details regarding the 
effect of this authority to allot are included in paragraph 1 of Part III of 
this document; 
(c)disapply Shareholders' statutory pre-emption rights in relation to the issue 
of Ordinary Shares and Warrants pursuant to the Proposals. Further details 
regarding the effect of this power to issue ordinary shares are included in 
paragraph 1 of Part III of this document; 
(d)amend the Articles so as to delete all provisions of the Articles, which have 
been incorporated into the Articles from the memorandum of association of the 
Company (with effect from 1 October 2009), as a result of the operation of 
section 28 of the Companies Act 2006; and 
(e)the adoption of new Articles. The new Articles will differ materially from 
the Company's existing Articles to reflect inter alia, the fact that as a result 
of the implementation of the Proposals (i) the Company's Share capital will be 
comprised of five classes of shares; (ii) the Ordinary Shares will no longer be 
admitted to the Official List and to trading on the London Stock Exchange's 
market for listed securities; and (iii) the UK Banking Syndicate will own 78 per 
cent. of the issued share capital (on a fully diluted basis). A summary of some 
of the key provisions of the new Articles are set out in paragraph 2.9 of Part 
III of this document. 
Resolution 2 - approval of Cancellation 
Under the Listing Rules, the Cancellation can only be effected by the Company 
after the passing of a special resolution by Shareholders (excluding the 
Management Team) in general meeting, and the expiration of a period of not less 
than 20 business days from the date of the Shareholder approval. Resolution 2 
therefore seeks approval of the Cancellation. 
Resolution 3 - approval of Related Party Transaction 
Resolution 3 seeks Shareholders' (excluding the Management Team) approval of the 
Proposals, which will constitute a Related Party Transaction. 
Resolution 4 - approval of Shared Ownership Plan for the purposes of the Listing 
Rules 
Resolution 4 seeks Shareholders' (excluding the Management Team) approval of the 
proposed Shared Ownership Plan and the proposed arrangements to be established 
for Mike McTighe based on the Shared Ownership Plan as described in paragraphs 
2.13 and 2.14 of Part III of this document. 
 
Resolution 5 - approval of Shared Ownership Plan for the purposes of the Code 
Resolution 5 seeks Independent Shareholders' approval (for the purposes of the 
Code) of the Shared Ownership Plan, as described in paragraph 2.13 of Part III 
of this document. The Code requires that the vote on the Shared Ownership Plan 
be conducted by way of a poll and that only Independent Shareholders should vote 
on such a resolution. 
Resolution 6 - approval of Rule 9 Waiver granted by the Takeover Panel 
Resolution 6 seeks Independent Shareholders' approval, as explained in paragraph 
8 above, of a waiver of the obligation that could arise for any member of the 
Lloyds Banking Group to make a general offer for the entire issued share capital 
of the Company as a result of completion of the Restructuring and exercise of 
the Warrants. This Resolution will need to be approved by way of a poll of 
Independent Shareholders. 
Prohibition on voting by the Management Team 
The Management Team will be participating in the Proposals. Each member of the 
Management Team is therefore deemed to be a "related party" of the Company for 
the purposes of the Listing Rules. Accordingly, the participation of the 
Management Team in the Proposals is classified by the Listing Rules as a 
"related party transaction" and, as such, requires the approval of Shareholders 
(excluding the Management Team) by way of a simple majority in general meeting. 
The Management Team (and their associates) will not be entitled to vote at the 
General Meeting on the Resolutions. Each member of the Management Team has 
undertaken that he will not, and will take all reasonable steps to ensure that 
his associates (as defined in the Listing Rules) will not, vote on the 
Resolutions at the General Meeting. 
Irrevocables 
The Company and the UK Banking Syndicate have received irrevocable undertakings 
from the Independent Directors to vote in favour of each of the Resolutions in 
respect of all of the 80,142 Ordinary Shares beneficially held by them, 
representing, in aggregate, 0.094 per cent. of the votes capable of being cast 
at the General Meeting. 
Further details of these irrevocable undertakings are set out in paragraph 4 of 
Part VI of this document. 
11.Effect of Restructuring on awards granted under the Heywood Williams Share 
Schemes 
Awards under the Heywood Williams Performance Share Scheme Plan 2006 will not 
vest as a result of the Proposals. Awards made in October 2006 and which will 
mature in October 2009 will lapse as the performance targets for these awards 
will not be satisfied. The holders of awards granted in March 2007 and March 
2008 (being Robert Barr, Mike Richards and Mark Wild) have agreed to surrender 
these awards conditional upon completion of the Restructuring. 
Due to the low value of the awards, the Remuneration Committee has exercised its 
discretion to determine that awards under the Heywood Williams Group Retention 
Shares Plan will be treated as vesting on completion of the Restructuring and 
participants will be offered a payment of cash based on the market value of the 
Ordinary Shares to which the awards relate. The cash cost should not exceed 
GBP40,000 in aggregate. 
Under the Heywood Williams Group PLC 2001 Savings Related Share Option Scheme 
options over only 70,727 Ordinary Shares are outstanding. Robert Barr and Mark 
Wild have agreed to surrender the 47,777 options, they hold in aggregate, 
conditional upon completion of the Restructuring leaving a total of 22,950 
options outstanding. Any options that are not surrendered will continue to 
subsist (albeit in respect of D Ordinary Shares) after the completion of the 
Restructuring and will, if necessary, be adjusted in line with the dilution of 
all Existing Shareholders. 
12.Director and Board Changes 
The UK Banking Syndicate intends to appoint Mike McTighe as their appointee to 
the Board on completion of the Proposals. Details of the terms of his 
appointment to the Board, his participation in the Proposals and his joint 
ownership of B Ordinary Shares with the EBT Trustee are also set out in 
Paragraphs 2.11, 2.12 and 2.14 of Part III of this document. 
With the exception of William Schmuhl, the Directors (including myself and the 
other non-executive Directors), will remain on the Board following completion of 
the Proposals and each will remain in their current roles. Proposed changes to 
the directors' service contracts or letters of appointment to be made as part of 
the Proposals are set out in paragraph 2.9 of Part III of this document. William 
Schmuhl will step down from the Board with effect from the completion of the 
Proposals. 
In addition, the Related Party Managers will be appointed to the Board with 
effect from the completion of the Proposals. Details of the proposed changes to 
their service contracts are set out in paragraph 2.10 of Part III of this 
document. 
13.Risk factors 
For a review of certain risk factors which should be taken into account when 
considering whether to vote in favour of the Resolutions, please refer to Part 
II of this document. 
14.General Meeting 
A notice of a General Meeting of Heywood Williams to be held at the offices of 
Pinsent Masons LLP at 3 Hardman Street, Manchester, M3 3AU at 11.00 am on 20 
October 2009 is set out at the end of this document. 
The purpose of the General Meeting is for Shareholders to consider and, if 
thought fit, approve the Resolutions. 
Completion of the Proposals, which is expected to occur on or around 24 November 
2009, will be conditional, inter alia, upon the following (subject to any waiver 
of such conditions made in accordance with the terms of the Restructuring 
Agreements): 
-the passing of each of the Resolutions; 
-either (a) the issue by the Irish Competition Authority of a determination 
under section 21 of the Irish Competition Act 2002 in terms acceptable to the UK 
Banking Syndicate authorising the Proposals; or (b) the period specified in 
section 21(2) of the Irish Competition Act 2002 having elapsed without the Irish 
Competition Authority having informed the UK Banking Syndicate of its 
determination (if any) under section 21 of the Irish Competition Act 2002 in 
relation to the Proposals; and prior to completion of the Proposals no 
application in the Irish High Court having been made by any person seeking 
judicial review of the determination referred to in (a) above or the failure to 
make a determination as referred to in (b) above (as the case may be); 
-the Office of Fair Trading not having referred the Proposals to the Competition 
Commission under section 33 of the Enterprise Act 2002 or, if the Proposals are 
referred to the Competition Commission before they are completed, the 
Competition Commission making a Positive Decision; 
-the Office of Fair Trading not having invited one or more of the parties to the 
Investment Agreement to an issues meeting (within the meaning of the Office of 
Fair Trading's jurisdictional and procedural guidance for mergers (OFT527)) in 
respect of the Proposals, or, if the Office of Fair Trading has invited one or 
more of the parties to the Investment Agreement to such an issues meeting, it 
subsequently confirming in terms reasonably satisfactory to the UK Banking 
Syndicate that it is not its intention to refer the Proposals to the Competition 
Commission or, if the Proposals are subsequently referred to the Competition 
Commission, the Competition Commission making a Positive Decision; and 
-the Restructuring Agreements not having been terminated prior to completion of 
the Restructuring and the conditions precedent to certain of the Restructuring 
Agreements having been satisfied. A description of the Restructuring Agreements 
is set out in Part III of this document. 
15.Settlement of D Ordinary Shares 
Following the effective date for the Restructuring, expected to be 24 November 
2009, any CREST holders who held Ordinary Shares as at the record date and are 
entitled to new D Ordinary Shares, are expected to have their CREST Accounts 
credited with the D Ordinary Shares on or around 24 November 2009. Any 
certificated holders on the register as at the record date for the Restructuring 
(5.00 pm on 20 November 2009) and entitled to D Ordinary Shares are expected to 
have share certificates despatched by 30 November 2009. 
16.Action to be taken 
You will find enclosed with this document a Form of Proxy for use at the General 
Meeting. 
 
Whether or not you intend to be present at the General Meeting, you are 
requested to complete the Form of Proxy in accordance with the instructions 
printed on it and to return it to the Company's Registrars, Equiniti Limited, 
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6ZL as soon as possible 
and, in any event, so as to arrive not later than 11.00 am on 18 October 2009. 
You may, if you wish, register the appointment of a proxy or proxies, or voting 
instructions for the General Meeting electronically by logging on to 
www.sharevote.co.uk. You will need to use the series of numbers made up of your 
Voting ID, Task ID and Shareholder Reference Number printed on your Forms of 
Proxy. Full details of the procedure are given on the website referred to above. 
The proxy appointment and/or voting instructions must be received by Equiniti at 
least 48 hours before the appointed time of the General Meeting, that is to say, 
no later than 11.00 am on 18 October 2009. Please note that any electronic 
communication sent to the Company or Equiniti that is found to contain a 
computer virus will not be accepted. The use of the internet service in 
connection with the General Meeting is governed by Equiniti's conditions of use 
set out on the website, www.sharevote.co.uk, and may be read by logging on to 
that website. 
If you hold your Ordinary Shares in uncertificated form (i.e. in CREST) you may 
vote using the CREST proxy voting service in accordance with the procedures set 
out in the CREST Manual (please also refer to the accompanying notes to the 
Notice of General Meeting set out at the end of this document). Proxies 
submitted via CREST (under CREST participant ID RA19) must be received by 
Equiniti not later than 11.00 am on 18 October 2009. 
The completion and return of a Form of Proxy will not preclude you from 
attending the General Meeting and voting in person if you wish to do so. 
If you have any questions relating to this document or the General Meeting, 
please call the Shareholder Helpline operated by Salisbury Associates on 
freephone 0800 012 6252 between 9.00 am and 5.00 pm Monday to Friday (excluding 
bank or public holidays). Please note that the Shareholder Helpline cannot 
provide advice on the merits of the matters to be considered at the General 
Meeting nor can it give any financial, legal or taxation advice or accept proxy 
voting instructions. 
Should you have any questions relating to the completion and return of your Form 
of Proxy or CREST proxy voting, please call the Shareholder Helpline operated by 
the Company's Registrars, Equiniti, on 0871 384 2856 (or, from outside the 
United Kingdom, [phone]) between 9.00 am and 5.00 pm Monday to Friday 
(excluding bank or public holidays). Calls to 0871 384 2856 cost 8 pence per 
minute (including VAT) plus your service provider's network extras. Calls to the 
helpline from outside the United Kingdom will be charged at applicable 
international rates. Different charges may apply to calls from mobile 
telephones. Please note that calls to these numbers may be monitored for 
security and training purposes. The helpline cannot provide advice on the merits 
of the matters to be considered at the General Meeting nor can it give any 
financial, legal or taxation advice or accept proxy voting instructions. 
17.Further information 
Your attention is drawn to the further information in relation to the Proposals, 
the Company and the Lloyds Banking Group set out in Parts III to VI of this 
document. 
You are advised to read the whole of this document and not merely rely on the 
summarised information in this letter. 
18.Importance of the vote 
Given the Group's current financial position and the uncertain nature of the 
Group's home improvement and residential building markets generally, your Board 
believes that proceeding with the Proposals is the only available means by which 
the Group can address its financial position. If the Proposals do not proceed 
for any reason, the Board believes that it is highly likely that the Group would 
be unable to continue to operate within its existing banking facilities and 
would require significant immediate emergency funding. The Board is of the view 
that it is probable that appropriate emergency funding sources would not be 
available and, in this event, the Group would be unable to sustain its position 
as a going concern. Therefore, it is highly likely that failure to pass the 
Resolutions would lead the Group to enter into administration or some other form 
of insolvency procedure. Whilst the Board recognises that it is difficult to 
predict the exact timing at which these developments would occur, the Board 
believes that such administration or other insolvency proceedings could commence 
as early as December 2009. 
The Board believes that it is unlikely that the Ordinary Shares would retain any 
value in an administration process or other insolvency, and that the 
Restructuring and other Proposals represent the only available route to 
achieving a stronger balance sheet and providing a long term sustainable capital 
structure for the Group. 
19.Recommendation 
The Board considers the Proposals to be in the best interests of the Company and 
of Shareholders as a whole. Accordingly, the Board recommends that Shareholders 
vote in favour of the Resolutions to be proposed at the General Meeting as the 
Independent Directors intend to do in respect of the Ordinary Shares in which 
they are beneficially interested (representing, in aggregate, 0.094 per cent. of 
the issued voting share capital of the Company). 
The Board, which has been so advised by Rothschild, considers that the Proposals 
are fair and reasonable and in the best interests of Independent Shareholders 
and the Company as a whole. In providing such advice, Rothschild has taken into 
account the commercial assessment of the Board. 
The Related Party Directors have taken no part in the Board's consideration of 
the Proposals. Each of the Related Party Directors and Related Party Managers 
have undertaken not to vote on the Resolutions and have undertaken to take all 
reasonable steps to ensure their respective associates do not vote on the 
Resolutions at the General Meeting. 
 
 
Yours faithfully, 
R.F. Boyes 
Chairman 
 
 
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